Phoenix Footwear Group, Inc. (OTCMarkets.com: PXFG) today reported results for the Second Quarter and First Six months ended July 2, 2016.
Second Quarter and First Six Months of Fiscal 2016
SECOND QUARTER AND FIRST SIX MONTHS OF FISCAL 2016
For the quarter ended July 2, 2016, net sales increased $184,000, or 4.5% to $4.24 million compared to $4.05 million for the second quarter of fiscal 2015. Net sales for the quarter included growth in the Company’s e-commerce, independent, and internet based channels of distribution that was offset by declines in other channels.
Net sales for the first six months of fiscal 2016 decreased $987,000, or 9.2% to $9.7 million compared to $10.7 million for the first six months of fiscal 2015. Contributing to the lower net sales for the first six months was a decrease in sales to a large national retailer and a decrease in the Company’s catalog channel of distribution, that was partly offset by increases in the Company’s e-commerce sales and other internet based retailers.
Gross profit increased $421,000 from $1.1 million to $1.6 million in the second quarter of fiscal 2016. Gross margins as a percentage of net sales for the second quarter of fiscal 2016 improved to 36.8% compared to 28.1% for the second quarter of fiscal 2015.
Gross profit for the first six months of fiscal 2016 increased $134,000 to $3.6 million compared to $3.5 million during the first six months of fiscal 2015. Gross margin as a percentage of net sales for the first six months of fiscal 2016 improved to 37.4% compared to 32.7% for the first six months of fiscal 2015.
Contributing to the higher gross margin for the three and first six months of fiscal 2016 were the reduction in the inventory obsolescence reserve matched against the clearance of phased-out and discontinued goods together with the reduced air shipment of goods compared to the three and first six months of fiscal 2015.
SG&A for the second quarter and first six months of fiscal 2016 increased to $1.9 million and $4.1 million compared to $1.6 million and $3.7 million in the three and six months of fiscal 2015.
Contributing to the increase in SG&A for the second quarter and first six months of fiscal 2016 includes planned additions in sales, marketing and distribution along with planned increased spending supporting the Company’s e-commerce initiative and other related advertising and marketing investments.
The Company reported a net operating loss of $539,000 or $0.04 per share for the second quarter, compared to a net operating loss from continuing operations of $651,000 or $0.08 per share for the same period of the prior year.
For the first six months of fiscal 2016, the Company reported a net operating loss from continuing operations of $737,000 or $0.06 per share, compared to a net operating loss from continuing operations of $690,000 or $0.08 per share for the first six months of fiscal 2015.
The loss before interest, taxes, depreciation and amortization (or “EBITDA”) from continuing operations for the first six months of fiscal 2016 was $329,400 compared to $55,700 for the first six months of fiscal 2015.
About Phoenix Footwear Group, Inc.
Phoenix Footwear Group, Inc., headquartered in Carlsbad, California, specializes in quality comfort women’s and men’s footwear with a design focus on fitting features. Phoenix Footwear designs, develops, markets and sells footwear in a wide range of sizes and widths under the brands Trotters® and SoftWalk®. These brands are primarily sold through department stores, leading specialty and independent retail stores, mail order catalogues and internet retailers and are carried by approximately 839 customers in over 1,572 retail locations throughout the U.S. Phoenix Footwear has been engaged in the manufacture or importation and sale of quality footwear since 1882.
Forward-Looking Statements
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. These forward-looking statements include, but are not limited to, statements regarding Phoenix Footwear’s ability to repay its bank debt in a timely manner, future growth and performance of its individual brands, expected financial performance and condition for fiscal 2016 and/or statements preceded by, followed by or that include the words “believes,”“could,”“expects,”“anticipates,”“estimates,”“intends,”“plans,”“projects,”“seeks,”“exploring,” or similar expressions. Although Phoenix Footwear believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by Phoenix Footwear or any other person that the objectives and plans of Phoenix Footwear will be achieved. All forward-looking statements included in this press release speak only as of the date of this press release and are based on Phoenix Footwear's current expectations and projections about future events, based on information available at the time of the release, and Phoenix Footwear expressly disclaims any obligation to release publicly any update or revision to any forward-looking statement contained herein if there are changes in Phoenix Footwear’s expectations or if any events, conditions or circumstances on which any such forward-looking statement is based.
| Phoenix Footwear Group, Inc. | ||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||
| (In thousands) | ||||||||||
| (Unaudited) | ||||||||||
| July 2, 2016 | January 2, 2016 | |||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 283 | $ | 283 | ||||||
| Accounts receivable, net | 2,341 | 2,812 | ||||||||
| Inventories, net | 11,203 | 10,363 | ||||||||
| Other current assets | 477 | 407 | ||||||||
| Total current assets | 14,304 | 13,865 | ||||||||
| Property, plant and equipment, net | 43 | 54 | ||||||||
| Capital leased asset | 477 | 515 | ||||||||
| Other assets | 135 | 161 | ||||||||
| TOTAL ASSETS | $ | 14,959 | $ | 14,595 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Notes payable, current | $ | 5,165 | $ | 5,156 | ||||||
| Accounts payable | 4,204 | 2,974 | ||||||||
| Accrued expenses | 846 | 805 | ||||||||
| Current portion of long term debt | 435 | 446 | ||||||||
| Total current liabilities | 10,650 | 9,381 | ||||||||
| Convertible notes payable | 1,350 | 1,350 | ||||||||
| Term notes payable | 257 | 444 | ||||||||
| Capital lease obligation | 478 | 502 | ||||||||
| Other non-current liabilities | 187 | 198 | ||||||||
| Total liabilities | 12,922 | 11,875 | ||||||||
| Stockholders' equity | 2,037 | 2,720 | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 14,959 | $ | 14,595 | ||||||
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| Phoenix Footwear Group, Inc. | |||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||
| (In thousands, except per share data) | |||||||||||
| (Unaudited) | |||||||||||
| Three Months Ended | |||||||||||
| July 2, 2016 | July 4, 2015 | ||||||||||
| Net sales | $ | 4,242 | 100% | $ | 4,058 | 100% | |||||
| Cost of goods sold | 2,680 | 63% | 2,917 | 72% | |||||||
| Gross profit | 1,562 | 36.8% | 1,141 | 28.1% | |||||||
| Operating expenses: | |||||||||||
| Selling, general and administrative expenses | 1,941 | 46% | 1,629 | 40% | |||||||
| Goodwill and intangible impairment charges | - | - % | - | 0% | |||||||
| Total operating expenses | 1,941 | 46% | 1,629 | 40% | |||||||
| Operating loss | (379) | -9% | (488) | -12% | |||||||
| Interest expense, net | 160 | 4% | 163 | 4% | |||||||
| Loss before income taxes | (539) | -13% | (651) | -16% | |||||||
|
Income tax (benefit) expense |
- | 0% | - | - % | |||||||
| Net loss | $ | (539) | -13% | $ | (651) | -16% | |||||
| Loss per share: | |||||||||||
| Basic | |||||||||||
| Continuing operations | $ | (0.04) | $ | (0.08) | |||||||
| Net loss | $ | (0.04) | $ | (0.08) | |||||||
| Diluted | |||||||||||
| Continuing operations | $ | (0.04) | $ | (0.08) | |||||||
| Net loss | $ | (0.04) | $ | (0.08) | |||||||
| Weighted-average shares outstanding: | |||||||||||
| Basic | 12,488 | 8,418 | |||||||||
| Diluted | 12,488 | 8,418 | |||||||||
| Phoenix Footwear Group, Inc. | |||||||||||
| Consolidated Statements of Operations | |||||||||||
| (In thousands, except per share data) | |||||||||||
| (Unaudited) | |||||||||||
| Six Months Ended | |||||||||||
| July 2, 2016 | July 4, 2015 | ||||||||||
| Net sales | $ | 9,743 | 100% | $ | 10,730 | 100% | |||||
| Cost of goods sold | 6,095 | 63% | 7,216 | 67% | |||||||
| Gross profit | 3,648 | 37% | 3,514 | 33% | |||||||
| Operating expenses: | |||||||||||
| Selling, general and administrative expenses | 4,084 | 42% | 3,724 | 35% | |||||||
| Total operating expenses | 4,084 | 42% | 3,724 | 35% | |||||||
|
Operating (Loss) Income |
(436) | -5% | (210) | -2% | |||||||
| Interest expense, net | 301 | 3% | 480 | 4% | |||||||
| Loss before income taxes and discontinued operations | (737) | -8% | (690) | -6% | |||||||
| Income tax (benefit) expense | - | 0% | - | - % | |||||||
| Net loss | $ | (737) | -8% | $ | (690) | -6% | |||||
| Loss per share: | |||||||||||
| Basic and diluted | |||||||||||
| Continuing operations | $ | (0.06) | $ | (0.08) | |||||||
| Net loss | $ | (0.06) | $ | (0.08) | |||||||
| Weighted-average shares outstanding: | |||||||||||
| Basic and diluted | 12,453 | 8,398 | |||||||||
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