Phoenix Footwear Group, Inc. Reports Second Quarter 2017 Results
Phoenix Footwear Group, Inc. (OTCMarkets.com: PXFG) today reported results for the Second Quarter and First Six months ended July 1, 2017.
Second Quarter and First Six Months of Fiscal 2017
- Net loss for the first six months of fiscal 2017 improved to $612,000 compared to a net loss of $737,000 for the first six months of fiscal 2016. The EBITDA loss improved to a loss of $257,400 for the first six months of fiscal 2017.
- Net loss for the second quarter of fiscal 2017 improved to $519,000 compared to a net loss of $539,000 for the second quarter of fiscal 2016. The EBITDA loss of $333,000 for the second quarter of 2017 was flat compared to $330,000 for the second quarter of 2016.
- Net sales for the first six months of fiscal 2017 decreased 13.4% to $8.4 million from $9.7 million when compared to the first six months of fiscal 2016. Of this decline, $713,000, or 55% was associated with the loss of two customers that ceased doing business in late 2016.
- More recently, the Company has made progress expanding its business with several national retail accounts to which it will be shipping this fall, including: Dillard’s, Lord & Taylor and Designer Shoe Warehouse (DSW).
- During the third quarter, the Company has also begun selling Bueno footwear which it expects will contribute materially to its revenue for 2018. First deliveries of this new product line will take place for Holiday 2017. Interested retailers can see the product at industry shows including: FN Platform, Atlanta Shoe Market, TRU Show, Northwest Market, BSTA and other regional shows, or by emailing Bueno@phxg.com.
SECOND QUARTER AND FIRST SIX MONTHS OF FISCAL 2017
For the quarter ended July 1, 2017, net sales decreased $784,000, or 18.5% to $3.46 million compared to $4.24 million for the second quarter of fiscal 2016. The majority of the decrease in net sales for the quarter was associated with internet based customers of which $354,000 was associated with the loss of two large customers who ceased operations in the third quarter of 2016, and first week of January 2017. The balance of the decline in net sales was associated with the independent and catalog channels of distribution.
Net sales for the first six months of fiscal 2017 decreased $1.3 million, or 13.4% to $8.4 million compared to $9.7 million for the first six months of fiscal 2016. Internet retailers accounted for the majority of this decrease, of which $713,000 was associated with the loss of two large customers who ceased operations in August of 2016, and the first weeks of January of 2017. Net sales in the independent channel of distribution contributed to the lower net sales volume during the period.
Gross profit decreased $291,000 from $1.6 million to $1.3 million in the second quarter of fiscal 2017. Gross margins as a percentage of net sales for the second quarter of fiscal 2017 and 2016, were 36.8%.
Gross profit for the first six months of fiscal 2017 decreased $550,000 to $3.1 million compared to $3.6 million during the first six months of fiscal 2016. Gross margin as a percentage of net sales for the first six months of fiscal 2017, declined to 36.7% compared to 37.4% for the first six months of fiscal 2016.
Contributing to the lower gross margin for the first six months of fiscal 2017 was a 1.5% increase in the net sales volume of lower margin licensed footwear as a percentage of the total net sales volume to 18.3% from 16.8% together with a lower volume of phased-out and discontinued goods sold during the period.
SG&A for the second quarter and first six months of fiscal 2017 decreased to $1.6 million and $3.45 million compared to $1.9 million and $4.1 million in the three and first six months of fiscal 2016.
Contributing to the decrease in SG&A for the second quarter and first six months of fiscal 2017 were planned reductions in personnel, and marketing expenditures.
The Company reported a net operating loss of $519,000 or $0.04 per share for the second quarter, compared to a net operating loss from operations of $539,000 or $0.04 per share for the second quarter of the prior year.
For the first six months of fiscal 2017, the Company reported a net operating loss from operations of $612,000 or $0.05 per share, compared to a net operating loss from operations of $737,000 or $0.06 per share for the first six months of fiscal 2016.
The loss before interest, taxes, depreciation and amortization (or “EBITDA”) from operations for the first six months of fiscal 2017 was $257,400 compared to $329,400 for the first six months of fiscal 2016.
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 815 customers in over 1,345 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 2017 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 1, 2017 | December 31, 2016 | |||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 385 | $ | 342 | ||||||
| Accounts receivable, net | 1,467 | 2,096 | ||||||||
| Inventories, net | 9,183 | 9,160 | ||||||||
| Other current assets | 738 | 557 | ||||||||
| Total current assets | 11,773 | 12,155 | ||||||||
| Property, plant and equipment, net | 28 | 35 | ||||||||
| Capital leased asset | 403 | 440 | ||||||||
| Other assets | 83 | 109 | ||||||||
| TOTAL ASSETS | $ | 12,287 | $ | 12,739 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Notes payable, current | $ | 3,989 | $ | 4,424 | ||||||
| Accounts payable | 4,000 | 3,362 | ||||||||
| Accrued expenses | 864 | 904 | ||||||||
| Current portion of long term debt | 303 | 427 | ||||||||
| Total current liabilities | 9,156 | 9,117 | ||||||||
| Convertible notes payable | 1,350 | 1,350 | ||||||||
| Term notes payable | 234 | 97 | ||||||||
| Capital lease obligation | 423 | 451 | ||||||||
| Other non-current liabilities | 134 | 146 | ||||||||
| Total liabilities | 11,297 | 11,161 | ||||||||
| Stockholders' equity | 990 | 1,578 | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 12,287 | $ | 12,739 | ||||||
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| Phoenix Footwear Group, Inc. | |||||||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| July 1, 2017 | July 2, 2016 | ||||||||||||||
| Net sales | $ | 3,457 | 100 | % | $ | 4,242 | 100 | % | |||||||
| Cost of goods sold | 2,186 | 63 | % | 2,680 | 63 | % | |||||||||
| Gross profit | 1,271 | 36.8 | % | 1,562 | 36.8 | % | |||||||||
| Operating expenses: | |||||||||||||||
| Selling, general and administrative expenses | 1,649 | 48 | % | 1,941 | 46 | % | |||||||||
| Goodwill and intangible impairment charges | - | - | % | - | 0 | % | |||||||||
| Total operating expenses | 1,649 | 48 | % | 1,941 | 46 | % | |||||||||
| Operating loss | (378 | ) | -11 | % | (379 | ) | -9 | % | |||||||
| Interest expense, net | 141 | 4 | % | 160 | 4 | % | |||||||||
| Loss before income taxes | (519 | ) | -15 | % | (539 | ) | -13 | % | |||||||
| Income tax (benefit) expense | - | 0 | % | - | - | % | |||||||||
| Net loss | $ | (519 | ) | -15 | % | $ | (539 | ) | -13 | % | |||||
| Loss per share: | |||||||||||||||
| Basic | |||||||||||||||
| Operations | $ | (0.04 | ) | $ | (0.04 | ) | |||||||||
| Net loss | $ | (0.04 | ) | $ | (0.04 | ) | |||||||||
| Diluted | |||||||||||||||
| Operations | $ | (0.04 | ) | $ | (0.04 | ) | |||||||||
| Net loss | $ | (0.04 | ) | $ | (0.04 | ) | |||||||||
| Weighted-average shares outstanding: | |||||||||||||||
| Basic | 12,568 | 12,488 | |||||||||||||
| Diluted | 12,568 | 12,488 | |||||||||||||
| Phoenix Footwear Group, Inc. | |||||||||||||||
| Consolidated Statements of Operations | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Six Months Ended | |||||||||||||||
| July 1, 2017 | July 2, 2016 | ||||||||||||||
| Net sales | $ | 8,439 | 100 | % | $ | 9,743 | 100 | % | |||||||
| Cost of goods sold | 5,341 | 63 | % | 6,095 | 63 | % | |||||||||
| Gross profit | 3,098 | 37 | % | 3,648 | 37 | % | |||||||||
| Operating expenses: | |||||||||||||||
| Selling, general and administrative expenses | 3,445 | 41 | % | 4,084 | 42 | % | |||||||||
| Total operating expenses | 3,445 | 41 | % | 4,084 | 42 | % | |||||||||
|
Operating (Loss) Income |
(347 | ) | -4 | % | (436 | ) | -5 | % | |||||||
| Interest expense, net | 265 | 3 | % | 301 | 3 | % | |||||||||
| Loss before income taxes and discontinued operations | (612 | ) | -7 | % | (737 | ) | -8 | % | |||||||
| Income tax (benefit) expense | - | 0 | % | - | - | % | |||||||||
| Net loss | $ | (612 | ) | -7 | % | $ | (737 | ) | -8 | % | |||||
| Loss per share: | |||||||||||||||
| Basic and diluted | |||||||||||||||
| Operations | $ | (0.05 | ) | $ | (0.06 | ) | |||||||||
| Net loss | $ | (0.05 | ) | $ | (0.06 | ) | |||||||||
| Weighted-average shares outstanding: | |||||||||||||||
| Basic and diluted | 12,542 | 12,453 | |||||||||||||
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