Phoenix Footwear Group, Inc. (OTCMarkets.com: PXFG) today reported results for the fourth quarter and year ended January 2, 2016.
Fourth Quarter and Fiscal Year 2015
- Net Sales for the fourth quarter of fiscal 2015 decreased 9.7% to $5.10 million compared to $5.65 million for the fourth quarter of fiscal 2014. Net Sales for fiscal 2015 decreased 1.5% to $21.7 million from $22.0 million in fiscal 2014. The decrease in fourth quarter and full year Net Sales was a result of the Company’s realignment of its distribution of Trotters products in a large national account, combined with shipments of an additional week (53 weeks) in fiscal 2014.
- Sales of the Company’s licensed footwear continued to expand, increasing 23% for the quarter and 90% for the full year.
- The Company generated an Operating Loss for the fourth quarter of $135,000 compared to Operating Income of $216,000 for the fourth quarter of fiscal 2014. The Operating Loss for the twelve months of fiscal 2015 totaled $256,000 compared to Operating Income of $1.1 million for the twelve months of fiscal 2014.
- Since October 3, 2015 the Company has not been in compliance with its Fixed Charge Coverage Ratio (“FCCR”). During this period, NewStar Business Credit has waived these covenant defaults. On March 18, 2016, the Company and NewStar entered into an amendment of their Loan Agreement to modify this covenant. The Company is in compliance with the newly modified covenant.
- Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for fiscal year 2015 declined to $34,300 from$1.32 million for fiscal year 2014.
Fiscal 2015
For the fiscal year ended January 2, 2016, net sales decreased $340,000 or 1.5% to $21.7 million from $22.0 million when compared to the fiscal year ended January 3, 2015. The decrease in net sales for fiscal year 2015 was primarily the result of a reduction in sales of Trotters branded product as the Company reduced its footprint in a large national account together with the implementation of a MAP policy, that was partly offset by a 90.3% increase in net sales of licensed occupational footwear during fiscal 2015 when compared to fiscal 2014.
Gross profit for fiscal 2015 decreased $800,000 or 10.0% to $7.3 million from $8.1 million when compared to fiscal 2014. Gross profit as a percentage of net sales declined 310 basis points to 33.6% from 36.7% when compared to fiscal 2014. The decrease in the gross profit as a percentage of net sales was impacted by an increase in discounts and allowances provided to a large national retailer with the realignment of the Company’s distribution channels and implementation of a MAP policy, an increase in freight variance associated with the increased demand for licensed occupational footwear, and the clearance of phased-out and discontinued footwear during the period.
Selling, general and administrative expenses or SG&A, increased to $7.5 million during fiscal 2015 compared to $6.9 million for fiscal 2014. SG&A as a percentage of net sales increased to 34.8% for fiscal 2015, compared to 32.2% for fiscal 2014. The increase in SG&A for fiscal 2015 was largely attributable to increase in selling and headcount additions in support of the Company’s overall marketing strategy and anticipated double digit growth of its occupational footwear.
The Company reported a loss from continuing operations of $1.0 million or $0.11 per share for the fiscal year ended January 2, 2016, compared to earnings from continuing operations of $341,000 or $0.04 per share for the fiscal year ended January 3, 2015.
Earnings before interest, taxes, depreciation and amortization (or “EBITDA”) from continuing operations for fiscal 2015 declined to $34,300 compared to $1.32 million for fiscal 2014.
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 838 customers in over 1,650 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. | ||||||||||
| Consolidated Balance Sheets | ||||||||||
| (In thousands) | ||||||||||
| January 2, 2016 | January 3, 2015 | |||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 283 | $ | 328 | ||||||
| Accounts receivable, net | 2,812 | 2,449 | ||||||||
| Inventories, net | 10,363 | 8,150 | ||||||||
| Other current assets | 407 | 514 | ||||||||
| Total current assets | 13,865 | 11,441 | ||||||||
| Property, plant and equipment, net | 54 | 71 | ||||||||
| Capital leased assets | 515 | 527 | ||||||||
| Other assets | 161 | 50 | ||||||||
| TOTAL ASSETS | $ | 14,595 | $ | 12,089 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Notes payable, current | $ | 5,156 | $ | 3,831 | ||||||
| Accounts payable | 2,974 | 2,601 | ||||||||
| Accrued expenses | 805 | 1,137 | ||||||||
| Current portion of long term debt | 446 | 534 | ||||||||
| Total current liabilities | 9,381 | 8,103 | ||||||||
| Notes payable, net of current portion | 444 | 124 | ||||||||
| Capital lease obligation, net of current portion | 502 | 543 | ||||||||
| Convertible notes payable | 1,350 | 1,350 | ||||||||
| Other non-current liabilities | 198 | 230 | ||||||||
| Total liabilities | 11,875 | 10,350 | ||||||||
| Stockholders' equity | 2,720 | 1,739 | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 14,595 | $ | 12,089 | ||||||
| Phoenix Footwear Group, Inc. | |||||||||||||||||
| Consolidated Statements of Operations | |||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended | |||||||||||||||||
| January 2, 2016 | January 3, 2015 | ||||||||||||||||
| Net sales | $ | 5,100 | 100 | % | $ | 5,650 | 100 | % | |||||||||
| Cost of goods sold | 3,268 | 64 | % | 3,524 | 62 | % | |||||||||||
| Gross profit | 1,832 | 36 | % | 2,126 | 38 | % | |||||||||||
| Operating expenses: | |||||||||||||||||
| Selling, general and administrative expenses | 1,967 | 39 | % | 1,910 | 34 | % | |||||||||||
| Total operating expenses | 1,967 | 39 | % | 1,910 | 34 | % | |||||||||||
| Operating (loss) earnings | (135 | ) | -3 | % | 216 | 4 | % | ||||||||||
| Other income, net | - | 0 | % | - | 0 | % | |||||||||||
| Interest expense, net | 161 | 3 | % | 215 | 4 | % | |||||||||||
| (Loss) earnings before income taxes and discontinued operations | (296 | ) | -6 | % | 1 | 0 | % | ||||||||||
| Income tax expense | - | 0 | % | 18 | 0 | % | |||||||||||
| Loss from continuing operations | (296 | ) | -6 | % | (17 | ) | 0 | % | |||||||||
| Loss from discontinued operations, net of tax | - | 0 | % | - | 0 | % | |||||||||||
| Net loss | $ | (296 | ) | -6 | % | $ | (17 | ) | 0 | % | |||||||
| Loss per share: | |||||||||||||||||
| Basic: | |||||||||||||||||
| Continuing operations | $ | (0.02 | ) | $ | - | ||||||||||||
| Discontinued operations | - | - | |||||||||||||||
|
Net loss |
$ | (0.02 | ) | $ | - | ||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||
| Basic | 12,418 | 8,358 | |||||||||||||||
| Phoenix Footwear Group, Inc. | |||||||||||||||||
| Consolidated Statements of Operations | |||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||
| Fiscal Years Ended | |||||||||||||||||
| January 2, 2016 | January 3, 2015 | ||||||||||||||||
| Net sales | $ | 21,655 | 100 | % | $ | 21,995 | 100 | % | |||||||||
| Cost of goods sold | 14,374 | 66 | % | 13,914 | 63 | % | |||||||||||
| Gross profit | 7,281 | 34 | % | 8,081 | 37 | % | |||||||||||
| Operating expenses: | |||||||||||||||||
| Selling, general and administrative expenses | 7,537 | 35 | % | 6,949 | 32 | % | |||||||||||
| Total operating expenses | 7,537 | 35 | % | 6,949 | 32 | % | |||||||||||
| Operating (loss) income | (256 | ) | -1 | % | 1,132 | 5 | % | ||||||||||
| Interest expense, net | 776 | 4 | % | 773 | 4 | % | |||||||||||
| (Loss) earnings before income taxes and discontinued operations | (1,032 | ) | -5 | % | 359 | 2 | % | ||||||||||
| Income tax expense | - | 0 | % | 18 | - | % | |||||||||||
| (Loss) earnings from continuing operations | (1,032 | ) | -5 | % | 341 | 2 | % | ||||||||||
| Loss from discontinued operations, net of tax | - | 0 | % | (14 | ) | 0 | % | ||||||||||
| Net (loss) earnings | $ | (1,032 | ) | -5 | % | $ | 327 | 2 | % | ||||||||
| (Loss) earnings per share: | |||||||||||||||||
| Basic: | |||||||||||||||||
| Continuing operations | $ | (0.11 | ) | $ | 0.04 | ||||||||||||
| Discontinued operations | - | - | |||||||||||||||
| Net earnings | $ | (0.11 | ) | $ | 0.04 | ||||||||||||
| Diluted: | |||||||||||||||||
| Continuing operations | $ | (0.11 | ) | $ | 0.02 | ||||||||||||
| Discontinued operations | - | - | |||||||||||||||
| Net earnings | $ | (0.11 | ) | $ | 0.02 | ||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||
| Basic | 9,533 | 8,343 | |||||||||||||||
| Diluted | 9,533 | 14,726 | |||||||||||||||
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