EXHIBIT 99.1
PHOENIX FOOTWEAR GROUP, INC.
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FOR IMMEDIATE RELEASE
PHOENIX FOOTWEAR GROUP, INC. ANNOUNCES
SECOND QUARTER 2003 RESULTS
Carlsbad, California, July 23, 2003 -- Phoenix Footwear Group, Inc. (Amex: PXG)
announced today results for the second quarter ended June 28, 2003. Net sales
totaled $7.6 million versus $8.5 million for the second quarter of 2002, a
decrease of $900,000 or 10.6%. Gross Profit increased to $3.2 million during the
current quarter as compared to $3.1 for the prior year quarter, an increase of
3.4%. The Company's financial results for the second quarter resulted in a net
loss of ($688,000) which included expenses totaling $1.3 million associated with
the previously disclosed dissenting shareholders' litigation and corporate
relocation costs. The loss per share was ($0.19) for the second quarter and
included ($0.28) per share in litigation settlement and corporate relocation
costs as compared to earnings per diluted share of $0.09 for the prior year
period. The per share amounts reflect the Company's 2-for-1 stock split which
was effective May 22, 2003.
The Company also announced that the Penobscot litigation was settled during the
second quarter, and no further charges are expected with regard to this
litigation.
The Company reaffirmed its financial guidance for the full-year 2003 of $0.70 to
$0.75 per fully diluted share, before accounting for previously disclosed
year-to-date litigation, acquisition and corporate relocation costs, as well as
the pending H.S. Trask & Co. acquisition. The per share amounts reflect the
Company's 2-for-1 stock split which was effective May 22, 2003.
James R. Riedman, Chairman and CEO, commented, "We posted continued gross profit
margin expansion during the second quarter despite the difficult retail
environment, highlighting our commitment to generating profitable returns for
our shareholders. As we support our brands, our business strategy entails strict
product discipline, cost controls and an emphasis on maintaining low debt
levels. As a result, we are positioned to grow our operating earnings, after the
impact of expenses associated with the Penobscot litigation. Despite our second
quarter revenue declines caused by the soft footwear market, our brands have
continued to maintain their share of available consumer dollars and we are
optimistic that we will return to top-line growth in the second half of 2003."
Mr. Riedman continued, "In addition, we remain on track to close on our
acquisition of H.S. Trask & Co. during our third quarter. The addition of H.S.
Trask will add a well-known line of men's footwear to the Phoenix Footwear
product line, providing us with an opportunity to drive additional revenues and
cash flows. The integration of the H.S. Trask line into our distribution
platform will create natural cost-saving synergies, enhancing profitability over
the next 12 months. Looking ahead, our focus remains on supporting organic
growth, while expanding our brand portfolio through strategic acquisitions that
will be accretive to earnings and will maximize shareholder value."
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RESULTS FOR THE SECOND QUARTER ENDED JUNE 28, 2003:
Net sales for the quarter ended June 28, 2003 decreased 10.6% to $7.6 million as
compared to $8.5 million for the second quarter of 2002 primarily due to poor
weather conditions and a depressed economic retail environment.
Gross profit in the second quarter of 2003 increased 3.4% to $3.2 million or
42.2% of net sales as compared to $3.1 million or 36.5% of net sales in the
second quarter of 2002. The improvement in gross margin as a percentage of net
sales primarily relates to an improved product sales mix and a reduction in the
volume of closeout sales.
Selling, general and administrative expenses for the second quarter of 2003 were
$2.6 million or 34.4% of net sales, versus $2.4 million or 28.5% of net sales
for the second quarter of 2002. This increase was primarily related to increased
marketing and advertising expenses, increased employee compensation and benefit
costs, and occupancy costs associated with the Company's new west coast
operations.
During the second quarter of 2003, interest expense amounted to $386,000 and
included an interest charge of $346,000 related to previously disclosed
dissenting shareholders' litigation. Without the interest charge, interest
expense for the current quarter would have been $40,000 as compared to $103,000
in the prior year period. The decrease is a result of lower interest rates and
average outstanding indebtedness during the current quarter as compared to the
prior year period.
Additionally, in accordance with the Company's stock repurchase program approved
by its Board of Directors in May 2002, the Company repurchased approximately
16,400 shares during the second quarter of 2003 at an average purchase price of
$4.35. These per share amounts reflect the Company's 2-for-1 stock split which
was effective May 22, 2003.
RESULTS FOR THE SIX MONTHS ENDED JUNE 28, 2003:
Net sales for the six months ended June 28, 2003 decreased 12.9% to $16.8
million as compared to $19.2 million for the six months ended June 30, 2002
primarily due to unseasonably cold weather and economic concerns.
Gross profit for the six months ended June 28, 2003 increased 4.2% to $7.2
million or 43.0% of net sales as compared to $6.9 million or 35.9% of net sales
for the comparable prior year period. The improvement in gross margin as a
percentage of net sales primarily relates to an improved product sales mix and a
reduction in the volume of closeout sales.
Selling, general and administrative expenses for the six months ended June 28,
2003 were $5.5 million, or 32.5% of net sales, versus $5.0 million, or 26.0% of
net sales for the comparable prior year period. This increase was primarily due
to increased marketing and advertising expenses, employee compensation and
benefit costs, and increased occupancy costs associated with the Company's new
west coast operations.
Interest expense for the six months ended June 28, 2003 totaled $452,000 and
included interest charges of $376,000 related to previously disclosed dissenting
shareholders' litigation. Without these interest charges, interest expense would
have been $76,000 as compared to $335,000 in the prior year period. The decrease
is a result of lower interest rates and average outstanding indebtedness during
the current six month period as compared to the prior year period.
Additionally, in accordance with the Company's stock repurchase program approved
by its Board of Directors in May 2002, the Company repurchased approximately
57,800 shares during the six
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months ended June 28, 2003 at an average purchase price of $3.47. These per
share amounts reflect the Company's 2-for-1 stock split which was effective May
22, 2003.
Phoenix Footwear Group, Inc., headquartered in Carlsbad, California, designs,
develops and markets casual and dress footwear. The Company's premium footwear
brands include the Trotters(R) and SoftWalk(R) lines. The Company was ranked by
Footwear News as the fastest growing footwear firm during the three-year period
of 1999 to year-end 2001. Phoenix Footwear Group, Inc is traded on the American
Stock Exchange under the symbol PXG.
Safe Harbor Statements Under the Private Securities Litigation Reform Act of
1995: The statements contained in this press release which are not historical
facts are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that
forward-looking statements are inherently uncertain. Actual results and timing
of the events may differ materially from the future results, timing, performance
or achievements expressed or implied by such forward-looking statements. Factors
that might cause Phoenix Footwear's financial performance to be different
include risks of changing consumer preference, inability to successfully design,
develop or market its brands, competition from other footwear manufacturers,
loss of key employees, general economic conditions and adverse factors impacting
the footwear industry, and the inability of the Company to source its products
due to political or economic factors or the imposition of trade or duty
restrictions. The Company assumes no duty to update information contained in
this press release at any time.
(See Attached Financial Tables)
CONTACTS:
Kenneth Wolf Todd St.Onge
Chief Financial Officer Brainerd Communicators, Inc.
Phoenix Footwear Group, Inc. (212) 986-6667
(760) 602-9688
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Phoenix Footwear Group, Inc
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED
(UNAUDITED) (UNAUDITED)
June 28, June 30, June 28, June 30,
2003 2002 2003 2002
---- ---- ---- ----
NET SALES $ 7,552,000 100.0% $ 8,446,000 100.0% $ 16,759,000 100.0% $ 19,239,000 100.0%
Cost of goods sold 4,365,000 57.8% 5,363,000 63.5% 9,552,000 57.0% 12,323,000 64.1%
----------- --- ----------- --- ------------ --- ------------ ---
GROSS PROFIT 3,187,000 42.2% 3,083,000 36.5% 7,207,000 43.0% 6,916,000 35.9%
OPERATING EXPENSES:
Selling and administrative expenses 2,601,000 34.4% 2,408,000 28.5% 5,454,000 32.5% 5,001,000 26.0%
Other expense, net 939,000 12.4% 0 0.0% 1,415,000 8.4% 0 0.0%
----------- --- ----------- --- ------------ --- ------------ ---
Total operating expenses 3,540,000 46.9% 2,408,000 28.5% 6,869,000 41.0% 5,001,000 26.0%
----------- ----------- ------------ ------------
(LOSS) / INCOME FROM OPERATIONS (353,000) -4.7% 675,000 8.0% 338,000 2.0% 1,915,000 10.0%
Interest expense 386,000 5.1% 103,000 1.2% 452,000 2.7% 335,000 1.7%
----------- --- ----------- --- ------------ --- ------------ ---
(LOSS) / INCOME BEFORE INCOME TAXES (739,000) -9.8% 572,000 6.8% (114,000) -0.7% 1,580,000 8.2%
Income tax (benefit) / provision (51,000) 229,000 199,000 632,000
----------- ----------- ------------ ------------
NET (LOSS) / INCOME $ (688,000) -9.1% $ 343,000 4.1% $ (313,000) -1.9% $ 948,000 4.9%
=========== === =========== === ============ === ============ ===
(LOSS) / EARNINGS PER COMMON SHARE:
Basic ($0.19) $0.10 ($0.08) $ 0.28
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Diluted ($0.19) $0.09 ($0.08) $ 0.25
=========== =========== ============ ============
Weighted-average shares outstanding:
Basic 3,690,279 3,540,710 3,682,387 3,336,406
Diluted 3,690,279 3,952,248 3,682,387 3,865,296
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Phoenix Footwear Group, Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF AS OF
JUNE 28, DECEMBER 31,
2003 2002
---- ----
ASSETS
Current assets:
Cash $ 528,000 $ 1,265,000
Accounts receivable, net 5,638,000 5,679,000
Other accounts receivable 544,000 316,000
Inventories, net 8,488,000 6,662,000
Deferred taxes 297,000 297,000
Other current assets 686,000 185,000
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Total current assets 16,181,000 14,404,000
Property, Plant & Equipment, net 1,029,000 1,499,000
Intangible assets, net 1,645,000 1,645,000
Other assets 851,000 1,406,000
----------- -----------
$19,706,000 $18,954,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,652,000 $ 1,872,000
Accrued expenses 1,084,000 1,164,000
Note payable - line of credit 2,580,000 --
Notes payable - current 750,000 750,000
Liability to former stockholders -- 1,806,000
Income taxes payable 89,000 --
----------- -----------
Total current liabilities 7,155,000 5,592,000
Notes Payable, non-current 1,500,000 2,250,000
Deferred Income Tax 1,000,000 1,000,000
----------- -----------
Total liabilities 9,655,000 8,842,000
Stockholders' equity 10,051,000 10,112,000
----------- -----------
$19,706,000 $18,954,000
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