EXHIBIT 99.1
PHOENIX FOOTWEAR GROUP, INC.
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
PHOENIX FOOTWEAR GROUP, INC. ANNOUNCES
FOURTH QUARTER AND FULL-YEAR 2003 RESULTS
- Fourth Quarter Organic Revenue Growth of 10% -
- Organic Growth Expected to Continue in 2004 -
- 2004 Revenue Forecast of $62-$67 million -
- 2004 EPS Forecast of $0.85-$0.95 -
Carlsbad, California, February 12, 2004 -- Phoenix Footwear Group, Inc. (Amex:
PXG) announced today consolidated results for the fourth quarter and full-year
ended December 27, 2003. Net sales for the fourth quarter totaled $11.3 million
versus $7.4 million for the fourth quarter of 2002, an increase of $3.9 million
or 53%. Gross margin for the fourth quarter increased to 43% compared to 41% in
the prior year quarter. The increase in net sales for the fourth quarter of 2003
is a result of 10% year-over-year organic sales growth from the Company's legacy
brands, Trotters(R) and SoftWalk(R), combined with the addition of the H.S.
Trask(R) and Ducks Unlimited(R) footwear lines, which were acquired on August 7,
2003, and the Royal Robbins(R) line, which was acquired on October 31, 2003.
The Company's financial results for the fourth quarter of 2003 resulted in net
income of $108,000, compared to $204,000 in the fourth quarter of 2002. Net
income per diluted share was $0.02 for the fourth quarter and included ($0.02)
per diluted share from an asset impairment charge. Net income per diluted share
for the comparable prior year quarter was $0.05 and also included ($0.02) per
diluted share in asset impairment and disposal charges.
Net income for the full year period ended December 27, 2003 totaled $941,000,
versus $1.7 million for the full year 2002. Net income per diluted share was
$0.22 for the full year 2003 period and included ($0.28) per share in litigation
settlement, acquisition, and corporate relocation costs totaling $2.1 million,
offset by a $285,000 excise tax refund. Net income per diluted share for the
comparable prior year period was $0.45 and included ($0.07) per share in asset
impairment and disposal charges.
The per share amounts for the fourth quarter and full year ended December 27,
2003 include the weighted average share effect of the 699,980 and 71,889 shares
of newly issued common stock associated with the H.S. Trask & Co. and Royal
Robbins, Inc acquisitions, respectively.
James R. Riedman, Chairman and CEO, commented, "We closed 2003 with a return to
strong organic growth as our fourth quarter organic revenues increased by 10%.
While our revenues rebounded, we remained disciplined in our approach to cost
controls and inventory management, resulting in a fourth quarter gross profit
margin of 43%. We are committed to building shareholder value by developing a
portfolio of sustainable and profitable niche brands, while aggressively
leveraging a shared infrastructure. During the past year, we closed on the
acquisitions of H.S. Trask & Co., which marked our entry into the men's casual
footwear market, and Royal Robbins, Inc., which gave us a complete line of
classic men's and women's outdoor clothing. Most important, as a result of the
strategic and financial initiatives that we implemented in 2003, we have entered
2004 with considerable revenue and profit momentum."
Greg A. Tunney, President and COO, commented, "Beyond our core brands and the
added benefits of the H.S. Trask(R) and Royal Robbins(R) lines, we have
considerable platforms for organic growth in 2004, including the long-awaited
men's SoftWalk(R) line, Strol, which was debuted this week at the Las Vegas Shoe
Show, as well as the introduction of the H.S. Trask(R) women's line. We look
forward to rolling out these new brands in the year ahead."
RESULTS FOR THE FOURTH QUARTER ENDED DECEMBER 27, 2003:
Net sales for the fourth quarter ended December 27, 2003 increased 53% to $11.3
million as compared to $7.4 million for the fourth quarter of 2002. Excluding
sales from the Company's recently acquired brands, H.S. Trask(R), Ducks
Unlimited(R), and Royal Robbins(R) lines, net sales for the fourth quarter were
$8.2 million.
Gross margin in the fourth quarter was 43% of net sales as compared to 41% of
net sales in the fourth 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 fourth quarter of 2003 were
$4.2 million or 38% of net sales, versus $2.1 million or 29% of net sales for
the fourth quarter of 2002. The increase was primarily related to costs
associated with the addition of the H.S. Trask(R), Ducks Unlimited(R) and Royal
Robbins(R) lines.
During the fourth quarter of 2003, interest expense amounted to $107,000,
compared to $343,000 in the comparable prior year period. The prior year quarter
included $280,000 of interest expense related to previously disclosed dissenting
shareholders' litigation that was settled in the second quarter of 2003.
RESULTS FOR THE FULL YEAR ENDED DECEMBER 27, 2003:
Net sales for the twelve months ended December 27, 2003 increased 8% to $39.1
million as compared to $36.2 million for the twelve months ended December 31,
2002. Included in the net sales for the twelve months ended December 27, 2003
are $4.7 million in sales from the H.S. Trask(R) and Ducks Unlimited(R) footwear
lines which were acquired on August 7, 2003, as well as the Royal Robbins(R)
line, which was acquired on October 31, 2003. Excluding sales from the H.S.
Trask(R), Ducks Unlimited(R) and Royal Robbins(R) lines, net sales for the
twelve months ended December 27, 2003 decreased $1.8 million or 5% compared to
the twelve months ended December 31, 2002. This decrease was primarily due to
depressed retail and economic conditions which occurred during the majority of
2003.
Gross margin for the twelve months ended December 27, 2003 was 43% of net sales
as compared to 38% 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 twelve months ended
December 27, 2003 were $12.7 million, or 32% of net sales, versus $9.7 million,
or 27% of net sales for the comparable prior year period. This increase was
primarily related to the Company's recent brand acquisitions and included
increased marketing and advertising expenses, employee compensation and benefit
costs, and increased occupancy costs associated with the Company's new West
Coast operations.
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Interest expense for the twelve months ended December 27, 2003 totaled $620,000
and included interest charges of $376,000 related to previously disclosed
dissenting shareholders' litigation. Without these interest charges, interest
expense would have been $244,000. Interest expense for 2002 totaled $751,000 and
also included $280,000 of interest expense associated with the previously
disclosed dissenting shareholders' litigation. Exclusive of the dissenting
shareholders' litigation interest for both years, interest expense would have
decreased $227,000 during 2003 as a result of lower interest rates and average
outstanding indebtedness.
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 twelve month period ended December 27, 2003 at an average purchase
price of $3.47. The Company did not repurchase any shares during the fourth
quarter ended December 27, 2003.
BUSINESS OUTLOOK
In light of SEC Regulations, the Company elects to provide certain
forward-looking information in this press release. These statements are based on
current information and expectations, and actual results may differ materially.
These statements do not include the potential impact of any mergers,
acquisitions or other business combinations that may be completed after February
12, 2004. The Company undertakes no obligation to update this information. See
further disclaimer below:
"As a result of our expanded portfolio and our return to organic growth, we
expect overall revenues of $62 to $67 million for the full year 2004 period,
representing an increase of 59% to 71% over full-year 2003 revenues. In addition
we expect full-year 2004 EPS of $0.85 to $0.95, representing an almost fourfold
improvement in our EPS over 2003. We remain focused on further expanding our
brand portfolio through prudent acquisitions that will add to our revenue and
profit growth potential," stated Mr. Riedman.
ABOUT PHOENIX FOOTWEAR GROUP, INC.
Phoenix Footwear Group, Inc., headquartered in Carlsbad, California, designs,
develops and markets men's and women's footwear and apparel. The Company's
premium brands include the Trotters(R), SoftWalk(R), H.S. Trask(R), and Ducks
Unlimited(R) footwear lines and the Royal Robbins(R) and Audubon(R) apparel
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, and the 10th most
profitable for 2002 based on net margins. Phoenix Footwear Group, Inc. is traded
on the American Stock Exchange under the symbol PXG.
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 the expected Revenues,
Profits and EPS for the full year 2004. Investors are cautioned that all
forward-looking statements involve risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking
statements. These include without limitation, changing consumer preferences,
risks relating to our inability to successfully design, develop or market our
brands, competition from others competing in our markets, loss of key employees,
our inability to source our products due to political or economic factors or the
imposition of trade or duty restrictions, the possibility of impairment charges
resulting from future adjustments to the value of goodwill we recorded in
connection with the H.S. Trask and Royal Robbins acquisitions,
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risks that businesses we have or may acquire will not be successfully integrated
with our existing business and the impact that the failure to successfully
integrate could have on the realization of the anticipated benefits of the
acquisitions, our ability to retain customers of acquired businesses and market
acceptance of the acquisitions. More information about these and other potential
factors that could affect Phoenix Footwear's business and financial results is
included in Phoenix Footwear's Annual Report on Form 10-K for the fiscal year
ended Dec. 31, 2002 filed with the Securities and Exchange Commission (the
"SEC"), the Registration Statement on Form S-3 filed by Phoenix Footwear on
September 24, 2003 with the SEC under the caption "Risk Factors" and in any
subsequent reports filed with the SEC, all of which are available at the SEC's
website at www.sec.gov. 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 are based on
information available at the time of the release, and Phoenix Footwear assumes
no obligation to update any forward-looking statement.
All amounts discussed above are reported in accordance with generally accepted
accounting principles ("GAAP"). When comparing performance between periods, the
Company discusses non-GAAP financial measures such as organic sales growth. In
our measure of organic sales growth, we have excluded the impact of acquisitions
from the comparison of quarterly sales. Management believes that discussing
organic sales growth provides a better understanding of the reported results.
(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
<Table>
<Caption>
FOR THE QUARTER ENDED FOR THE TWELVE MONTHS ENDED
(UNAUDITED)
DECEMBER 27, DECEMBER 31, DECEMBER 27, DECEMBER 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
NET SALES $ 11,316,000 100% $ 7,401,000 100% $ 39,077,000 100% $ 36,161,000 100%
Cost of goods sold 6,442,000 57% 4,370,000 59% 22,457,000 57% 22,397,000 62%
------------ ---- ----------- ---- ------------ ---- ------------ ----
GROSS PROFIT 4,874,000 43% 3,031,000 41% 16,620,000 43% 13,764,000 38%
OPERATING EXPENSES:
Selling and administrative expenses 4,233,000 38% 2,144,000 29% 12,696,000 32% 9,661,000 27%
Other expense, net 146,000 1% 133,000 2% 1,377,000 4% 442,000 1%
------------ ---- ----------- ---- ------------ ---- ------------ ----
Total operating expenses 4,379,000 39% 2,277,000 31% 14,073,000 36% 10,103,000 28%
------------ ----------- ------------ ------------
INCOME FROM OPERATIONS 495,000 4% 754,000 10% 2,547,000 7% 3,661,000 10%
Interest expense 107,000 343,000 620,000 751,000
------------ ----------- ------------ ------------
INCOME BEFORE INCOME TAXES 388,000 3% 411,000 6% 1,927,000 5% 2,910,000 8%
Income tax provision 280,000 207,000 986,000 1,207,000
------------ ----------- ------------ ------------
NET INCOME $ 108,000 1% $ 204,000 3% $ 941,000 2% $ 1,703,000 5%
============ =========== ============ ============
EARNINGS PER COMMON SHARE:
Basic $0.02 $0.06 $0.24 $0.50
Diluted $0.02 $0.05 $0.22 $0.45
Weighted-average shares outstanding:
Basic 4,430,618 3,521,012 3,963,382 3,418,468
Diluted 4,950,153 3,720,644 4,350,132 3,781,634
</Table>
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Phoenix Footwear Group, Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
<Table>
<Caption>
AS OF AS OF
DECEMBER 27, DECEMBER 31,
ASSETS 2003 2002
------------- -------------
Current assets:
Cash $ 1,058,000 $ 1,265,000
Accounts receivable, net 8,083,000 5,679,000
Other accounts receivable 530,000 316,000
Inventories, net 12,717,000 6,662,000
Deferred taxes -- 297,000
Other current assets 803,000 185,000
------------- -------------
Total current assets 23,191,000 14,404,000
Property, plant & equipment, net 1,623,000 1,499,000
Goodwill & unamortizable intangibles 8,998,000 1,645,000
Intangible assets, net 1,766,000 --
Other assets 833,000 1,406,000
------------- -------------
$ 36,411,000 $ 18,954,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,782,000 $ 1,872,000
Accrued expenses 1,077,000 1,164,000
Contingent liability 1,942,000 --
Note payable - line of credit 5,480,000 --
Notes payable - current 1,669,000 750,000
Liability to former stockholders -- 1,806,000
Deferred Income tax 195,000 --
Income taxes payable 111,000 --
------------- -------------
Total current liabilities 15,256,000 5,592,000
Notes payable, non-current 4,933,000 2,250,000
Deferred income tax 1,235,000 1,000,000
------------- -------------
Total liabilities 21,424,000 8,842,000
Stockholders' equity 14,987,000 10,112,000
------------- -------------
$ 36,411,000 $ 18,954,000
============= =============
</Table>
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