Phoenix Footwear Group, Inc. reported that net sales for the fourth quarter increased 83% totaling $20.7 million compared to $11.3 million for the fourth quarter of 2003.
PXG reported a net loss of $624,000 or 8 cents per diluted share compared to net income of $108,000 or 2 cents per diluted share for the fourth quarter of 2003. Gross margin for the 2004 fourth quarter was 35.4%, compared to 43.1% for the fourth quarter of 2003.
For the full year ended January 1, 2005, net sales increased 95% totaling $76.4 million versus $39.1 million for the full year 2003. Net income for the full year 2004 was $3.0 million, compared to net income of $941,000 for the full year 2003. Net income per diluted share for the full year 2004 was $0.48, as compared to $0.22 for the comparable prior year period. Gross margin for the full year 2004 was 41.3%, compared to 42.5% for the full year 2003.
The per share amounts for the fourth quarter and full year ended January 1, 2005 include the effect of 2.9 million shares issued during fiscal 2004.
James R. Riedman, Chairman, commented, “We posted strong revenue growth and profitability in 2004, doubling the size of our business. While we are disappointed with our sales results, namely at our Altama and Trotters units, we are actively managing these brands to improve their results through investments in new products and increased sales support, and early returns are encouraging.”
Richard White, Chief Executive Officer, commented, “We have taken various steps to improve sales results for our Altama and Trotters brands. At Altama, we have placed the unit in a strong position to compete for two sizable DOD combat boot procurements in 2005, and have also continued to pursue non-DOD commercial business through the introduction of a new public safety footwear line, which we unveiled at the WSA Footwear Show in February. At Trotters, we have redesigned and repositioned the brand, and have also added two new sales positions to help broaden the brand’s distribution. In addition to these efforts, we have added additional sales and management positions across our portfolio, and are also looking forward to the initial build-out of our new Strol brand, which is the men’s version of our popular SoftWalk brand. Overall we are encouraged with the early performance of our brands this year, and are focused on restoring growth across our portfolio in 2005.”
Net sales for the fourth quarter ended January 1, 2005 increased 83%, to $20.7 million compared to $11.3 million for the fourth quarter of 2004. This increase includes $6.9 million of new revenue associated with the Altama brand acquisition, completed during the third quarter of 2004. Excluding Altama, Phoenix’s Trotters, SoftWalk, H.S. Trask, and Royal Robbins brands generated organic growth of 12.9% during the fourth quarter as compared to pro forma net sales for these brands during the prior year quarter.
Gross margin in the fourth quarter was 35.4% of net sales, compared to 43.1% in the fourth quarter of 2003. The decrease in gross margin percent was primarily related to increased mark downs and close-out activity associated with retail market conditions and the Company’s liquidation of slow moving inventory. Additionally, the Company’s gross margins were negatively affected by the inclusion of the Altama brand gross margins which generate lower gross margins than our other branded products. Operating expenses for the fourth quarter of 2004 were $7.9 million or 38.2% of net sales, versus $4.4 million or 38.9% of net sales for the fourth quarter of 2003. This increase is related to increased operating costs associated with supporting a higher sales volume, our recently acquired brands and increased sales, design and management compensation expenses.
During the fourth quarter of 2004, interest expense totaled $385,000, compared to $107,000 in the comparable prior year period. This increase is primarily related to increased acquisition and working capital debt associated with our 2003 and 2004 brand acquisitions.
Net sales for the full year ended January 1, 2005 increased 95% to $76.4 million as compared to $39.1 million for the full year 2003. Excluding Altama, net sales for the Company’s Trotters, SoftWalk, H.S. Trask, and Royal Robbins brands generated organic growth of 5.5% during the full year 2004, as compared to pro forma net sales for these brands during the prior year period.
Gross margin for the full year ended January 1, 2005 was 41.3% of net sales, compared to 42.5% for the full year 2003. The decrease in gross margin percentage was primarily related to increased mark downs and close-out activity and the inclusion of the Altama brand gross margins which generate lower gross margins than our other branded products. Operating expenses for the full year 2004 were $25.7 million or 33.6% of net sales, versus $14.1 million or 36.1% of net sales for the full year 2003. The dollar increase was related to increased operating costs associated with supporting a higher sales volume, our recently acquired brands and increased sales, design and management compensation expenses. The decline in operating expenses as a percentage of net sales is primarily attributable to non-recurring expenses recorded in the prior year totaling $1.4 million associated with litigation settlement, acquisition and corporate relocation costs partially offset by an excise tax refund. Additionally, Altama generally incurs lower operating expenses as a percentage of net sales than does the Company’s other brands.
Interest expense amounted to $888,000 for the full year ended January 1, 2005, compared to $620,000 for the full year 2003. This increase is primarily related to increased acquisition and working capital debt associated with our 2003 and 2004 brand acquisitions. Additionally, the prior year period results included interest charges totaling $376,000 associated with the dissenting stockholders litigation settlement.
2005 BUSINESS OUTLOOK
For the full year 2005, the Company expects to report overall revenues of $90 to $95 million and diluted EPS of $0.65 to $0.70. Included in projected EPS is $0.12 per share in amortization charges of acquisition-related intangibles and charges related to the expensing of stock to employees in the Company’s 401(k) savings plan.
Phoenix Footwear Group, Inc.
Consolidated Condensed Statement of Operations
For the Quarter Ended
(Unaudited)
January 1, December 27,
2005 2003
Net sales $20,696,000 100% $11,316,000 100%
Cost of goods sold 13,378,000 65% 6,442,000 57%
Gross profit 7,318,000 35% 4,874,000 43%
Operating expenses:
Selling and administrative
expenses 7,870,000 38% 4,233,000 37%
Other expense, net 51,000 0% 146,000 1%
Total operating expenses 7,921,000 38% 4,379,000 39%
Income from operations (603,000) -3% 495,000 4%
Interest expense 385,000 107,000
Income before income taxes (988,000) -5% 388,000 3%
Income tax provision (364,000) 280,000
Net Income $(624,000) -3% $108,000 1%
Earnings per common share:
Basic ($0.08) $0.02
Diluted ($0.08) $0.02
Phoenix Footwear Group, Inc.
Consolidated Condensed Statement of Operations
For the Twelve Months Ended
January 1, December 27,
2005 2003
Net sales $76,386,000 100% $39,077,000 100%
Cost of goods sold 44,802,000 59% 22,457,000 57%
Gross profit 31,584,000 41% 16,620,000 43%
Operating expenses:
Selling and administrative
expenses 25,610,000 34% 12,696,000 32%
Other expense, net 113,000 0% 1,377,000 4%
Total operating expenses 25,723,000 34% 14,073,000 36%
Income from operations 5,861,000 8% 2,547,000 10%
Interest expense 888,000 620,000
Income before income taxes 4,973,000 7% 1,927,000 5%
Income tax provision 1,990,000 986,000
Net Income $2,983,000 4% $941,000 2%
Earnings per common share:
Basic $0.51 $0.24
Diluted $0.48 $0.22
