Glasses and costume jewelry designer and marketer FGX International had net sales increase 10% to $59.1 million in the third quarter ended Oct. 4, 2008, from $53.9 million in the third quarter of 2007. Net income increased to $3.9 million from break even in the third quarter of 2007 and earnings per diluted share increased to 18 cents in the third quarter of 2008 from break even in the third quarter of 2007. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 9% to $12.2 million from $11.2 million in 2007s third quarter.
CEO Alec Taylor commented, “The momentum we experienced in the first six months of the year continued into the third quarter despite challenging economic times in which many of our retail partners experienced sales softness. Our Foster Grant and Magnivision brands are providing great value to consumers who look for brand names they know and trust. Additionally, we continued to maintain our high gross margins in the face of inflationary pressures while once again improving on key working capital metrics.”
Highlights for the nine months include:
— Net sales increased 7% to $189.9 million in the first nine months of
2008 from $177.7 million in the first nine months of 2007.
— Net income increased 200% to $10.2 million in the first nine months of 2008 from $3.4 million in the first nine months of 2007.
— Earnings per diluted share increased to $0.48 in the first nine months of 2008 from $0.23 in the first nine months of 2007, a 109% increase.
— EBITDA increased 4% to $35.9 million in the first nine months of 2008 from $34.4 million in the first nine months of 2007.
The increase in sales in the sunglasses and prescription frame segment for both the quarter and first nine months was due to organic growth at existing customers and higher sales related to a promotional program at a major customer.
Taylor continued, “We were pleased with our third quarter 2008 financial results, particularly in light of the current retail environment. Our non-prescription reading glasses business continued to enjoy strong and predictable results with double digit year-over-year sales increases while maintaining high gross margins. Our sunglasses business enjoyed an excellent summer selling season, once again posting impressive sales growth compared to the prior year period. We remain on track to complete 2008 within our guidance announced at the end of last year.”
As of Oct. 4, 2008, the company had $64.7 million of availability under its revolving credit facility, which expires in 2012. In addition, through the first nine months of 2008, FGXI has generated $25.4 million of Free Cash Flow. The company believes it has adequate liquidity and capital resources to operate its business as currently conducted.
Outlook
For the fourth quarter 2008, excluding any unforeseen charges or events, the company currently expects net sales in the range of $66-68 million, earnings per diluted share in the range of 29 cents to 31 cents and EBITDA in the range of $18 million to $20 million. These ranges would yield full year 2008 net sales of $256 million to 258 million, earning per diluted share of 77 cents to 79 cents and EBITDA of $54 million to $56 million.
The company anticipates stock compensation expense to be approximately $0.6 million, or 2 cents per diluted share, in the fourth quarter of 2008.
FGX INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF INCOME AND OTHER SELECTED DATA
(Unaudited, in thousands, except per share data)
Three Months Ended(4)
Oct. 4, 2008 Sept. 29, 2007
Net sales:
Non-prescription Reading Glasses $36,501 $30,935
Sunglasses and Prescription Frames 10,425 8,698
Costume Jewelry 5,151 6,770
International 7,026 7,516
Total net sales 59,103 53,919
Cost of sales 25,880 24,762
Gross profit 33,223 29,157
Operating expenses:
Selling expenses 18,406 16,134
General and administrative expenses 5,927 4,998
Amortization of acquired intangibles 1,295 1,543
Abandoned lease charge - -
Total operating expenses 25,628 22,675
Operating income 7,595 6,482
Interest expense, net 1,478 6,037
Other income (expense), net (198) 56
Income before income taxes and minority
interest 5,919 501
Income tax expense (benefit) 1,909 539
Income (loss) before minority interest 4,010 (38)
Minority interest expense 103 20
Net income (loss) $3,907 $(18)
EPS: Basic $0.18 $(0.00)
Diluted $0.18 $(0.00)
Weighted average shares outstanding:
Basic 21,171 14,638
Diluted 21,316 14,638
Capital expenditures $3,609 $3,282
The table below reconciles EBITDA to
net income, the most directly comparable
GAAP measure.
Net income (loss) $3,907 $(18)
Income tax expense (benefit) 1,909 539
Interest expense, net 1,478 6,037
Depreciation and amortization 4,935 4,611
EBITDA (1) $12,229 $11,169
EBITDA margin (EBITDA / net sales) 20.7% 20.7%
The table below reconciles Free Cash
Flow to the EBITDA table above.
EBITDA $12,229 $11,169
Less: Capital Expenditures (3,609) (3,282)
Free Cash Flow (1) $8,620 $7,887
