Phoenix Footwear Group, Inc. announced results for the year ended December 31, 2002, reporting annual net sales of $36.2 million versus $46.9 million for the prior year. Net income for the full year 2002 increased 24.3% to $1,703,000 versus $1,370,000 for the prior year and earnings per diluted share increased 9.6% to $0.91 versus $0.83 for the previous year.
Excluding non-recurring charges incurred during the full year 2002 totaling $722,000, associated with an interest charge on previously disclosed litigation and asset impairment / disposal charges, earnings per diluted share would have been $1.13. Net sales and income results also reflect the impact of divested Slipper Brands in late 2001.
For the fourth quarter ended December 31, 2002, net sales were $7.4 million versus $14.6 million for the prior year period. Net income for the fourth quarter of 2002 totaled $204,000 as compared to net income of $1,556,000 for the fourth quarter of 2001, or $0.11 versus $0.89 per diluted share, respectively. Included in the fourth quarter results for 2001 is a pre- tax gain of approximately $1.2 million relating to the sale of the Company’s Slipper Brands. Excluding non-recurring charges incurred during the fourth quarter of 2002 totaling $413,000, associated with an interest charge on previously disclosed litigation and asset impairment / disposal charges, earnings per diluted share would have been $0.22. Net sales and income results also reflect the impact of divested Slipper Brands during late 2001.
James R. Riedman, Chairman and CEO, commented, “Our combined shoe brands generated increased sales in the fourth quarter and full year despite the challenging economic climate. Our results reflect our focus on building and supporting sustainable brands, with an emphasis on classic styles and comfort, rather than chasing short-term trends. Our product discipline, combined with our continued debt reduction program and emphasis on cost controls, supported our 24.3% increase in net income for 2002. We closed the year with a solid financial position; cash on hand of $1.3 million and only $3.0 million in bank debt, a decrease of 80% over the prior year. In 2003 we remain focused on growing the distribution of our Trotters(R) and SoftWalk(R) brands, while prudently seeking acquisition opportunities that can further bolster our revenues and profits. We expect to continue to report solid top and bottom- line growth in the full year ahead.”
Additionally, the Company announced on January 8, 2003 that it had sent a letter to the Board of Directors of Antigua Enterprises, Inc. (TSX Venture: ANE) (OTC: ANTGF.PK) in which Phoenix Footwear offered to acquire Antigua through a tax-free merger. At this point the offer is still pending and the two companies remain in dialogue.
Net sales for the fourth quarter of 2002 were $7.4 million compared to $14.6 million for the same period in the prior year. Net sales in the fourth quarter of 2001 included $7.3 million in sales generated by divested brands. Net sales for the Company’s current brands, Trotters(R) and SoftWalk(R), increased 1.7% in the fourth quarter of 2002 as compared to the same period in the prior year.
Gross profit in the fourth quarter of 2002 was $3.0 million or 41.0% of net sales as compared to $4.4 million or 30.3% of net sales in the fourth quarter of 2001. The improvement in gross margin as a percentage of net sales primarily relates to the divestiture of the Company’s Slipper Brands in late 2001, which carry a lower gross margin than the Company’s combined Trotters(R) and SoftWalk(R) shoe brands.
Selling, general and administrative expenses as a percentage of net sales was 29.0% or $2.1 million for the quarter ended December 31, 2002, as compared to 23.7% or $3.5 million for the same quarter in fiscal 2001. The expenses in 2001 include amounts associated with supporting the sales of the previously divested brands. Included in other expenses in the fourth quarter ended December 31, 2002 are asset impairment and disposal charges totaling $133,000.
During the fourth quarter of 2002, interest expense amounted to $343,000 and included an interest charge of $280,000 related to previously disclosed litigation. Without the interest charge, interest expense for the fourth quarter of 2002 would have been $63,000 as compared to $376,000 for the same period in 2001. The decrease is a result of lower interest rates and average outstanding indebtedness during the current quarter as compared to the prior year period.
Net sales for the twelve months ended December 31, 2002 were $36.2 million as compared to $46.9 million for the prior year period. Net sales for the twelve months ended December 31, 2001 included $12.6 million in sales generated by divested brands. Net sales for the Company’s current brands, Trotters(R) and SoftWalk(R), increased 5.9% for the twelve months ended December 31, 2002 as compared to the prior year.
Gross profit for the twelve months ended December 31, 2002 was $13.8 million or 38.1% of net sales as compared to $15.4 million or 32.9% of net sales in the twelve months ended December 31, 2001. The improvement in gross margin as a percentage of net sales primarily relates to the divestiture of the Company’s Slipper Brands in late 2001, which carry a lower gross margin than the Company’s combined Trotters(R) and SoftWalk(R) shoe brands.
Selling, general and administrative expenses as a percentage of net sales was 26.7% or $9.7 million for the twelve months ended December 31, 2002, as compared to 25.4% or $11.9 million for the same period in fiscal 2001. The expenses in 2001 include amounts associated with supporting the sales of the previously divested brands. Included in other expenses in the twelve months ended December 31, 2002 are asset impairment and disposal charges totaling $442,000.
Included in other expenses for the twelve months ended December 31, 2001 are costs associated with the termination of the Penobscot Shoe Company Retirement Plan, totaling $1.7 million. During the quarter ended June 30, 2001, the Company completed the termination of this defined benefit pension plan. On the date of termination, the surplus in the plan totaling $2.4 million was less than the carrying value of the prepaid pension cost asset of $3.7 million, resulting in a loss of $1.3 million. This loss was increased by an excise tax totaling $357,000, which resulted in a total loss on this transaction of $1.7 million. Also included in other expenses for the twelve months ended December 31, 2001 is a gain of $1.2 million as a result of the sale of the Company’s Slipper Brands in late 2001 and a $142,000 gain on the sale of property.
For the twelve months ended December 31, 2002 interest expense amounted to $751,000 and included an interest charge of $280,000 related to previously disclosed litigation. Without the interest charge, interest expense for the twelve months ended December 31, 2002 would have been $471,000 as compared to $1.7 million for the prior year period. The decrease is a result of lower interest rates and average outstanding indebtedness in 2002 as compared to the prior year.
Phoenix Footwear Group. Inc. Consolidated Condensed Statement of Operations
For the Three Months Ended December 31,
(Unaudited)
Q4 Q4
2002 Actual 2001 Actual
Net sales $7,401,000 100.0% $14,608,000 100.0%
Cost of goods sold 4,370,000 59.0% 10,179,000 69.7%
Gross profit 3,031,000 41.0% 4,429,000 30.3%
Operating expenses:
Selling and administrative
expenses 2,144,000 29.0% 3,460,000 23.7%
Other expense, net 133,000 1.8% (1,339,000) -9.2%
Total operating expenses 2,277,000 30.8% 2,121,000 14.5%
Income from operations 754,000 10.2% 2,308,000 15.8%
Interest expense 343,000 4.6% 376,000 2.6%
Income before income taxes 411,000 5.6% 1,932,000 13.2%
Income tax provision 207,000 376,000
Net Income $204,000 2.8% $1,556,000 10.6%
For the Year Ended December 31,
YTD YTD
2002 Actual 2001 Actual
Net sales $36,161,000 100.0% $46,851,000 100.0%
Cost of goods sold 22,397,000 61.9% 31,439,000 67.1%
Gross profit 13,764,000 38.1% 15,412,000 32.9%
Operating expenses:
Selling and administrative
expenses 9,661,000 26.7% 11,917,000 25.4%
Other expense, net 442,000 1.2% 375,000 0.8%
Total operating expenses 10,103,000 27.9% 12,292,000 26.2%
Income from operations 3,661,000 10.1% 3,120,000 6.7%
Interest expense 751,000 2.1% 1,683,000 3.6%
Income before income taxes 2,910,000 8.0% 1,437,000 3.1%
Income tax provision 1,207,000 67,000
Net Income $1,703,000 4.7% $1,370,000 2.9%
