Phoenix Footwear Group announced 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, combined with the addition of the H.S. Trask and Ducks
Unlimited 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.
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.
“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.
Phoenix Footwear Group, Inc.
Consolidated Condensed Statement of Operations
For the Quarter Ended
(Unaudited)
December 27, December 31,
2003 2002
Net sales $11,316,000 100% $7,401,000 100%
Cost of goods sold 6,442,000 57% 4,370,000 59%
Gross profit 4,874,000 43% 3,031,000 41%
Operating expenses:
Selling and
administrative
expenses 4,233,000 38% 2,144,000 29%
Other expense, net 146,000 1% 133,000 2%
Total operating expenses 4,379,000 39% 2,277,000 31%
Income from operations 495,000 4% 754,000 10%
Interest expense 107,000 343,000
Income before income taxes 388,000 3% 411,000 6%
Income tax provision 280,000 207,000
Net Income $108,000 1% $204,000 3%
Earnings per common share:
Basic $0.02 $0.06
Diluted $0.02 $0.05
Weighted-average shares
outstanding:
Basic 4,430,618 3,521,012
Diluted 4,950,153 3,720,644
For the Twelve Months Ended
December 27, December 31,
2003 2002
Net sales $39,077,000 100% $36,161,000 100%
Cost of goods sold 22,457,000 57% 22,397,000 62%
Gross profit 16,620,000 43% 13,764,000 38%
Operating expenses:
Selling and
administrative
expenses 12,696,000 32% 9,661,000 27%
Other expense, net 1,377,000 4% 442,000 1%
Total operating
expenses 14,073,000 36% 10,103,000 28%
Income from operations 2,547,000 7% 3,661,000 10%
Interest expense 620,000 751,000
Income before income
taxes 1,927,000 5% 2,910,000 8%
Income tax provision 986,000 1,207,000
Net Income $941,000 2% $1,703,000 5%
Earnings per
common share:
Basic $0.24 $0.50
Diluted $0.22 $0.45
Weighted-average
shares outstanding:
Basic 3,963,382 3,418,468
Diluted 4,350,132 3,781,634
