Phoenix Footwear Group, Inc. reported results for the second quarter ended July 3, 2010.


Second Quarter 2010


•Net earnings of $201,000, or $0.03 per share, compared to a net loss of $5.1 million, or $0.63 per share, for the second quarter of 2009.


•Loss from continuing operations of $1.1 million compared to a loss of $2.1 million for the second quarter of 2009.


•Net sales of $3.8 million, down 5% compared to net sales of $4.0 million for the second quarter of 2009.


•Funded bank debt balance of $2.2 million at the close of the second quarter, down 27% compared to $3.0 million at the close of the fourth quarter of 2009.


For the quarter ended July 3, 2010, net sales totaled $3.8 million compared to $4.0 million in the prior year comparative period. For the current quarter, net sales of Trotters increased by 10%, while net sales of SoftWalk and Trask decreased by 17% and 47%, respectively.


Russell Hall, President and Chief Executive Officer, commented, “The second quarter is always our seasonally weakest of the year. Additionally, our results this quarter were heavily impacted by retailers' reorder activity. We experienced solid demand for our products and good sell through at retail, however customers' efforts to minimize their inventories generated weaker follow on sales for the quarter than would otherwise have been normal. During the quarter we again were able to produce growth in Trotters and based upon a strong future order backlog, we expect to generate solid growth during the third quarter in both our Trotters and SoftWalk brands.


Our sales organization has been able to make continued progress in opening new doors and more recently we have introduced a new toning product called 'HealthGlide' under our SoftWalk label. This product is being offered as a casual alternative within this athletically dominated market segment. We believe this new initiative has the potential to add significantly to our SoftWalk sales and we are currently in the market generating sales orders. We plan to have HealthGlide reach retail floors this December.”


Gross profit was $738,000 for the quarter, up 42% compared to the prior year's comparable quarter. Gross margin improved to 20%, an increase of seven percentage points over the second quarter of 2009 and a decrease of 15 percentage points from the most recent quarter. Selling, general and administrative expenses, or SG&A, totaled $1.8 million, down 29% compared to $2.5 million in the second quarter of 2009. This reduction included a $235,000 decrease in compensation and employee benefits resulting from planned headcount reductions, a $100,000 decrease in bank fees, and a reduction in accrued liabilities of $395,000 to reflect a change in estimate relating to a sales tax accrual. SG&A as a percentage of net sales was 47% for the second quarter of 2010 compared to 63% in the prior year comparative period.


In the second quarter, our net income totaled $201,000. Operating loss from continuing operations for the quarter totaled $1.1 million compared to an operating loss of $2.1 million in the prior year comparative period. 


Mr. Hall concluded, “In addition to our sales efforts, we have also taken steps to further reduce our SG&A expenses by approximately $700,000 annually. These savings will begin to be realized during the fourth quarter. Our singular focus remains to return to operating profitability by accelerating sales and tightly controlling our costs.”  















































































































































































































































































































Phoenix Footwear Group, Inc.


Condensed Consolidated Statements of Operations


(In thousands, except per share data)




(Unaudited)



Three Months Ended









July 3, 2010




July 4, 2009



Net sales


$                   3,779


100%



$                3,961


100%


Cost of goods sold


3,041


80%



3,443


87%


Gross profit


738


20%



518


13%








Operating expenses:  







 Selling, general and administrative


1,767


47%



2,480


63%


    Total operating expenses


1,767


47%



2,480


63%








Operating loss


(1,029)


-27%



(1,962)


-50%








Interest expense, net


75


2%



135


3%








Loss before income taxes and discontinued operations


(1,104)


-29%



(2,097)


-53%








Income tax expense (benefit)


(8)


– %



37


1%








Loss from continuing operations


(1,096)


-29%



(2,134)


-54%








Earnings (loss) from discontinued operations, net of tax


1,297


34%



(2,981)


-75%








Net earnings (loss)


$                      201


5%



$              (5,115)


-129%




















Earnings (loss) per share:













Basic and diluted







Continuing operations


$                   (0.13)




$                (0.26)



Discontinued operations


0.16




(0.37)



Net earnings (loss)


$                     0.03




$                (0.63)









Weighted-average shares outstanding:







Basic and diluted


8,166




8,166