Phoenix Footwear Group, Inc. widened its loss from continuing
operations in the first quarter to $2.7 million, or 33 cents a share, a
loss of $500,000, or 5 cents, a year ago. Sales from continuing
operations were $6.1 million, down 35% from $9.4 million a year ago.
Included in the company's first quarter loss for 2009 are severance
charges totaling $1.0 million. During the first quarter of fiscal 2008,
the company recorded other income of $750,000 related to its
divestiture of Altama Delta Corporation.
The loss from discontinued operations totaled $241,000 for the quarter
ended April 4, 2009 compared to earnings of $199,000 for the quarter
ended March 29, 2008. Included in discontinued operations are the
company's Tommy Bahama business unit and Chambers Belt company.
As previously reported, on February 24, 2009, the company entered into
an Amendment to its License Agreement with Tommy Bahama that amended
and terminated the License. In connection with ceasing the Tommy Bahama
business operations, the company has sold its entire Tommy Bahama
product inventory and eliminated all related staff positions. In the
first quarter of fiscal 2009, the company incurred $286,000 of
severance charges. All but $38,000 of cash expenditures relating to
employee severance costs incurred as of April 4, 2009 are expected to
be paid by the end of fiscal 2009. In addition, the company recorded
non-cash charges in the first quarter of fiscal 2009 of $363,000 of
inventory and other write-offs and $36,000 of fixed assets and
intangible impairment charges.
Also, as previously reported on April 23, 2009, Chambers Belt company
(Chambers), a wholly owned subsidiary of the company, entered into an
Asset Purchase Agreement with Tandy Brands Accessories, Inc. (Tandy).
Subject to the terms and conditions of the Asset Purchase Agreement, at
closing, Tandy will purchase Chambers' manufacturing equipment, certain
inventory at cost, certain intellectual property and customer
relationships, and provide for payment at closing of the inventory
costs, an additional $500,000 and a $430,000 advance payment against
the earn-out payments which will be due. The earn-out payments will be
made on a monthly basis based on actual revenue and will equal 21.5% of
the revenue of the acquired business during the first 12 months
following closing, subject to a $2 million minimum. The sale of assets
does not include the company's accounts receivable, or Wrangler mass
license or cash on hand. This transaction is expected to close during
the second quarter.
The net proceeds of these two transactions together with the
monetization and collection of Chambers' receivables following the
closing and the collection of the earn-out payments, when fully
collected, are expected to generate net cash in excess of $14 million,
which would allow the company to repay its bank indebtedness. The
company's funded bank debt totaled $7.9 million as of May 16, 2009 down
from $13.1 million as of April 4, 2009. The company continues to be in
default under its revolving line of credit and is seeking amendments
and waivers as well as increased borrowing availability. However, there
is no assurance that the company will obtain either.
Commenting, CEO Rusty Hall said, “The first quarter marked a
continuation of an extraordinarily challenging retail environment. Our
focus has been on taking significant actions to ensure we have both a
capital structure and cost structure that allows us to exit this
downturn as a viable and healthy enterprise. Towards that end, we have
made very measurable progress; the benefits of which will be visible in
the upcoming quarters.”
The company's continuing operations include the Trotters, SoftWalk and
H.S. Trask footwear brands. It is also a licensee of the Wrangler brand.