Phoenix Footwear Group, Inc. reported a net profit of $60,000, or 1 cent a share, in the third quarter compared with a a net loss of $2.1 million, or 26 cents a share, for the third quarter of fiscal 2008.
The company previously announced a preliminary net profit of $310,000 for the third quarter. The smaller profit reflected an additional charge arising solely from closing transaction costs relating to the company's divestiture of certain discontinued operations.
A loss from continuing operations during the third quarter of $1.0 million, or $0.12 per share. Included in this loss is $303,000 in amortized financing exit fees, $180,000 of payroll related expenses for terminated employees, and $115,000 of financial consulting and other fees. This loss compares to a loss from continuing operations of $1.3 million for the third quarter of fiscal 2008.
Net sales from continuing operations during the third quarter of $5.5 million, down 32% compared to net sales from continuing operations of $8.0 million during the third quarter of fiscal 2008.
Funded bank debt balance of $2.6 million at the close of the third quarter, which is a reduction of $5.4 million from the close of the second fiscal quarter of 2009.
Banking Update
On November 5, 2009 the company and Wells Fargo Bank, National Association entered into a Fifth Amendment to Credit and Security Agreement. Under the terms of this Amendment, the existing credit agreement was changed by, among other things, decreasing the inventory sublimit of the borrowing base to $2.1 million and resetting the percentage of Eligible Inventory included in the borrowing base to 41% and eliminating the one percent (1%) daily reductions included in the previous amendment.
As of November 11, 2009, the company had $2.6 million outstanding under the Credit Agreement with remaining availability of $257,000. The company is engaged in discussions with several different financing sources concerning the refinancing of the revolving line of credit debt on or before November 30, 2009.
Liquidity Update
Recently the Worker, Homeownership and Business Assistance Act of 2009 (the Act) was enacted. The Act provides for an election for federal taxpayers to increase the carry back period for an applicable net operating loss to 3, 4 or 5 years. Accordingly, the company is applying for a refund of approximately $2.0 million with the Internal Revenue Service. The Company expects to receive these funds in the next 45 days, which will be applied to increase the company's liquidity and working capital.
Phoenix Footwear Group, Inc.
Consolidated Condensed Statements of Operations
(Unaudited)
(In thousands, except per share data)
For the Three Months Ended
October 3, September 27,
2009 2008
---- ----
Net sales $5,453 100.0% $8,028 100.0%
Cost of goods sold 3,536 64.8% 4,567 56.9%
----- -----
Gross profit 1,917 35.2% 3,461 43.1%
Operating expenses:
Selling, general and
administrative expenses 2,621 48.1% 4,722 58.8%
----- -----
Total operating expenses 2,621 48.1% 4,722 58.8%
----- -----
Operating loss (704) -12.9% (1,261) -15.7%
Interest expense, net 306 5.6% 47 0.6%
--- ---
Loss before income taxes
and discontinued
operations (1,010) -18.5% (1,308) -16.3%
Income tax expense
(benefit) 9 0.2% 7 -%
--- ---
Loss before discontinued
operations (1,019) -18.7% (1,315) -16.4%
Earnings (loss) from
discontinued operations,
net of tax 1,079 19.8% (803) -10.0%
----- ----
Net earnings (loss) $60 1.1% $(2,118) -26.4%
=== =======
Earnings (loss) per share:
Basic and diluted
Continuing operations $(0.12) $(0.16)
Discontinued operations 0.13 (0.10)
---- -----
Net earnings (loss) $0.01 $(0.26)
===== ======
Weighted-average shares
outstanding:
Basic and diluted 8,166 8,166
