Phoenix Footwear Group, Inc. reported that net sales for the second quarter ended June 26, 2004 increased 83.7% to $13.9 million from $7.6 million for the second quarter of 2003. Net sales for the current period include $134,000 of royalty income compared to zero for the prior year period.
The Company's financial results for the second quarter of 2004 resulted in pre-tax income of $1.1 million, compared to a pre-tax loss of ($739,000) in the second quarter of 2003. Net income per diluted share was $0.12 for the second quarter ended June 26, 2004 as compared to a loss of ($0.19) per diluted share for the prior year quarter. The prior year second quarter results included costs associated with the settlement of the dissenting stockholders' litigation and the relocation of the Company's corporate headquarters from Old Town, Maine to Carlsbad, California totaling $939,000 and an interest charge of $346,000 also related to the dissenting stockholders' litigation settlement. Gross margin for the current year second quarter was 45.3%, compared to 42.2% for the second quarter in 2003.
The per share amounts for the second quarter ended June 26, 2004 include the 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, which occurred during the second half of 2003.
James R. Riedman, Chairman, commented, “Our second quarter results reflect our success in integrating recent acquisitions and driving sales growth across our expanded portfolio of niche brands. By aggressively leveraging a shared infrastructure and maintaining a focus on strict cost controls and inventory management, we have continued to generate profitable returns for our shareholders. Our operating income and net income surged during the quarter, highlighting our profit-driven business model.”
Mr. Riedman continued, “During the past 12 months, we have taken significant steps to expand our portfolio and position Phoenix Footwear for growth and value creation. We closed on the acquisition of Altama Footwear on July 19th, representing our third major transaction in the past year. An established, growing and profitable player in the military and commercial boot markets, Altama further diversified our revenue stream and enhanced our profitability. We also appointed five, seasoned brand managers during the past year and upgraded our senior management team and Board of Directors. Finally, we streamlined our infrastructure, completed the repositioning of our H.S. Trask® product line and launched several brand extensions.”
“Given these efforts, we have now moved from an active investment and transition phase to a period where our primary focus is on operating execution and driving organic growth,” Riedman continued. “In the second half of 2004 and beyond, we expect the investments we made in our business to become increasingly visible, as we seek to grow our revenues and profits to the benefit of our shareholders.”
Net sales for the second quarter ended June 26, 2004 increased $6.3 million or 83.7%, increasing to $13.9 million from $7.6 million for the second quarter of 2003. Of this increase $5.9 million is attributable to acquired brand revenue associated with the H.S. Trask®, Ducks Unlimited®, and Royal Robbins® brand acquisitions which occurred during the second half of 2003. Giving effect to these acquisitions as if they occurred on January 1, 2003, the Company's brands on a combined basis experienced flat year-over-year pro forma organic net sales growth based on $13.9 million in pro forma net sales for the second quarter ended June 28, 2003. Net sales for the Company's Trotters®, SoftWalk®, and Royal Robbins® brands increased 11.2% during the current quarter as compared to pro forma net sales for the prior year quarter. This sales percentage increase was offset by decreased sales from the Company's H.S. Trask® and Ducks Unlimited® brands as compared to the prior year quarter's pro forma net sales, resulting from a sourcing restructuring and product repositioning program which was completed during the current quarter.
Gross margin in the second quarter was 45.3% of net sales, compared to 42.2% in the second quarter of 2003. The increase in gross margin was primarily related to our 2003 brand acquisitions and an improved product sales mix. Selling, general and administrative expenses for the second quarter of 2004 were $5.0 million or 36.2% of net sales, versus $2.6 million or 34.4% of net sales for the second quarter of 2003. This increase was related to increased operating costs associated with supporting a higher sales volume, our recently acquired brands and increased sales, design and management compensation expenses.
During the second quarter of 2004, interest expense totaled $134,000, compared to $386,000 in the comparable prior year period. The prior year second quarter results included an interest charge totaling $346,000 associated with the dissenting stockholders' litigation settlement.
Net sales for the six months ended June 26, 2004 increased $15.8 million or 94.0%, increasing to $32.5 million from $16.8 million for the six months ended June 28, 2003. Of this increase $14.2 million is attributable to acquired brand revenue associated with the H.S. Trask®, Ducks Unlimited®, and Royal Robbins® brand acquisitions which occurred during the second half of 2003. Giving effect to these acquisitions as if they occurred on January 1, 2003, the Company's brands on a combined basis generated $1.7 million in pro forma organic net sales growth for the six months ended June 26, 2004 or 5.6%, based on $30.8 million in pro forma net sales for the six months ended June 28, 2003. Net sales for the Company's Trotters®, SoftWalk®, and Royal Robbins® brands increased 11.7% during the six month period ended June 26, 2004, as compared to pro forma net sales for the prior year period. This sales percentage increase was offset by decreased sales from the Company's H.S. Trask® and Ducks Unlimited® brands as compared to the prior year period's pro forma net sales resulting from a sourcing restructuring and product repositioning program which was completed during the second quarter of 2004.
Gross margin for the six months ended June 26, 2004 was 44.4% of net sales, compared to 43.0% for the six months ended June 28, 2003. The increase in gross margin was primarily related to our 2003 brand acquisitions and an improved product sales mix. Selling, general and administrative expenses for the six months ended June 26, 2004 were $10.8 million or 33.3% of net sales, versus $5.5 million or 32.5% of net sales for the six months ended June 28, 2003. This increase was related to increased operating costs associated with supporting a higher sales volume, our recently acquired brands and increased sales, design and management compensation expenses.
Interest expense amounted to $304,000 for the six months ended June 26, 2004, compared to $452,000 for the six months ended June 28, 2003. The prior year period results included interest charges totaling $376,000 associated with the dissenting stockholders' litigation settlement.
“As a result of the addition of Altama Footwear in the third quarter, we have increased our financial guidance for fiscal 2004. We now expect overall revenues of $79 to $89 million for the full-year 2004, compared to our prior guidance of $62 to $67 million. In addition we now expect full-year 2004 Diluted EPS of $1.00 to $1.10, compared to our prior full-year guidance of $0.85 to $0.95 per diluted share. Our updated EPS guidance includes newly issued shares associated with our recently completed secondary offering and Altama acquisition totaling 2.7 million shares.”
Pro Forma Net Sales Pro Forma Net Sales
for the Three Months for the Six Months
Ended June 28, 2003 Ended June 28, 2003
(in thousands) (in thousands)
(unaudited) (unaudited)
Phoenix Footwear Group, Inc.
(Actual) $ 7,552 $ 16,759
Acquired Brands (H.S. Trask & Co.,
Royal Robbins, Inc.) 6,367 14,044
Total Net Sales $ 13,919 $ 30,803
Phoenix Footwear Group, Inc.
Consolidated Condensed Statement of Operations
For the Quarter Ended
(Unaudited)
June 26, June 28,
2004 2003
Net sales $13,876,000 100.0% $7,552,000 100.0%
Cost of
goods sold 7,587,000 54.7% 4,365,000 57.8%
Gross profit 6,289,000 45.3% 3,187,000 42.2%
Operating expenses:
Selling and
administrative
expenses 5,021,000 36.2% 2,601,000 34.4%
Other expense, net 26,000 0.2% 939,000 12.4%
Total operating
expenses 5,047,000 36.4% 3,540,000 46.9%
Operating
income (loss) 1,242,000 9.0% (353,000) -4.7%
Interest expense 134,000 1.0% 386,000 5.1%
Earnings (loss)
before income
taxes 1,108,000 8.0% (739,000) -9.8%
Income tax
provision
(benefit) 465,000 (51,000)
Net earnings
(loss) $643,000 4.6% ($688,000) -9.1%
Net earnings
(loss) per share:
Basic $0.14 ($0.19)
Diluted $0.12 ($0.19)
