Spy Inc. reported the sales of Spy-branded products reached $10.0 million in the quarter ended June 30, an increase of 7 percent or $700,000 from the second quarter of 2012.
The company, which has been in a turnaround mode for the last two years, also named a new CFO and board member with extensive public company experience.
Spy reported net sales increased by 6 percent or $500,000, to $10.0 million compared to $9.5 million in the second quarter of 2012. There were no licensed brand sales in the second quarter of 2013, compared with $100,000 in the second quarter of 2012.
“We are really happy to have achieved the ninth consecutive quarter of year over year growth of Spy brand products, with strong Spy brand sales growth of 10 percent in the first half of 2013 over the first half of 2012, and the first half of 2013 was 29 percent higher than the first half of 2011,” said President and CEO Michael Marckx.
“Moving forward, our Happy Lens Collection is expanding to include a growing list of new styles and will be featured in our Rx, Performance and Goggle Collections, which will further leverage this innovation in many ways. On top of our successful Happy Lens launch, we are even more pleased with the combination of things we accomplished this half: solid sales growth, improved gross margins, lower operating expenses, positive cash flow from operations and income from operations. We believe this solid first half of the year helps to position us well for the balance of 2013.”
Income from operations improved by $1.4 million to $300,000 in the second quarter of 2013, compared to a loss from operations of approximately $1.1 million in the second quarter of 2012. The $1.4 million improvement was partially due to the increase in sales combined with a 250 basis point improvement in gross profit as a percent of sales, which generated $500,000 in additional gross profit contribution.
Additionally, total operating expenses in the second quarter of 2013 were lower by $900,000, compared to the second quarter of 2012, primarily a result of the restructure actions taken in the third quarter of 2012. Cash flow used by operating activities was $500,000 million in the second quarter of 2013, compared to negative $3.5 million in the second quarter of 2012, or an improvement of more than $3.0 million.
The net loss improved by $1.1 million to $600,000 in the second quarter of 2013, compared to a net loss of $1.6 million in the second quarter of 2012. The improved net loss was due to the reduction in the loss from operations, partially offset by higher interest expense. Interest expense included in the net losses is primarily “paid in kind” by being added to the outstanding principal balance rather than being paid in cash.
Spy also announced that Jim McGinty will assume the role of CFO, effective August 19, 2013. In addition, effective August 22, 2013, David Rane will join the company's board of directors.
Throughout his career McGinty has honed his expertise in the retail sector, happily working with standouts and popular fashion purveyors Victoria's Secret, Structure, and Express, all functioning as divisions of Limited, Inc. Most recently, and for the last 13 years, McGinty stoked the fire at Hot Topic, Inc. — a publicly traded teen specialty retailer, where he served as Chief Financial Officer.
Rane's professional history spans 30 years in senior financial roles in the hard good and technology industries, as well as the investment management sector, all under publicly traded companies. Rane began his financial career with 15 years of experience as CPA for PricewaterhouseCoopers, servicing the firm's national office for accounting and SEC reporting issues. At Callaway Golf, Rane served as Executive Vice President and Chief Financial Officer during the period that the company grew from $124 million in revenue to over $800 million in revenue.
From 2007 and immediately prior to joining Spy, Rane served on the Board of Directors and as Audit Committee Chairman of Telanetix, Inc. (TNIX), a publicly traded company, and currently consults on financial management and financing.