CARLSBAD, Calif., April 20 /PRNewswire-FirstCall/ -- Phoenix
Footwear Group, Inc. (NYSE Alternext US: PXG) today reported
results for the fourth quarter and year ended January 3, 2009. In
addition, the Company provided an update on its strategic process.
Fourth Quarter and Full 2008 Fiscal Year Results For the fourth
quarter ended January 3, 2009, net sales from continuing operations
totaled $16.5 million, down 15% from sales of $19.4 million in the
fourth quarter of 2007. For the full 2008 fiscal year, net sales
from continuing operations were $75.1 million, a 9% decrease from
$82.9 million for fiscal 2007. The net loss from continuing
operations was $14.2 million, or $1.74 per share for the fourth
quarter of 2008, compared to a net loss from continuing operations
of $12.8 million, or $1.59 per share for the fourth quarter of
fiscal 2007. Included in the net loss for the fourth quarter of
fiscal 2008 were $10.8 million in non-cash impairment charges
compared to $6.0 million in non-cash impairment charges for the
same period in the previous fiscal year. For the full 2008 fiscal
year, net losses from continuing operations totaled $18.8 million,
or $2.31 per share inclusive of the $10.8 million impairment
charges. In fiscal 2007, the Company recorded a net loss from
continuing operations of $16.6 million, or $2.07 per share
inclusive of the $6.0 million impairment charges. Net sales in the
Company's accessories and footwear businesses declined during
fiscal 2008 reflecting an unusually weak retail environment and an
effort by the Company's major customers to reduce their inventories
on hand. The Company's accessories segment generated net sales of
$37.4 million for fiscal 2008, a $4.1 million decrease from $41.5
million for fiscal 2007, primarily attributable to softness in the
women's mass and specialty channels. Footwear sales (including both
the footwear and premium footwear segments) were $37.7 million for
fiscal 2008, a decrease of $3.6 million from footwear sales of
$41.3 million in fiscal 2007. Net sales decreased in all primary
footwear distribution channels, including independent retailers,
department stores and catalog vendors, as the retail market
continued to experience unprecedented softness during the second
half of fiscal 2008. Gross profits declined by $1.1 million for the
2008 fiscal year as the Company's net sales declined; gross
margins, however, improved by two percentage points from 31% in
fiscal 2007 to 33% in fiscal 2008. This improvement resulted from
fewer closeout sales during fiscal 2008 and the streamlining of the
Company's sourcing operations during the latter half of fiscal
2007. As a result of aggressive inventory management, the Company
finished fiscal 2008 with net inventories of $18.0 million, a 10%
reduction in inventories from the prior fiscal year end level of
$19.9 million. "With the economic headwinds, this past year was an
especially challenging one," said Russell Hall, President and CEO
of Phoenix Footwear Group, Inc. "We are disappointed in our net
sales decline and resulting net loss; however we have made some
important gains in managing our inventory and gross margins and in
restructuring and right sizing our business as detailed in our
Annual Report on Form 10-K for fiscal 2008 which we filed today
with the SEC. Our productivity improvements, combined with our new
organizational structure, position us to produce better results
once retail conditions normalize." The Company has been in
continuing default on its bank debt since September 27, 2008. As a
result of this and the fact that the Company has had net losses for
the past two fiscal years, the Company's independent registered
public accountants have included a going concern explanatory
paragraph in their report on the Company's financial statements
included in the Company's Annual Report on Form 10-K for the 2008
fiscal year that the Company filed today with the Securities and
Exchange Commission. This announcement of a qualification is being
made in compliance with NYSE Alternext US Company Guide Rule 610(b)
requiring a public announcement of the receipt of an audit opinion
that contains a going concern qualification and does not reflect
any change or amendment to the consolidated financial statements as
filed. Further information regarding the going concern
qualification is contained in the Company's Annual Report on Form
10-K referred to above. Strategic Initiative Update Phoenix
Footwear also provided the following update on its strategic
initiatives to return the Company to profitability and reduce or
eliminate its bank debt. In February 2009, the Company terminated
its Tommy Bahama license agreement. At the same time, the Company
discontinued production and sales of Tommy Bahama branded products
other than pending orders and sales to Tommy Bahama Group to
fulfill a products purchase agreement. By shutting down the Tommy
Bahama footwear division, the Company eliminated a division which
incurred operating losses of $2.4 million and $3.5 million during
fiscal 2008 and fiscal 2007, respectively. Additionally, the
Company is in the process of monetizing the associated working
capital and plans to use the resulting proceeds to reduce its bank
debt by an estimated $2.5 million. In the first quarter of fiscal
2009, the Company will report the results of its Tommy Bahama
business as discontinued operations. In connection with this
action, in the first quarter of fiscal 2009, a pre-tax charge of
between $680,000 and $830,000 will be recorded. During the first
quarter of fiscal 2009, the Company took further steps to reduce
its corporate overhead. In addition to the 3 positions eliminated
relating to Tommy Bahama, 13 managerial and support positions were
also eliminated. This restructuring is expected to result in an
estimated savings of greater than $2.0 million in annual payroll
and related expenses. In connection with this action, in the first
quarter of fiscal 2009, a pre-tax restructuring charge of
approximately $1.0 million for these activities will be recorded.
Recently, Wrangler Apparel Inc. advised the Company of its intent
to directly enter the accessories business and take in-house its
Wrangler mass license business. In the wake of this development,
the Company has decided to sell the Chambers private label
accessories business and certain assets. More specifically, the
Company is negotiating with interested parties the terms of a sale
transaction which would include Chambers manufacturing equipment,
certain Chambers inventory at cost and certain intellectual
property and customer relationships. The Company does not plan to
include in the Chambers sale the division's accounts receivables or
Wrangler licenses. Upon closing a transaction, the Company plans to
collect these receivables and proceeds and wind-down the divisions
remaining activities as the Wrangler licenses expire unrenewed. The
Company expects that the Tommy Bahama transaction and Chambers
transaction would yield sufficient net proceeds to extinguish its
bank debt during fiscal 2009. Until a Chambers transaction is
agreed upon and entered into, the Company cannot provide any
assurance that a sale will occur or the ultimate amount of proceeds
that will result from it. About Phoenix Footwear Group, Inc.
Phoenix Footwear Group, Inc., headquartered in Carlsbad,
California, designs, develops and markets men's and women's
footwear and accessories. Phoenix Footwear's brands include
Trotters (R), SoftWalk (R), H.S. Trask (R) and it is a licensee of
the Wrangler brand. Emphasizing quality, fit and traditional and
authentic designs, these brands are primarily sold through
department stores, specialty retailers, mass merchants and
catalogs. Phoenix Footwear Group, Inc. is traded on the NYSE
Alternext US under the symbol PXG. Forward-Looking Statements The
words "anticipates," "will," "expects," "intends" and words of
similar meaning identify forward-looking statements.
Forward-looking statements also include representations of the
Company's expectations or beliefs concerning future events that
involve risks and uncertainties, including the Company's statements
regarding the proposed Chambers sale transaction, the expected
closing and timing of that transaction and the expected net
proceeds from that transaction and the monetization of Chambers'
working capital and the Tommy Bahama transaction and the repayment
of the Company's debt and other risks detailed in the Company's
periodic report filings with the Securities and Exchange
Commission. The potential risks and uncertainties include, among
others, the possibility that a Chambers transaction is not
successfully concluded, or the unexpected liabilities related to
the disposition arise or the transactions do not yield the
anticipated proceeds. The forward-looking statements speak only as
of the date of this press release, and the Company expressly
disclaims any obligation to release publicly any update or revision
to any forward-looking statement contained herein if there are
changes in the Company's expectations or if any events, conditions
or circumstances on which any such forward-looking statement is
based. This press release contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, which are intended to be covered by the safe
harbors created thereby. These forward-looking statements include,
but are not limited to, statements regarding future growth and
performance of individual brands, Phoenix Footwear's expected
financial performance and condition for fiscal 2009 and/or
statements preceded by, followed by or that include the words
"believes," "could," "expects," "anticipates," "estimates,"
"intends," "plans," "projects," "seeks," "exploring, " or similar
expressions. Many of these risks and uncertainties are discussed in
Phoenix Footwear's Annual Report on Form 10-K for the fiscal year
ended January 3, 2009 filed with the Securities and Exchange
Commission (the "SEC"), and in any subsequent reports filed with
the SEC, all of which are available at the SEC's website at
http://www.sec.gov/. These include, without limitation: Phoenix
Footwear's ability to obtain a replacement bank facility or waiver
of defaults and amendments to its defaulted secured credit
arrangement and the attendant risk of increased costs or
stockholder dilution from refinancing the defaulted debt or
foreclosure on the Company's assets if a waiver/amendment is not
obtained or the debt is not refinanced; the risk that Phoenix
Footwear. will not be able to continue as a going concern; Phoenix
Footwear's ability to return to profitability despite its
restructuring efforts and debt reduction; risk associated with the
recent disruptions in the overall economy and the impact on the
retail industry, including Phoenix Footwear's customers; risk
associated with Phoenix's accessories business; the concentration
of Phoenix Footwear's sales to a relatively small group of
customers; changing consumer preferences and fashion trends;
Phoenix's ability to execute on its growth strategies, including
the introduction of new products or the distribution of products
through new channels; competition from other companies in Phoenix
Footwear's markets; the potential financial instability of Phoenix
Footwear's customers and the risk of loss of future and pending
orders; Phoenix Footwear's ability to protect its intellectual
property rights; the risk of losing third party trademark licenses;
Phoenix Footwear's ability to manage inventory levels; fluctuations
in its financial results as a result of the seasonality in its
business; the risks of doing business in international markets;
Phoenix Footwear's reliance on independent manufacturers;
disruptions in Phoenix Footwear's manufacturing system; the loss of
one or more senior executives; fluctuations in the price,
availability and quality of raw materials; a decline in general
market and economic conditions; and, risk associated with claims
arising from divestiture transactions, including indemnification
claims. Although Phoenix Footwear believes that the assumptions
underlying the forward- looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward-looking
statements included in this press release will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by Phoenix
Footwear or any other person that the objectives and plans of
Phoenix Footwear will be achieved. All forward-looking statements
included in this press release are based on Phoenix Footwear's
current expectations and projections about future events, based on
information available at the time of the release, and Phoenix
Footwear assumes no obligation to update any forward-looking
statements. Phoenix Footwear Group, Inc. Consolidated Condensed
Statement of Operations (In thousands, except per share data) For
the Three Months Ended (Unaudited) January 3, December 29, 2009
2007 ---- ---- Net sales $16,479 100.0% $19,409 100.0% Cost of
goods sold 12,036 73.0% 14,337 73.9% Gross profit 4,443 27.0% 5,072
26.1% Operating expenses: Selling, general and administrative
expenses 7,314 44.4% 9,037 46.6% Non-cash 401k stock grant
compensation 43 0.3% 134 0.7% Amortization 149 0.9% 228 1.2%
Goodwill and intangible impairment charges 10,831 6,034 Other
(income) expense, net - -% 479 2.5% Total operating expenses 18,337
111.3% 15,912 82.0% Operating Loss (13,894) -84.3% (10,840) -55.9%
Interest expense 207 295 Loss before income taxes and discontinued
operations (14,101) -85.6% (11,135) -57.4% Income tax provision
(benefit) 104 1,655 Loss before discontinued operations (14,205)
-86.2% (12,790) -65.9% (Loss) earnings from discontinued
operations, net of tax (698) -4.2% 899 4.6% Net (loss) earnings
$(14,903) -90.4% $(11,891) -61.3% Loss per common share: Basic and
diluted Continuing operations $(1.74) $(1.59) Discontinued
operations (0.09) 0.11 Net loss $(1.83) $(1.48) Weighted-average
shares outstanding: Basic and diluted 8,166 8,045 For the Twelve
Months Ended January 3, December 29, 2009 2007 ---- ---- Net sales
$75,070 100.0% $82,871 100.0% Cost of goods sold 50,493 67.3%
57,215 69.0% Gross profit 24,577 32.7% 25,656 31.0% Operating
expenses: Selling, general and administrative expenses 31,492 42.0%
33,484 40.4% Non-cash 401k stock grant compensation 171 0.2% 534
0.6% Amortization 604 0.8% 903 1.1% Goodwill and intangible
impairment charges 10,831 6,034 Other (income) expense, net (1,500)
-% 451 0.5% Total operating expenses 41,598 55.4% 41,406 50.0%
Operating Loss (17,021) -22.7% (15,750) -19.0% Interest expense
1,613 1,402 Loss before income taxes and discontinued operations
(18,634) -24.8% (17,152) -20.7% Income tax provision (benefit) 149
(559) Loss before discontinued operations (18,783) -25.0% (16,593)
-20.0% (Loss) earnings from discontinued operations, net of tax
(677) -0.9% 15,249 18.4% Net (loss) earnings $(19,460) -25.9%
$(1,344) -1.6% Loss per common share: Basic and diluted Continuing
operations $(2.31) $(2.07) Discontinued operations (0.08) 1.90 Net
loss $(2.39) $(0.17) Weighted-average shares outstanding: Basic and
diluted 8,144 8,031 Phoenix Footwear Group, Inc. Consolidated
Condensed Balance Sheets (In thousands) As of As of January 3,
December 29, ASSETS 2009 2007 ---- ---- Current assets: Cash and
cash equivalents $456 $2,355 Accounts receivable, net 10,684 14,323
Inventories, net 17,983 19,874 Notes receivable - 13,303 Other
current assets 1,510 1,661 Income taxes receivable 312 2,657 Total
current assets 30,945 54,173 Property, plant & equipment, net
2,089 1,996 Goodwill & unamortizable intangibles - 6,190
Intangible assets, net 22 5,268 Other assets 93 50 $33,149 $67,677
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes
payable - line of credit $11,173 $22,666 Accounts payable 5,431
7,032 Accrued expenses 3,198 3,833 Other current liabilities 1,376
1,467 Income taxes payable 78 444 Total current liabilities 21,256
35,442 Other long-term liabilities 531 1,127 Deferred income tax
liability - 21 Total liabilities 21,787 36,590 Stockholders' equity
11,362 31,087 $33,149 $67,677 DATASOURCE: Phoenix Footwear Group,
Inc. CONTACT: Dennis Nelson, Chief Financial Officer of Phoenix
Footwear Group, Inc., +1-760-602-9688 Web Site:
http://www.phoenixfootwear.com/
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