From: ASAP
Phoenix Footwear Group, Inc. (AMEX: PXG) announced today that net income for the third quarter of 2002 was $551,377, compared to net income of $817,711 for the third quarter of 2001, or $0.28 versus $0.49 per fully diluted share, respectively. The Company announced a $205,000 charge in the third quarter of 2002 associated with the impairment of property. Excluding the charge for the impairment of the property, third quarter 2002 net income would have been $0.35 per fully diluted share. Net income results also reflect the impact of divested slipper brands in 2001. Net income for the nine months ended September 30, 2002 was $1,499,251, compared to a net loss of ($185,210) for the same period in 2001, or $0.77 versus ($0.12) per fully diluted share, respectively. Excluding the charge for the impairment of the property, net income for the first nine months of 2002 would have been $0.84 per fully diluted share. James R. Riedman, Chairman and CEO, commented, "Our revenues were impacted by the economic slowdown and continued weakness in the retail sector. Several of our key retailers reduced their basic inventory levels during the third quarter, adversely impacting our re-order business. We did however reduce bank debt by approximately $2.6 million during the quarter, and year-to-date we have reduced bank debt by approximately $11.1 million. Looking to 2003, our strong brands coupled with the progress we have made in reducing our debt and controlling costs, place us in a strong position to drive earnings results. We also expect sales growth to return in the current quarter and continue into 2003. Our current expectation for full-year 2003 is earnings per share in the range of $1.40 - $1.50." Results for the Third Quarter Ended September 30, 2002: Nine Months and Quarter Ended September 30, 2002 compared to the Nine Months and Quarter Ended September 30, 2001: Net sales for the third quarter of 2002 were $9.5 million compared to $12.9 million for the same period in the prior year. Net sales in the third quarter of 2001 included $3.2 million in sales generated by previously divested brands. Net sales for the Company's current brands, Trotters(R) and SoftWalk(R), in the third quarter of 2002 versus the third quarter of 2001 declined approximately 2.2%. Gross profit in the third quarter of 2002 was $3.8 million or 40.1% of net sales as compared to $4.0 million or 30.7% of net sales in the third quarter of 2001. The main reason for the improvement in the gross profit % in the third quarter of 2002 versus the third quarter of 2001 relates to the improved gross profit % in the Trotters(R) and SoftWalk(R) shoe brands vs. the gross profit % attributed to the previously divested slipper brands and the fact that the third quarter of 2001 included a higher percentage of closeout sales than the third quarter of 2002. Selling, general and administrative expenses as a percentage of net sales was 27.5% or $2.6 million for the quarter ended September 30, 2002, as compared to 22.1% or $2.9 million for the same quarter in fiscal 2001. The costs in 2001 include amounts associated with supporting the sales of the previously divested brands. Included in other expenses in the third quarter ended September 30, 2002 is a charge of $205,000 associated with the impairment of property. Results for the Nine Months Ended September 30, 2002: Net sales for the nine months ended September 30, 2002 were $28.8 million compared to $32.2 million for the same period in the prior year. Net sales in the nine months ended September 30, 2001 included $5.3 million in sales generated by previously divested brands. The growth rate in the Trotters(R) and SoftWalk(R) brands in the nine months ended September 30, 2002 vs. the nine months ended September 30, 2001 was approximately 7.1%. Gross profit in the nine months ended September 30, 2002 was $10.7 million or 37.3% of net sales as compared to $11.0 million or 34.1% of net sales in the nine months ended September 30, 2001. The main reason for the improvement in the gross profit % in the nine months ended September 30, 2002 versus the nine months ended September 30, 2001 relates to the improved gross profit % in the Trotters(R) and SoftWalk(R) shoe brands vs. gross profit attributed to the previously divested slipper brands. Selling, general and administrative expenses as a percentage of net sales was 26.5% or $7.6 million for the nine months ended September 30, 2002, as compared to 26.4% or $8.5 million for the same period in fiscal 2001. The costs in 2001 include amounts associated with supporting the sales of the previously divested brands. Included in other expenses in the nine months ended September 30, 2002 is a charge of $205,000 associated with the impairment of property. Included in other expenses for the nine months ended September 30, 2001 are costs associated with the termination of the Penobscot Shoe Company Retirement Plan, totaling $1,713,710. During the quarter ended June 30, 2001, the Company completed the termination of its defined benefit pension plan. On the date of termination, the Company received cash totaling $2,377,600, which was less than the carrying value of the prepaid pension cost asset of $3,734,670, resulting in a loss of $1,357,070. This loss was increased by an excise tax totaling $356,640, which resulted in a total loss on this transaction totaling $1,713,710. During the third quarter of 2002, interest expense amounted to $73,159 as compared to $297,910 in the same period in 2001. This decrease is a result of the lower outstanding indebtedness. For the nine months ended September 30, 2002 interest expense amounted to $408,025 compared to $1,307,644 for the same period last year. The reason for the decrease is the decrease in outstanding debt vs. last year. For the nine months ended September 30, 2002, the interest expense includes $31,250 related to a note paid April 11, 2002 and $45,000 relating to non-recurring costs associated with financing inventory purchases. The Company's effective tax rate for the third quarter of 2002 is 40% as compared to 1.0% in the third quarter of 2001. In 2001 the Company reduced its valuation allowance for its deferred income tax assets, resulting in a lower effective tax rate. Liquidity and Capital Resources As of September 30, 2002 Phoenix Footwear had working capital of $8,135,437 vs. working capital of $5,356,898 at December 31, 2001. Working capital may vary from time to time as a result of seasonal requirements which are heightened during the first and third quarters, the timing of factory shipments and the need to increase inventories and support an in-stock position in anticipation of customers' orders, and the timing of accounts receivable collections. The consolidated statement of cash flows for the nine months ended September 30, 2002 shows a decrease of cash since December 31, 2001. Net cash provided by operations was approximately $9,834,433, primarily due to the decrease in inventories and accounts receivable. At the end of the third quarter of 2002, total bank indebtedness was $3,744,000, and total indebtedness was $5,549,951, which consisted of: line of credit balance of $744,000, notes payable non-current of $3,000,000, and a liability relating to the dissenting shareholders of Penobscot of $1,805,951. The current loan agreement with the existing bank is comprised of a term loan in the amount of $3,000,000 and a revolving line of credit ("revolver") with a maximum credit amount of $11,000,000. As of the end of September, 2002 the amount outstanding on the revolver was $744,000. The Company must meet certain restrictive financial covenants as agreed upon in the facility. Depending on the Company's future growth rate, funds may be required by operating activities. Management is not aware of any known demands, commitments, or events that would materially affect its liquidity. With continued use of its revolving credit facility and internally generated funds, the Company believes its present and currently anticipated sources of capital are sufficient to sustain its anticipated capital needs for the remainder of 2002. Phoenix Footwear Group, Inc., based in Old Town, Maine, designs, develops and markets casual and dress footwear for women and men. The company's premium footwear brands include the Trotters(R) and SoftWalk(R) lines. Formerly known as Daniel Green Company (NASDAQ: DAGR) , Phoenix Footwear Group is now traded on the American Stock Exchange under the symbol PXG. Safe Harbor Statements Under the Private Securities Litigation Reform Act of 1995: The statements contained in this press release which are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. Actual results and timing of the events may differ materially from the future results, timing, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause Phoenix Footwear's financial performance to be different include risks of changing consumer preference, inability to successfully design, develop or market its brands, competition from other footwear manufacturers, loss of key employees, general economic conditions and adverse factors impacting the footwear industry, and the inability of the Company to source its products due to political or economic factors or the imposition of trade or duty restrictions. The Company assumes no duty to update information contained in this press release at any time.
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