CARLSBAD, Calif., Nov. 11 /PRNewswire-FirstCall/ -- Phoenix
Footwear Group, Inc. (NYSE Alternext US: PXG), a multi-brand
footwear and accessories company, announced today consolidated
results for the third quarter and nine months ended September 27,
2008. Jim Riedman, Phoenix Footwear's Chairman, commented, "As the
retail environment continued to be impacted by mounting economic
concerns, we focused our efforts on making improvements in the
controllable aspects of our business. We improved our operating
efficiencies and expanded gross margins, resulting in a lower
operating loss compared to a year ago. In addition, we ended the
quarter with significantly reduced inventory and debt levels.
However, as we previously reported, this progress was offset by
deteriorating consumer spending, resulting in disappointing sales
and a loss for the third quarter." "Due to the unsettled capital
markets and deepening retail challenges, as announced in a separate
press release we issued today, our Board of Directors has formed a
Special Committee which has engaged BB&T Capital Markets, a
division of Scott & Stringfellow, Inc., as its financial
advisor, to consider strategic alternatives, including proposals
for the purchase of the Company or one or more of its divisions, in
an effort to enhance stockholder value. In the meantime, we will
continue to diligently execute our strategic plan and capitalize on
market opportunities," concluded Mr. Riedman. Third Quarter Fiscal
2008 Operating Results -- Net sales from continuing operations
decreased 16.4% to $18.7 million, compared to $22.3 million for the
third quarter of fiscal 2007. The Company experienced sales
declines across all of its brands, reflecting the challenging
retail environment. -- Gross margin expanded 780 basis points to
32.8%, compared to 25.0% for the third quarter of 2007. The
increase was due to strong gross margin growth in the Company's
Trotters and SoftWalk divisions. -- Operating expenses decreased
3.7% to $8.0 million, or 43% of net sales, compared to $8.3
million, or 37% of net sales, for the third quarter of fiscal 2007.
The decrease in operating expenses is primarily attributable to a
decrease in headcount in several corporate departments along with
tight expense control at the divisional level. -- Operating loss
narrowed to $1.9 million, compared to $2.7 million a year ago. --
Net loss from continuing operations was $2.1 million, or $0.25 per
share, on 8.2 million weighted-average shares outstanding, compared
to net loss of $1.8 million, or $0.22 per share, from continuing
operations a year ago. "The extremely challenging economic
conditions have negatively impacted our distribution channels,
slowed down re-order rates and resulted in weaker than expected
performance for all of our brands," commented Cathy Taylor, Phoenix
Footwear's Chief Executive Officer. "While the recent events in the
industry have demonstrated that consumer spending is likely to
remain soft through the fourth quarter and into 2009, we believe
each of our divisions is well positioned to return to positive
growth once the retail climate improves. We remain committed to
developing quality products and continuing to build strong
relationships with our retail partners." Recent Operating
Highlights by Brand -- Tommy Bahama - RELAXED Vulcanized programs
and sandal product will be in the market place for the first time
by the end of the fourth quarter and available across most
channels, including a broad selection at Nordstrom. -- H.S. Trask -
The Company has partnered with David Stoecklein, known as
"Photographer of the American West," to collaborate on H.S. Trask's
Fall 2008 catalog, web site and promote the brand. The launch of a
new H.S. Trask web site is scheduled for late November, while a new
catalog will be ready for the holiday season. H.S. Trask's new Fall
2008 products will be in stores by the end of November - beginning
of December. -- Trotters - During the fourth quarter, the Company
plans to open additional retail doors at Nordstrom in two regions
and expand its distribution in Von Maur for Spring 2009.
Additionally, the Company is going to launch a new web site for
Trotters in December and establish a new external online
partnership with Bon-Ton. -- SoftWalk - Re-order rates continue to
be strong and the Company is in a solid inventory position to
support future sales. In addition to a new web site for SoftWalk to
be launched in December the Company is going to expand its external
online relationship with Bon-Ton. For Spring 2009, the Company
plans to start selling its new opened up sandal packages in
Nordstrom. -- Chambers - Men's and Boy's mass business is ahead of
plan. The Company will be rolling out its Women's business in Guess
stores. First Nine Months of 2008 Results -- Net sales from
continuing operations decreased 8% to $58.6 million, compared to
$63.5 million for the first nine months of fiscal 2007. The net
sales decrease was attributable to lower re-order rates across all
divisions along with push outs of orders with key retailers in the
Company's H.S. Trask, Tommy Bahama, and Chambers divisions. --
Gross margin expanded 200 basis points to 34.4%, compared to 32.4%
for first nine months of 2007. The improvement in gross margin was
primarily attributable to strong gross margin growth in the
Company's Trotters and SoftWalk divisions. -- Operating expenses
decreased 9% to $23.3 million, or 40% of net sales, compared to
$25.5 million, or 40% of net sales, for the first nine months of
fiscal 2007. The decrease was attributable to a decrease in
headcount in several corporate departments along with tight expense
control at the divisional level. -- Operating loss narrowed to $3.1
million, compared to $4.9 million a year ago. -- Net loss from
continuing operations was $4.6 million, or $0.56 per share, on 8.1
million weighted-average shares outstanding. This compares to net
loss of $3.4 million, or $0.43 per share, from continuing
operations for the first nine months of fiscal 2007. Balance Sheet
and Liquidity As of September 27, 2008, tangible net worth totaled
$15.6 million, or $1.87 per share. The Company's bank debt, net of
cash, totaled $9.4 million. As of September 27, 2008, the Company
had $14.0 million in working capital, an increase of $4.0 million
from one year ago. As of September 27, 2008 the Company failed to
meet its financial covenants with its bank. The Company is having
ongoing discussions with the bank about a replacement facility
consistent with the Company's reduced funding needs. There is no
assurance, when or if, an amended or new facility will be provided
by the bank. Suspension of Financial Guidance Due to the unusual
softness at retail and its impact on our business, the Company does
not expect to achieve its previously issued financial guidance for
fiscal 2008. As a result, the Company is suspending its financial
guidance for fiscal 2008. Third Quarter Fiscal 2008 Conference Call
Phoenix Footwear will host a conference call to discuss the third
quarter results today at 4:30 p.m. Eastern Time. To participate in
the conference call, investors should dial 800-762-8908 ten minutes
prior to the scheduled start time. International callers should
dial 480-629-9031. If you are unable to participate in the live
call, a replay will be available beginning Tuesday, November 11, at
7:30 p.m. Eastern Time, through Tuesday, November 18, at midnight
Eastern Time. To access the replay, dial 800-406-7325 (passcode:
3939925). International callers should dial 303-590-3030 and use
the same passcode. The call will also be broadcast live over the
Internet and can be accessed on the Investor section of Phoenix
Footwear's website at http://www.phoenixfootwear.com/. For those
unable to participate during the live broadcast, the webcast will
be archived. About Phoenix Footwear Group, Inc. Phoenix Footwear
Group, Inc., headquartered in Carlsbad, California, designs,
develops and markets a diversified selection of men's and women's
dress and casual footwear, belts, and other accessories. Phoenix
Footwear's brands and licenses include Tommy Bahama Footwear and
Accessories(R), Trotters(R), SoftWalk(R), H.S. Trask(R), Chambers
Belts(R) and Wrangler. 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, which was formerly the American Stock Exchange, under
the symbol PXG. Forward-Looking Statements 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 2008 and beyond 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.
Investors are cautioned that all forward-looking statements involve
risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. Many of
these risks and uncertainties are discussed in Phoenix Footwear's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 27, 2008 and its Annual Report on Form 10-K for the
fiscal year ended December 29, 2007, both which are 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: including the Phoenix Footwear's the decision to
explore strategic opportunities, Phoenix Footwear's ability to
successfully implement a strategic opportunity, whether a strategic
opportunity could result in enhanced stockholder value, Phoenix
Footwear's ability to obtain a waiver of defaults or amendments to
its revolving credit facility or comply with any new financial
covenants which are established; risk associated with claims
arising from past divestitures, including indemnification claims;
risks associated with future acquisitions, including potential
dilution and integration issues; 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, the possibility of impairment charges resulting from future
adjustments to the value of goodwill recorded in connection with
past or future acquisitions. 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)
September 27, September 29, 2008 2007 ------------- ------------
Net sales $18,669 100.0% $22,319 100.0% Cost of goods sold 12,538
67.2% 16,738 75.0% ------- ---- ------- ---- Gross profit 6,131
32.8% 5,581 25.0% Operating expenses: Selling and administrative
expenses 7,806 41.8% 7,998 35.8% Non cash 401k stock grant
compensation 43 0.2% 113 0.5% Amortization 150 0.8% 226 1.0% Other
(income) expense, net - -% (30) -% ------- ---- ------- ---- Total
operating expenses 7,999 42.8% 8,307 37.2% ------- -------
Operating Loss (1,868) -10.0% (2,726) -12.2% Interest expense, net
183 442 ------- ------- Loss before income taxes and discontinued
operations (2,051) -11.0% (3,168) -14.2% Income tax provision
(benefit) 7 (1,391) ------- ------- Loss before discontinued
operations (2,058) -11.0% (1,777) -8.0% (Loss) earnings from
discontinued operations, net of tax (60) -0.3% 12,839 57.5% -------
------- Net (loss) earnings $(2,118) -11.3% $11,062 49.6% =======
======= Loss per common share: Basic and diluted Continuing
operations $(0.25) $(0.22) Discontinued operations (0.01) 1.60
------- ------- Net loss $(0.26) $1.38 ======= =======
Weighted-average shares outstanding: Basic and diluted 8,166 8,045
For the Nine Months Ended (Unaudited) September 27, September 29,
2008 2007 ------------- ------------ Net sales $58,591 100.0%
$63,462 100.0% Cost of goods sold 38,456 65.6% 42,878 67.6% -------
---- ------- ---- Gross profit 20,135 34.4% 20,584 32.4% Operating
expenses: Selling and administrative expenses 24,179 41.3% 24,446
38.5% Non cash 401k stock grant compensation 128 0.2% 400 0.6%
Amortization 455 0.8% 676 1.1% Other (income) expense, net (1,500)
-% (28) -% ------- ---- ------- ---- Total operating expenses
23,262 39.7% 25,494 40.2% ------- ------- Operating Loss (3,127)
-5.3% (4,910) -7.7% Interest expense, net 1,406 1,107 -------
------- Loss before income taxes and discontinued operations
(4,533) -7.7% (6,017) -9.5% Income tax provision (benefit) 45
(2,579) ------- ------- Loss before discontinued operations (4,578)
-7.8% (3,438) -5.4% (Loss) earnings from discontinued operations,
net of tax 21 0.0% 13,985 22.0% ------- ------- Net (loss) earnings
$(4,557) -7.8% $10,547 16.6% ======= ======= Loss per common share:
Basic and diluted Continuing operations $(0.56) $(0.43)
Discontinued operations - 1.74 ------- ------- Net loss $(0.56)
$1.31 ======= ======= Weighted-average shares outstanding: Basic
and diluted 8,136 8,026 Phoenix Footwear Group, Inc. Consolidated
Condensed Balance Sheets (In thousands) As of As of As of September
27, December 29, September 29, ASSETS 2008 2007 2007 -------
------- ------- (Unaudited) (Unaudited) Current assets: Cash and
cash equivalents $472 $2,355 $435 Accounts receivable, net 15,259
14,323 18,960 Inventories, net 18,314 19,874 20,762 Notes
receivable - 13,303 - Other current assets 1,034 1,661 2,100 Income
taxes receivable 545 2,657 - Deferred income tax asset - - 893
Current assets of discontinued operations - - 8,608 ------- -------
------- Total current assets 35,624 54,173 51,758 Property, plant
& equipment, net 2,229 1,996 2,132 Goodwill & unamortizable
intangibles 6,190 6,190 11,064 Intangible assets, net 4,813 5,268
6,658 Other assets 109 50 50 Deferred income tax asset - - 542 Long
term assets of discontinued operations - - 17,359 ------- -------
------- $48,965 $67,677 $89,563 ======= ======= ======= LIABILITIES
AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable - Line
of Credit $9,919 $22,666 $20,366 Accounts payable 6,599 7,032 8,701
Accrued expenses 2,857 3,833 2,438 Other liabilities 2,219 1,467
1,073 Income taxes payable 16 444 - Current liabilities of
discontinued operations - - 9,161 ------- ------- ------- Total
current liabilities 21,610 35,442 41,739 Other long term
liabilities 684 1,127 1,246 Deferred income tax liability 21 21 -
Long term liabilities of discontinued operations - - 3,507 -------
------- ------- Total liabilities 22,315 36,590 46,492
Stockholders' equity 26,650 31,087 43,071 ------- ------- -------
$48,965 $67,677 $89,563 ======= ======= ======= DATASOURCE: Phoenix
Footwear Group, Inc. CONTACT: P. Douglas Ford, Chief Financial
Officer of Phoenix Footwear Group, Inc., +1-760-602-9688, or Andrew
Greenebaum, , Lena Adams, , both of ICR, Inc., +1-310-954-1100, for
Phoenix Footwear Group, Inc. Web Site:
http://www.phoenixfootwear.com/
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