CARLSBAD, Calif., Aug.14 /PRNewswire-FirstCall/ -- Phoenix Footwear
Group, Inc. (NYSE Amex: PXG) today reported its results of
operations for the second quarter of fiscal 2009. -- Net sales from
continuing operations of $4.0 million, down 36% compared to net
sales from continuing operations of $6.2 million during the second
quarter of fiscal 2008. -- A loss from continuing operations during
the second quarter of $2.1 million, or $0.26 per share, compared to
a loss of $2.7 million, or $0.33 per share, for the first quarter
of fiscal 2009 and a loss of $2.1 million, or $0.26 per share, for
the second quarter of fiscal 2008. -- A reduction in SG&A
expenses to $2.5 million for the second quarter of fiscal 2009
compared to $3.8 million for the first quarter of fiscal 2009 and
$4.7 million for the second quarter of fiscal 2008. -- A loss from
discontinued operations of $3.0 million, or $0.37 per share for the
second quarter of fiscal 2009 compared to a loss of $12,000 for the
second quarter of fiscal 2008. In connection with this
discontinuance, the Company incurred pretax charges of $2.0 million
relating to severance payments and other costs associated with
exiting these businesses. In the third quarter, the Company expects
to record a $2.0 million gain with the closing of the sale of
certain Chambers' assets. Commenting on the quarter, Rusty Hall CEO
said, "In spite of the continued reduction in sales, we are
encouraged by what we were able to accomplish during the quarter.
Our cost structure has been rationalized; with annualized savings
of approximately $5.2 million in SG&A expenses of continuing
operations compared to the prior quarter. While we saw reduced
gross margins for the quarter as we aggressively managed our
inventories, our inventories are now 30% lower than this time last
year. We of course have finalized the sale of our belt and
accessories business, received an extension from Wells Fargo under
their Forbearance Agreement until September 30, 2009 and are in
receipt of several replacement credit proposals. Most importantly,
we are seeing marked improvements in our future orders and sales
trends. Combined with our cost reduction efforts, we believe the
table has been set for a return to profitability." As previously
reported on July 9, 2009, the Company's wholly-owned subsidiary,
Chambers Belt Company, which operated a belt and accessories
business, closed the sale of its business to Tandy Brands
Accessories, Inc. The transaction was completed pursuant to an
Amended and Restated Asset Purchase Agreement dated July 7, 2009
and included substantially all of Chambers' assets, excluding
receivables, cash and cash equivalents. As part of the purchase
price, at closing, Tandy paid $2.6 million for inventory and
$500,000 for equipment. In addition to the closing payments, Tandy
will pay Chambers an earn-out which is a percentage of Tandy's
revenue during the 12 months following the closing that is
generated from the sale of products formerly sold by the Chambers'
business. This earn-out is not capped and provides for $2 million
in minimum aggregate payments. These payments are to be paid on a
monthly basis, except for a $430,000 advance payment that was made
to Chambers at closing. 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 , SoftWalk
and H.S. Trask . 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 Amex
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
Chambers sale transaction, the monetization of Chambers' working
capital 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, 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 additional extensions of its
forbearance agreement from its lender for existing defaults under
its secured credit arrangement and the attendant risk of increased
costs or stockholder dilution from refinancing the defaulted debt
or foreclosure on Phoenix Footwear's assets if a forbearance
extension is not obtained or the debt is not refinanced; the risk
that Tandy will default on its earn-out payments; 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, including
those to whom the Company may be past-due; 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 Balance Sheets
(Unaudited) (In thousands) As of As of July 4, January 3, 2009 2009
---- ---- ASSETS Current assets: Cash and cash equivalents $156
$456 Accounts receivable, net 2,466 3,153 Inventories, net 6,461
9,503 Other current assets 1,127 916 Income taxes receivable 268
302 Current assets of discontinued operations 8,287 16,615 -----
------ Total current assets 18,765 30,945 Property, plant &
equipment, net 1,154 1,290 Other assets - 93 Long-term assets of
discontinued operations 567 821 ----- ------ TOTAL ASSETS $20,486
$33,149 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Notes payable, current $7,976 $11,173 Accounts
payable 2,472 1,887 Accrued expenses 1,977 1,557 Other current
liabilities 20 155 Income taxes payable 3 78 Current liabilities of
discontinued operations 4,311 6,406 ----- ----- Total current
liabilities 16,759 21,256 Other long-term liabilities 380 382
Long-term liabilities of discontinued operations - 149 --- ---
Total liabilities 17,139 21,787 Stockholders' equity 3,347 11,362
----- ------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $20,486
$33,149 ------- ------- Phoenix Footwear Group, Inc. Consolidated
Condensed Statements of Operations (Unaudited) (In thousands,
except per share data) For the Three Months Ended July 4, June 28,
2009 2008 ---- ---- Net sales $3,961 100.0% $6,182 100.0% Cost of
goods sold 3,443 86.9% 3,667 59.3% ----- ----- Gross profit 518
13.1% 2,515 40.7% Operating expenses: Selling, general and
administrative expenses 2,480 62.6% 4,700 76.0% Other (income)
expense, net - - % (750) -12.1% --- ---- Total operating expenses
2,480 62.6% 3,950 63.9% ----- ----- Operating Loss (1,962) -49.5%
(1,435) -23.2% Interest expense, net 135 3.4% 691 11.2% --- ---
Loss before income taxes and discontinued operations (2,097) -52.9%
(2,126) -34.4% Income tax expense (benefit) 37 0.9% 21 0.3% -- --
Loss before discontinued operations (2,134) -53.9% (2,147) -34.7%
(Loss) earnings from discontinued operations, net of tax (2,981)
-75.3% (12) -0.2% ------ --- Net loss $(5,115) -129.1% $(2,159)
-34.9% ======= ======= Loss per share: Basic and diluted Continuing
operations $(0.26) $(0.26) Discontinued operations (0.37) - ----- -
Net loss $(0.63) $(0.26) ====== ====== Weighted-average shares
outstanding: Basic and diluted 8,166 8,166 Phoenix Footwear Group,
Inc. Consolidated Condensed Statements of Operations (Unaudited)
(In thousands, except per share data) For the Six Months Ended July
4, June 28, 2009 2008 ---- ---- Net sales $10,052 100.0% $15,622
100.0% Cost of goods sold 7,467 74.3% 9,170 58.7% ----- ----- Gross
profit 2,585 25.7% 6,452 41.3% Operating expenses: Selling, general
and administrative expenses 6,262 62.3% 9,738 62.3% Other (income)
expense, net 1,018 10.1% (1,500) -9.6% ----- ------ Total operating
expenses 7,280 72.4% 8,238 52.7% ----- ----- Operating Loss (4,695)
-46.7% (1,786) -11.4% Interest expense, net 151 1.5% 802 5.1% ---
--- Loss before income taxes and discontinued operations (4,846)
-48.2% (2,588) -16.6% Income tax expense (benefit) 9 0.1% 38 0.2%
-- -- Loss before discontinued operations (4,855) -48.3% (2,626)
-16.8% (Loss) earnings from discontinued operations, net of tax
(3,222) -32.1% 187 1.2% ------ --- Net loss $(8,077) -80.4%
$(2,439) -15.6% ======= ======= (Loss) earnings per share: Basic
and diluted Continuing operations $(0.59) $(0.32) Discontinued
operations (0.40) 0.02 ----- ---- Net loss $(0.99) $(0.30) ======
====== Weighted-average shares outstanding: Basic and diluted 8,166
8,121 DATASOURCE: Phoenix Footwear Group, Inc. CONTACT: Dennis T.
Nelson, Chief Financial Officer of Phoenix Footwear Group, Inc.,
+1-760-602-9688 Web Site: http://www.phoenixfootwear.com/
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