Company Records Profit in the Third Quarter of Fiscal 2009 and
Announces Receipt of NYSE Amex Deficiency Letter CARLSBAD, Calif.,
Oct. 15 /PRNewswire-FirstCall/ -- Phoenix Footwear Group, Inc.
(NYSE Amex: PXG) today reported its preliminary results of
operations for the third quarter of fiscal 2009. -- Net profit of
$310,000, or $0.04 per share, compared to a net loss of $2.1
million for the third quarter of fiscal 2008. -- A loss from
continuing operations during the third quarter of $1.0 million, or
$0.12 per share. Included in this loss is $303,000 in amortized
financing exit fees, $180,000 of payroll related expenses for
terminated employees, and $115,000 of financial consulting and
other fees. This loss compares to a loss from continuing operations
of $1.3 million for the third quarter of fiscal 2008. -- Net sales
from continuing operations during the third quarter of $5.5
million, down 32% compared to net sales from continuing operations
of $8.0 million during the third quarter of fiscal 2008. -- Funded
bank debt balance of $2.6 million at the close of the third
quarter, which is a reduction of $5.4 million from the close of the
second fiscal quarter of 2009. Commenting on the quarter, Rusty
Hall, CEO, said, "We are pleased to report a net profit for the
quarter and to have begun rebuilding our capital base and balance
sheet. During the quarter we closed the divestiture of our belt
accessories business that was operated by our wholly-owned
subsidiary, Chambers Belt Company, reduced bank debt by 68%,
improved our gross margin by 22 percentage points from the second
quarter of fiscal 2009, and further reduced SG&A to $2.3
million for the quarter after eliminating certain nonrecurring
items. While our net sales for the quarter continued to be impacted
by the difficult retail environment, we believe we have made
considerable progress on the sales front. Our order backlog for
future shipments is 65% above orders at the same time last year and
our products are performing well at retail. Given the foundation
our team has rebuilt, and based on this backlog, we expect to begin
generating profitable organic growth beginning with the upcoming
quarter." As previously reported on July 9, 2009, we closed the
Chambers' asset sale transaction with Tandy Brands Accessories,
Inc. The transaction was completed pursuant to an Amended and
Restated Asset Purchase Agreement dated July 7, 2009. 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, during the 12 months following closing, Tandy is
obligated to pay Chambers an earn-out based on a percentage of
Tandy's revenues generated from the sale of products formerly sold
by the Chambers business. This earn-out is not capped and provides
for $2,000,000 in minimum aggregate payments. These payments are to
be paid on a monthly basis, except for an initial $430,000 advance
payment that was made to Chambers at closing. Banking Update On
October 15, 2009 the Company and Wells Fargo Bank, National
Association entered into a Third Amendment to Forbearance Agreement
and Fourth Amendment to Credit and Security Agreement. Under the
terms of this Amendment, the existing credit agreement and
forbearance agreements were changed by, among other things,
decreasing the inventory sublimit in the borrowing base to $2.3
million and providing for daily 1% decreases in the 46% advance
rate on eligible inventory after October 26, 2009 and extending the
maturity date for the revolving line of credit and the expiration
of the forbearance period to November 30, 2009. The time period
extensions are subject to the Company's continuing adherence to
various conditions. The Amendment requires the Company pay Wells
Fargo a $25,000 accommodation fee on December 1, 2009 unless
Phoenix Footwear repays the indebtedness in full on or before
November 30, 2009. As of October 14, 2009, the Company had $2.8
million outstanding under the Credit Agreement with remaining
availability of $221,000. The Company is engaged in discussions
with several different financing sources concerning the refinancing
of the revolving line of credit debt on or before November 30,
2009. The description of the agreements above is qualified in its
entirety by reference to the full text of the applicable
agreements, copies of which will be attached as an exhibit to the
Company's Quarterly Report on Form 10-Q for the period ended
October 3, 2009. NYSE Amex Delisting Notice On October 9, 2009, the
Company received a notice from the NYSE Amex LLC (NYSE Amex),
indicating that as of its quarter ended July 4, 2009, the Company
failed to meet the continued listing standards of the NYSE Amex.
Specifically, the letter stated that the Company is not in
compliance with Section 1003(a)(ii) of the NYSE Amex Company Guide,
with stockholders' equity of less than $4,000,000 and losses from
continuing operations and/or net losses in three of its four most
recent fiscal years. The letter also stated that the Company must
submit a plan to the NYSE Amex by November 9, 2009 addressing how
it intends to regain compliance with this continued listing
standards by April 11, 2011. The plan must be approved by the NYSE
Amex in order for the Company to maintain its listing. The Company
intends to submit a plan shortly to the NYSE Amex that responds to
this notification. The policy of the NYSE Amex is to make a
determination within 45 days of a company's submission of a plan
for compliance as to whether the company has made reasonable
demonstration in the plan of an ability to regain compliance with
the continued listing standards within the requisite time frame.
The NYSE Amex may either accept the plan, at which time the Company
will be subject to ongoing monitoring for compliance with the plan,
or not accept the plan and initiate delisting proceedings. There
can be no assurance that the NYSE Amex will accept any plan that
the Company submits or that, if it does accept any such plan, the
NYSE Amex will not subsequently initiate delisting proceedings as a
result of the NYSE Amex's compliance monitoring with respect to
that plan or otherwise. 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
Company's ability to repay its bank debt in a timely manner, obtain
an extension of the forbearance agreement by Wells Fargo,
successfully regain compliance with the NYSE Amex listing standards
and other risks detailed in the Company's periodic report filings
with the Securities and Exchange Commission. 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 refinance its existing
bank facility in a timely manner, obtain an extension of the Wells
Fargo forbearance agreement, obtain waiver of future defaults and
amendments to its 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 could be delisted from the NYSE Amex the
risk that Phoenix Footwear will not be able to continue as a going
concern; Phoenix Footwear's ability to sustain its 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;
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
Balance Sheets (Unaudited) (In thousands) As of As of October 3,
January 3, 2009 2009 ---- ---- ASSETS Current assets: Cash and cash
equivalents $207 $456 Accounts receivable, net 3,829 3,153
Inventories, net 6,016 9,503 Other current assets 1,687 916 Income
taxes receivable 245 302 Current assets of discontinued operations
171 16,615 ------- ------- Total current assets 12,155 30,945
Property, plant & equipment, net 1,087 1,290 Other assets - 93
Long-term assets of discontinued operations - 821 ------- -------
TOTAL ASSETS $13,242 $33,149 ======= ======= LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Notes payable, current
$2,573 $11,173 Accounts payable 2,441 1,887 Accrued expenses 1,522
1,557 Other current liabilities 22 155 Income taxes payable 5 78
Current liabilities of discontinued operations 2,620 6,406 -------
------- Total current liabilities 9,183 21,256 Other long-term
liabilities 378 382 Long-term liabilities of discontinued
operations - 149 ------- ------- Total liabilities 9,561 21,787
Stockholders' equity 3,681 11,362 ------- ------- TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $13,242 $33,149 ======= ======= Phoenix
Footwear Group, Inc. Consolidated Condensed Statements of
Operations (Unaudited) (In thousands, except per share data) For
the Three Months Ended October 3, September 27, 2009 2008 ---- ----
Net sales $ 5,453 100.0% $ 8,028 100.0% Cost of goods sold 3,536
64.8% 4,567 56.9% ------ ------ Gross profit 1,917 35.2% 3,461
43.1% Operating expenses: Selling, general and administrative
expenses 2,621 48.1% 4,722 58.8% ------ ------ Total operating
expenses 2,621 48.1% 4,722 58.8% ------ ------ Operating loss (704)
-12.9% (1,261) -15.7% Interest expense, net 306 5.6% 47 0.6% ------
------ Loss before income taxes and discontinued operations (1,010)
-18.5% (1,308) -16.3% Income tax expense (benefit) 9 0.2% 7 - %
------ ------ Loss before discontinued operations (1,019) -18.7%
(1,315) -16.4% Earnings (loss) from discontinued operations, net of
tax 1,329 24.4% (803) -10.0% ------ ------ Net earnings (loss) $
310 5.7% $(2,118) -26.4% ====== ====== Earnings (loss) per share:
Basic and diluted Continuing operations $ (0.12) $ (0.16)
Discontinued operations 0.16 (0.10) ------ ------ Net earnings
(loss) $ 0.04 $ (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 Nine Months Ended
October 3, September 27, 2009 2008 ---- ---- Net sales $15,505
100.0% $23,650 100.0% Cost of goods sold 11,003 71.0% 13,737 58.1%
------- ------- Gross profit 4,502 29.0% 9,913 41.9% Operating
expenses: Selling, general and administrative expenses 8,883 57.3%
14,460 61.1% Other expense (income), net 1,018 6.6% (1,500) -6.3%
------- ------- Total operating expenses 9,901 63.9% 12,960 54.8%
------- ------- Operating loss (5,399) -34.8% (3,047) -12.9%
Interest expense, net 457 2.9% 849 3.6% ------- ------- Loss before
income taxes and discontinued operations (5,856) -37.8% (3,896)
-16.5% Income tax expense (benefit) 18 0.1% 45 0.2% ------- -------
Loss before discontinued operations (5,874) -37.9% (3,941) -16.7%
Earnings (loss) from discontinued operations, net of tax (1,893)
-12.2% (616) -2.6% ======= ======= Net earnings (loss) $(7,767)
-50.1% $(4,557) -19.3% Earnings (loss) per share: Basic and diluted
Continuing operations $ (0.72) $ (0.48) Discontinued operations
(0.23) (0.08) ------- ------- Net earnings (loss) $ (0.95) $ (0.56)
======= ======= Weighted-average shares outstanding: Basic and
diluted 8,166 8,136 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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