PXFG Phoenix Footwear Group Inc (PK)

Reports Comprehensive Net Income for the Year

Launches “Grey’s Anatomy by SoftWalk” Professional Footwear

Phoenix Footwear Group, Inc. (OTCMarkets.com: PXFG) today reported results for the fourth quarter and year ended December 28, 2013.

Fourth Quarter and Fiscal Year 2013

• Net sales for the fourth quarter of fiscal 2013 increased 40.2% to $4.4 million compared to $3.1 million for the fourth quarter of fiscal 2012.
• Consolidated loss from continuing operations for the fourth quarter declined to $128,000 or $0.02 per share compared to a loss of $467,000 or $0.06 per share for the fourth quarter of fiscal 2012
• Reported net income of $70,000 or $0.01 per share for the twelve months of fiscal 2013 compared to net loss of $484,000 for the twelve months of fiscal 2012.
• Net sales for the fiscal year of 2013 increased 14.8% to $19.2 million compared to $16.7 million for the fiscal year of 2012.
• Consolidated earnings from continuing operations for the fiscal year improved to $143,000 or $0.02 per share compared to a loss of $437,000 or $0.06 per share for the 2012 fiscal year.
• Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for fiscal year 2013 improved 49.3% to $1.15 million compared to $771,000 for fiscal year 2012.
• The Company’s Independent Auditors have removed the “Going Concern” paragraph from their Report as a result of the continuing improvement of the Company’s operating results.

Grey’s Anatomy by SoftWalk®

As previously announced, the Company entered into a joint licensing agreement with ABC/Disney Studios to develop and market professional footwear for the medical community. During the fourth quarter, Phoenix launched this footwear with a 60-day exclusive partnership with industry-leading retailer Scrubs and Beyond. Known as Meredith, the new SoftWalk shoe combines lightweight athletic performance with unparalleled comfort. Grey’s Anatomy by SoftWalk is now available in over 150 retailers, including many of the medical uniform industry’s better retailers. The Company expects this product expansion to facilitate growth in future quarters.

Fiscal 2013

For the fiscal year ended December 28, 2013, net sales increased $2.5 million or 14.8% to $19.2 million from $16.7 million when compared to the fiscal year ended December 29, 2012. The increase in net sales for fiscal year 2013 was primarily driven by new product introductions designed to appeal to the broader customer demographic of the Company’s internet-based accounts, the on-time delivery of spring and fall goods, together with an improvement in the customer reorder volume of the Company’s fall product offering.

Gross profit for fiscal 2013 increased $847,000 or 13.5% to $7.1 million from $6.3 million when compared to fiscal 2012. Gross profit as a percentage of net sales declined slightly to 37.1% from 37.5% when compared to fiscal 2012. The decrease in the gross profit as a percentage of net sales was primarily due to an increase in discounts and allowances provided to certain internet-based customers on significantly higher sales and an increase in the reserve for the phase out of various styles.

Selling, general and administrative expenses or SG&A increased to $6.3 million during fiscal 2013 compared to $5.8 million for fiscal 2012. SG&A as a percentage of net sales decreased to 32.8% for fiscal 2013 compared to 34.4% for fiscal 2012.

During the third quarter of fiscal 2012, the Company recorded a non-cash adjustment of $160,000 reducing the state nexus sales tax accrual. Excluding this onetime adjustment, SG&A for fiscal 2013 increased $378,000 to $6.3 million compared to $5.9 million for fiscal 2012. $241,000 or 64.0% of the increase in SG&A was associated with the Grey’s Anatomy rollout, along with increases in sales and marketing expenses driven by the 14.8% increase in net sales during the year.

The Company reported earnings from continuing operations of $143,000 or $0.02 per share for the fiscal year ended December 28, 2013, compared to loss from continuing operations of $437,000 or $0.06 per share for the fiscal year ended December 29, 2012.

Earnings before interest, taxes, depreciation and amortization (or “EBITDA”) from continuing operations for fiscal 2013 improved 49.3% to $1.15 million compared to $771,000 for fiscal 2012.

About Phoenix Footwear Group, Inc.

Phoenix Footwear Group, Inc., headquartered in Carlsbad, California, specializes in quality comfort women’s and men’s footwear with a design focus on fitting features. Phoenix Footwear designs, develops, markets and sells footwear in a wide range of sizes and widths under the brands Trotters® and SoftWalk®. These brands are primarily sold through department stores, leading specialty and independent retail stores, mail order catalogues and internet retailers and are carried by approximately 581 customers in over 870 retail locations throughout the U.S. Phoenix Footwear has been engaged in the manufacture or importation and sale of quality footwear since 1882.

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 Phoenix Footwear’s ability to repay its bank debt in a timely manner, future growth and performance of its individual brands, expected financial performance and condition for fiscal 2014 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. 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 speak only as of the date of this press release and 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 expressly disclaims any obligation to release publicly any update or revision to any forward-looking statement contained herein if there are changes in Phoenix Footwear’s expectations or if any events, conditions or circumstances on which any such forward-looking statement is based.

  Phoenix Footwear Group, Inc. Condensed Consolidated Balance Sheets (In thousands)       December 28, 2013     December 29, 2012 ASSETS   Current assets: Cash and cash equivalents $ 141 $ 43 Accounts receivable, net 2,671 1,768 Inventories, net 7,646 6,974 Other current assets 753 1,039 Income taxes receivable   30   149 Total current assets 11,241 9,973   Property, plant and equipment, net 73 418 Capital leased assets 589 - Other assets   75   204 TOTAL ASSETS $ 11,978 $ 10,595   LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities: Notes payable, current $ 4,169 $ 3,506 Accounts payable 2,733 2,574 Accrued expenses 646 592 Other current liabilities - 208 Current portion of long term debt   220   96

Total current liabilities

7,768 6,976   Notes payable, net of current portion 618 936 Capital lease obligation, net of current portion 577 - Convertible notes payable 1,350 1,350 Other non-current liabilities   286   164 Total liabilities 10,599 9,426   Stockholders' equity   1,379   1,265 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 11,978 $ 10,691     Phoenix Footwear Group, Inc. Consolidated Statements of Operations (In thousands, except per share data)       (Unaudited) Three Months Ended         December 28, 2013 December 29, 2012 Net sales $ 4,415 100 % $ 3,148 100 % Cost of goods sold   2,892   66 %   2,032   65 %   Gross profit 1,523 35 % 1,116 35 %   Operating expenses: Selling, general and administrative expenses   1,549   35 %   1,367   43 % Total operating expenses   1,549   35 %   1,367   43 %   Operating loss (26 ) -1 % (251 ) -8 % Other (income)/expense, net (121 ) 3 % - 0 % Interest expense, net   195   4 %   193   6 %   Loss before income taxes and discontinued operations (100 ) -2 % (444 ) -14 %   Income tax expense   28   1 %   23   1 %   Loss from continuing operations (128 ) -3 % (467 ) -15 %   Loss from discontinued operations, net of tax   (12 ) 0 %   (74 ) -2 %   Net loss $ (140 ) -3 % $ (541 ) -17 %     Loss per share:   Basic: Continuing operations $ (0.02 ) $ (0.06 ) Discontinued operations   -     (0.01 ) Net earnings $ (0.02 ) $ (0.07 ) Weighted-average shares outstanding: Basic 8,298 8,238 Diluted 14,168 13,601     Phoenix Footwear Group, Inc. Consolidated Statements of Operations (In thousands, except per share data)       Fiscal Years Ended         December 28, 2013 December 29, 2012 Net sales $ 19,218 100 % $ 16,738 100 % Cost of goods sold   12,097   63 %   10,464   63 %   Gross profit 7,121 37 % 6,274 37 %   Operating expenses: Selling, general and administrative expenses   6,299   33 %   5,761   34 % Total operating expenses   6,299   33 %   5,761   34 %   Operating income 822 4 % 513 3 %   Other (income)/expense, net (121 ) 1 % - 0 % Interest expense, net   772   4 %   927   6 %   Earnings (loss) before income taxes and discontinued operations 171 1 % (414 ) -3 %   Income tax expense   28   0 %   23   0 %   Earnings (loss) from continuing operations 143 1 % (437 ) -3 %   Loss from discontinued operations, net of tax   (73 ) 0 %   (47 ) 0 %   Net earnings (loss) $ 70   0 % $ (484 ) -3 %   Earnings (loss) per share:   Basic: Continuing operations $ 0.02 $ (0.06 ) Discontinued operations   (0.01 )   (0.01 ) Net earnings $ 0.01   $ (0.07 )   Diluted: Continuing operations $ 0.01 $ (0.06 ) Discontinued operations   (0.01 )   (0.01 ) Net earnings $ -   $ (0.07 )   Weighted-average shares outstanding: Basic 8,283 8,223 Diluted 14,198 8,223  

Phoenix Footwear Group, Inc.Greg W. SlackChief Financial Officer(760) 602-9688