PXFG Phoenix Footwear Group Inc (PK)

Net Income for the Quarter Increases 71.6% to $548,000

Net Sales for the Quarter Increased 14.3%

Phoenix Footwear Group, Inc. (OTCMarkets.com: PXFG) today reported results for the Third Quarter and First Nine months ended September 27, 2014.

Third Quarter and First Nine Months of Fiscal 2014

• Net income for the third quarter improved 71.6% to $548,000 or $0.07 per share, compared to earnings of $320,000 or $0.04 per share during the third quarter of fiscal 2013. Included in net income for fiscal 2013 was a nonrecurring loss from discontinued operations of $43,000. Excluding this loss, net income increased 51.6%
• Net sales from continuing operations for the third quarter increased $794,000 or 14.3% to $6.4 million compared to $5.6 million for the third quarter of fiscal 2013.
• The Company generated earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $801,000 from continuing operations for the third quarter of fiscal 2014, compared to EBITDA of $628,000 for the third quarter of fiscal 2013.
• Net sales from continuing operations for the first nine months increased 10.4% or $1.5 million to $16.3 million compared to $14.8 million for the nine months of fiscal 2013.
• Net income from continuing operations for the first nine months of fiscal 2014 increased by 29.8% to $353,000 or $0.04 per share compared to a net income from continuing operations of $272,000 or $0.03 per share for the first nine months of fiscal 2013.

During the quarter, Phoenix continued its efforts to expand its distribution of key product categories resulting in accelerated growth. Notably, the Company increased its presence in several national retailers including Nordstrom, Dillard’s and Uniform Advantage.

In addition, during the quarter the Company also received the American Podiatric Medical Association’s (APMA) Seal of Acceptance for its Grey’s Anatomy by SoftWalk Collection. This innovative footwear for medical professionals is now sold in over 560 retail locations nationwide including many of the uniform industry’s leading retailers, such as Scrubs and Beyond, Work ‘n Gear and Uniform Advantage.

THIRD QUARTER AND FIRST NINE MONTHS OF FISCAL 2014

For the quarter ended September 27, 2014, net sales increased by $794,000, or 14.3% to $6.4 million compared to $5.6 million for the third quarter of fiscal 2013. Net sales for the first nine months of fiscal 2014 increased $1.5 million, or 10.4% to $16.3 million compared to $14.8 million for the first nine months of fiscal 2013. The increase in net sales for the quarter and first nine months of fiscal 2014 was primarily driven by sales of licensed footwear introduced during Spring 2014, together with increased sales to the Company’s catalog, Internet, and national retail customers.

Gross profit as a percentage of net sales for the third quarter of fiscal 2014 decreased to 38.3% compared to 39.3% for the third quarter of fiscal 2013. Gross profit as a percentage of net sales for the first nine months of fiscal 2014 decreased to 36.4% compared to 37.8% for the first nine months of fiscal 2013. Lower gross margins for the third quarter and first nine months of fiscal 2014 resulted primarily from the sale of lower margin licensed footwear.

SG&A for the third quarter of fiscal 2014 increased to $1.7 million or 4.8% compared to $1.6 million for the third quarter of fiscal 2013. SG&A as a percentage of net sales decreased to 26.6% for the second quarter of fiscal 2014 from 28.9% when compared to the same period of fiscal 2013. SG&A for the first nine months of fiscal 2014 increased to $5.0 million compared to $4.7 million for the first nine months of fiscal 2013. SG&A as a percentage of net sales decreased to 30.8% from 32.0% when compared to the same period of fiscal 2013.

The increase in SG&A for the third quarter and first nine months of fiscal 2014 is attributable to an increase in sales commissions generated from 14.3% and 10.4% growth in net sales during the third and first nine months of fiscal 2014.

The Company reported a net income from continuing operations of $548,000 or $0.07 per share for the third quarter, compared to a net operating income from continuing operations of $362,000 or $0.04 per share during the third quarter of fiscal 2013.

For the first nine months of fiscal 2014, the Company reported net income from continuing operations of $353,000 or $0.04 per share, compared to net income from continuing operations of $272,000 or $0.03 per share for the first nine months of fiscal 2013.

Earnings before interest, taxes, depreciation and amortization (or “EBITDA”) from continuing operations for the first nine months of fiscal 2014 was $1.06 million compared to $1.03 million for the first nine months of fiscal 2013.

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 800 customers in over 1,307 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)             (Unaudited) September 27, 2014 December 28, 2013 ASSETS   Current assets: Cash and cash equivalents $ 186 $ 141 Accounts receivable, net 4,785 2,671 Inventories, net 8,626 7,646 Other current assets 493 753 Income taxes receivable   30   30

Total current assets

14,120 11,241   Property, plant and equipment, net 77 73 Capital leased asset 543 589 Other assets   -   75 TOTAL ASSETS $ 14,740 $ 11,978   LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities: Notes payable, current $ 6,343 $ 4,169 Accounts payable 2,695 2,733 Accrued expenses 1,081 646 Current portion of long term debt   190   220 Total current liabilities 10,309 7,768   Convertible notes payable 1,350 1,350 Term notes payable 534 618 Capital lease obligation 554 577 Other non-current liabilities   256   286 Total liabilities 13,003 10,599   Stockholders' equity   1,737   1,379 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 14,740 $ 11,978     Phoenix Footwear Group, Inc. Condensed Consolidated Statements of Operations (In thousands, except per share data)             (Unaudited) Three Months Ended                   September 27, 2014 September 28, 2013 Net sales $ 6,357 100 % $ 5,563 100 % Cost of goods sold   3,922 62 %   3,379   61 %   Gross profit 2,435 38.3 % 2,184 39.3 %   Operating expenses: Selling, general and administrative expenses 1,688 27 % 1,610 29 % Goodwill and intangible impairment charges   - - %   -   0 % Total operating expenses   1,688 27 %   1,610   29 %   Operating income 747 12 % 574 10 %   Interest expense, net   199 3 %   212   4 %   Earnings before income taxes and discontinued operations 548 9 % 362 7 %   Income tax (benefit) expense   - 0 %   -   - %   Earnings from continuing operations 548 9 % 362 7 %   Loss from discontinued operations, net of tax   - 0 %   (42 ) -1 %   Net Earnings $ 548 9 % $ 320   6 %   Earnings per share: Basic Continuing operations $ 0.07 $ 0.04 Discontinued operations   -   -   Net Earnings $ 0.07 $ 0.04   Diluted Continuing operations $ 0.04 $ 0.03 Discontinued operations   -   -   Net Earnings $ 0.04 $ 0.03     Weighted-average shares outstanding: Basic 8,358 8,298 Diluted 14,717 14,168     Phoenix Footwear Group, Inc. Consolidated Statements of Operations (In thousands, except per share data)         (Unaudited) Nine Months Ended                   September 27, 2014 September 28, 2013 Net sales $ 16,345 100 % $ 14,800 100 % Cost of goods sold   10,391   64 %   9,202   62 %   Gross profit 5,954 36 % 5,598 38 %   Operating expenses: Selling, general and administrative expenses   5,044   31 %   4,739   32 % Total operating expenses   5,044   31 %   4,739   32 %   Operating lncome 910 6 % 859 6 %   Interest expense, net   557   3 %   587   4 %   Earnings before income taxes and discontinued operations 353 2 % 272 2 %   Income tax (benefit) expense   -   0 %   -   - %   Earnings from continuing operations 353 2 % 272 2 %   Loss from discontinued operations, net of tax   (9 ) 0 %   (61 ) 0 %   Net Earnings $ 344   2 % $ 211   1 %     Earnings per share:   Basic and diluted Continuing operations $ 0.04 $ 0.03 Discontinued operations   -     -   Net Earnings $ 0.04   $ 0.03     Diluted Continuing operations $ 0.02 $ 0.02 Discontinued operations   -     -   Net Earnings $ 0.02   $ 0.02     Weighted-average shares outstanding: Basic 8,332 8,278 Diluted

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Phoenix Footwear Group, Inc.Greg W. SlackChief Financial Officer760-602-9688