12 Mar Phoenix Footwear’s Q4 Revenues Climb
Phoenix Footwear, the parent of Trotters and SoftWalk, reported sales for the fourth quarter of fiscal 2014 increased 28.0 percent to $5.6 million
Operating Income for the fourth quarter was $216,000 compared to a loss of $26,000 for the fourth quarter of fiscal 2013.
Net sales for the fiscal year of 2014 increased 14.5 percent to $22.0 million compared to $19.2 million for the fiscal year of 2013.
Reported net income of $327,000 or 4 cents per share for the twelve months of fiscal 2014 compared to net income of $70,000 or 1 cent per share for the twelve months of fiscal 2013. Included in net income for 2013 was a gain of $121,000 from the settlement of the company’s litigation against Tandy Corporation.
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for fiscal year 2014 improved 14.8 percent to $1.32 million compared to $1.15 million for fiscal year 2013.
For the fiscal year ended January 3, 2015, net sales increased $2.8 million or 14.5 percent to $22.0 million from $19.2 million when compared to the fiscal year ended December 28, 2013. The increase in net sales for fiscal year 2014 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 2014 increased $960,000 or 13.5 percent to $8.1 million from $7.1 million when compared to fiscal 2013. Gross profit as a percentage of net sales declined 40 basis points to 36.7 percent from 37.1 percent when compared to fiscal 2013. The decrease in the gross profit as a percentage of net sales was primarily due to an increase in sales of lower margin goods and licensed footwear during the period.
Selling, general and administrative expenses or SG&A increased to $6.9 million during fiscal 2014 compared to $6.3 million for fiscal 2013. SG&A as a percentage of net sales decreased to 31.6 percent for fiscal 2014 compared to 32.8 percent for fiscal 2013. The majority of the $650,000 increase in SG&A for fiscal 2014 was associated with investments in new product development, advertising, marketing and other selling activities driving the 14.5 percent increase in net sales during the year.
The company reported earnings from continuing operations of $341,000 or $0.04 per share for the fiscal year ended January 3, 2015, compared to earnings from continuing operations of $143,000 or $0.02 per share for the fiscal year ended December 28, 2013.
Earnings before interest, taxes, depreciation and amortization (or “EBITDA”) from continuing operations for fiscal 2014 improved 14.8 percent to $1.32 million compared to $1.15 million for fiscal 2013.
As previously announced on February 2, 2015, the company entered into a Loan and Security Agreement with NewStar Business Credit, LLC. The Loan Agreement provides for up to $9.0 million in borrowing capacity consisting up to $8.0 million (subject to a borrowing base as defined in the Loan Agreement) with a five-year maturity (the “Revolving Credit Facility”) and a term loan of $1,000,000 (the “Term Loan”). The principal amount of the Term Loan is payable in 36 equal monthly installments of $27,777.77, plus accrued interest, on the first day of each calendar month beginning March 1, 2015.
Interest accrues on the principal amount outstanding under the Revolving Credit Facility at the rate equal to the greater of (i) the rate per annum published on each Business Day in the “Money Rates” table of The Wall Street Journal as the one-month LIBOR rate, adjusted daily, and (ii) 1.0 percent (such greater amount, the “LIBOR Rate”) plus 3.75 percent. Interest accrues on the principal amount outstanding under the Term Loan at the rate equal to the LIBOR Rate plus 5.0 percent.
This new Revolving and Term facility offers the company additional working capital at a substantially reduced cost. Commenting on the new loan agreements, James Riedman, President and CEO of Phoenix Footwear, added: “We have grown for three consecutive years, the last two of which have been at four times the industry average. We are especially pleased to be able to secure this additional capacity to fund our continued growth, while at the same time, reduce our capital costs.”
The Loan Agreement includes various financial and other covenants with which the company has to comply in order to maintain borrowing availability and avoid penalties, including maintaining minimum tangible net worth and minimum fixed charge coverage ratios.
At the closing under the Loan Agreement, the company used proceeds from the Term Loan and the Revolving Credit Facility to pay in full the obligations outstanding under that Loan and Security Agreement dated July 30, 2012 between the company and Alostar Bank of Commerce, which carried an annual interest rate of 6.5 percent plus a monthly fee of $2,000, and that Loan and Security Agreement dated July 30, 2012 between the company and Gibraltar Business Capital which carried an annual interest rate of 18 percent. Those agreements were terminated.