Published:
Innovo Group Reports 2005 Second Quarter Results
Innovo Group Inc. (NASDAQ: INNO) today
announced net sales of $29.4 million for its second quarter ended May 28,
2005, a 15% increase over net sales of $25.6 million in the prior year
comparative period. For the second quarter, the Company recorded net
income from continuing operations of $423,000, or $0.01 per share.
-- The Company's Joe's Jeans subsidiary experienced an increase of over
100% in net sales during the second quarter compared to the prior year
comparative period.
-- Branded apparel sales were $9.7 million during the second quarter
compared to $7.0 million in the prior year comparative period, a 38%
increase.
-- The Company's private label apparel sales were $19.7 million compared
to $18.5 million in the second quarter of 2004, a 6% increase.
-- The Company's overall gross margins increased to 25% for the second
quarter of fiscal 2005 from 10% in the prior year comparative period.
-- The Company generated net income from continuing operations of
$423,000 during the period.
Jay Furrow, CEO of Innovo, commented: "We are pleased with the first six
months of fiscal 2005 and continue to be encouraged with the overall
direction of our business. With the Company's improved financial
performance, we are optimistic about the Company's ability to continue to
successfully execute on our denim lifestyle strategy by capitalizing on our
existing businesses and other opportunities that complement our overall
strategy."
Second Quarter Results Summary
For the three months ended May 28, 2005, our net sales increased to $29.4
million from $25.6 million in the prior year comparative period, a 15%
increase. The Company generated net income from continuing operations of
$423,000 for the second quarter of 2005, or $0.01 per share, compared to a
loss from continuing operations of $6.0 million during the prior year
comparative period, or $0.21 per share. As announced during the quarter,
the Company completed the sale of its discontinued crafts business which
resulted in a net income from discontinued operations of $282,000, or $0.01
per share, and a total net income during the second quarter of $705,000, or
$0.02 per share.
The discussion below composes our financial results from our continuing
operations during the relevant periods. We have excluded our financial
results from our discontinued operations.
Net Sales
Net sales increased to $29.4 million in the second quarter of fiscal 2005
compared to $25.6 million in the second quarter of fiscal 2004, or a 15%
increase. During the period, net sales of the Company's branded apparel
increased to $9.7 million compared to $7.0 million in the prior year
comparative period, a 38% increase. Net sales of the Company's private
label apparel increased to $19.7 million for the second quarter of 2005
compared to $18.5 million in the prior year comparative period, a 6%
increase. The increase in net sales in the second quarter of fiscal 2005
was primarily attributable to: (i) an increase of over 100% in our net
sales of our Joe's Jeans branded apparel products due to growth of Joe's
Jeans in both the domestic and international markets; (ii) a slight
increase in sales to our private label customers in the apparel segment;
(iii) overall strong demand for denim apparel products in the marketplace;
and (iv) improved overall production and delivery performance compared to
the second quarter of fiscal 2004.
Gross Margins
Gross profit increased to $7.2 million in the second quarter of fiscal 2005
compared to $2.5 million in the second quarter of fiscal 2004, a 194%
increase. Our gross margin increased to 25% for the second quarter of
fiscal 2005 from 10% for the second quarter of fiscal 2004. This overall
gross margin improvement for the second quarter of fiscal 2005 was
primarily attributable to improved gross margins from our branded apparel
products due to (i) an increase in the average selling price for our Joe's
Jeans® products compared to the second quarter of fiscal 2004; (ii)
improved overall production and delivery performance in the second quarter
of fiscal 2005; (iii) higher than average sales to discounters at cost in
the second quarter of fiscal 2004 in order to reduce slower moving and
excess inventory during that period; (iv) a one-time inventory write-down
of $1.7 million we recorded in the second quarter of fiscal 2004 against
our slow moving and out-of-season Fetish(TM) branded apparel inventory.
Our branded apparel gross margin increase was partially offset by a 1%
decrease in gross margins for our private label apparel products in the
second quarter of fiscal 2005 compared to the second quarter of fiscal
2004.
SG&A Expenses
Selling, general and administrative expenses decreased to $6.0 million for
the second quarter of fiscal 2005 from $7.9 million for the second quarter
of fiscal 2004, a 24% decrease. The SG&A decrease in the second quarter of
fiscal 2005 is largely a result of the following factors: (i) $2,105,000 of
expense in the second quarter of fiscal 2004 directly related to the
termination of the Fetish(TM) license which we did not incur in the second
quarter of fiscal 2005; and (ii) a decrease in advertising expenses of
$250,000 associated with the terminated Fetish(TM) and Shago® license
agreements. These decreases were partially offset by an increase in our
selling expenses, which consist primarily of sales commissions, royalties,
and an earn-out expense on sales to AEO, of approximately $390,000 due to
our overall increase in net sales of 15%.
Income (Loss) from Continuing Operations
The factors explained above resulted in the Company generating net income
from continuing operations of $423,000 for the second quarter of fiscal
2005, or $0.01 per share, compared to a loss from continuing operations of
$6.0 million for the second quarter of fiscal 2004, or $0.21 per share.
Conference Call Information
Innovo's Chief Executive Officer and Chief Financial Officer will present a
discussion of Innovo Group's operating performance on its second quarter
2005 earnings conference call, which is scheduled for Thursday, July 7,
2005, at 4:30 p.m. EST. To access the live call, please dial
(800) 299-9630 (U.S.) or (617) 786-2904 (international). The conference ID
number and participant passcode is 73367002 and is entitled the "Q2 2005
Innovo Group Earnings Conference Call." The information provided on the
teleconference is only accurate at the time of the conference call, and
Innovo Group will take no responsibility for providing updated information.
A telephone replay of the conference call will be available beginning at
6:30 PM Eastern Time on July 7, 2005 until 11:58 PM Eastern Time on July
14, 2005 by dialing (888) 286-8010 (U.S) or (617) 801-6888 (international)
and using the conference passcode 20714477. In addition, the conference
call will be archived for one week on the Company's website at
www.innovogroup.com.
The following tables should be read in conjunction with the Quarterly
Report on Form 10-Q for the period ended May 28, 2005, to be filed with the
Securities and Exchange Commission on or before July 12, 2005.
INNOVO GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
05/28/05 11/27/04
--------- ---------
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 1,028 $ 516
Accounts receivable and due from factor,
net of allowance for customer credits
and allowance of $464 (2005) and
$1,022 (2004) 211 2,208
Inventories 11,295 5,524
Due from related parties 5,193 1,747
Prepaid expenses and other current assets 148 384
Assets of discontinued operations 1,858 3,131
--------- ---------
Total current assets 19,733 13,510
Property and equipment, net 475 270
Goodwill 12,592 12,592
Other intangible assets, net 11,006 11,690
Other assets 90 81
--------- ---------
Total assets $ 43,896 $ 38,143
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 5,076 $ 3,243
Due to factor 830 -
Due to related parties 170 143
Convertible notes payable, net of discount 221 4,132
Note payable to officer 106 439
Current portion of related party
long-term debt 1,363 673
Liabilities of discontinued operations 652 607
--------- ---------
Total current liabilities 8,418 9,237
Related party long-term debt 7,937 8,627
Commitments and Contingencies
8% Redeemable preferred stock, $0.10 par
value: 5,000 shares authorized, 0 shares
issued and outstanding (2005) and 194 shares
issued and outstanding (2004) - -
Stockholders' equity
Common stock, $0.10 par value: 40,000 shares
authorized 33,265 shares issued and 33,153
outstanding (2005) and 29,266 shares issued
and 29,189 outstanding (2004) 3,327 2,927
Additional paid-in capital 78,503 72,043
Accumulated deficit (51,513) (51,400)
Promissory note-former officer - (703)
Treasury stock, 112 shares (2005)
and 77 shares (2004) (2,776) (2,588)
--------- ---------
Total stockholders' equity 27,541 20,279
--------- ---------
Total liabilities and stockholders' equity $ 43,896 $ 38,143
========= =========
INNOVO GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three months ended Six months ended
05/28/05 05/29/04 05/28/05 05/29/04
-------- -------- -------- --------
(unaudited) (unaudited)
Net sales $ 29,398 $ 25,546 $ 52,496 $ 38,535
Cost of goods sold 22,157 23,086 40,367 34,078
-------- -------- -------- --------
Gross profit 7,241 2,460 12,129 4,457
-------- -------- -------- --------
Operating expenses
Selling, general and
administrative 5,967 7,874 10,656 13,697
Depreciation and amortization 380 371 756 788
-------- -------- -------- --------
6,347 8,245 11,412 14,485
-------- -------- -------- --------
Income (loss) from continuing
operations 894 (5,785) 717 (10,028)
Interest expense (462) (250) (899) (640)
Other income (expense) - 1 7 (48)
-------- -------- -------- --------
Income (loss) from continuing
operations, before taxes 432 (6,034) (175) (10,716)
Income taxes 9 (44) 18 (11)
-------- -------- -------- --------
Income (loss) from continuing
operations 423 (5,990) (193) (10,705)
Discontinued operations,
net of tax 282 (738) 80 (992)
-------- -------- -------- --------
Net income (loss) $ 705 $ (6,728) $ (113) $(11,697)
======== ======== ======== ========
Earnings (loss) per common
share - Basic
Earnings (loss) from
continuing operations $ 0.01 $ (0.21) $ (0.01) $ (0.39)
Earnings (loss) from
discontinued operations 0.01 (0.02) (0.00) (0.04)
-------- -------- -------- --------
Earnings (loss) per common
share - Basic $ 0.02 $ (0.23) $ (0.01) $ (0.43)
======== ======== ======== ========
Earnings (loss) per common
share - Diluted
Earnings (loss) from
continuing operations $ 0.01 $ (0.21) $ (0.01) $ (0.39)
Earnings (loss) from
discontinued operations 0.01 (0.02) (0.00) (0.04)
-------- -------- -------- --------
Earnings (loss) per common
share - Diluted $ 0.02 $ (0.23) $ (0.01) $ (0.43)
======== ======== ======== ========
Weighted average shares
outstanding
Basic 31,763 28,928 30,590 27,358
Diluted 33,326 28,928 30,590 27,358
INNOVO GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six months ended
05/28/05 05/29/04
--------- ---------
(unaudited)
Cash used in continuing activities $ (3,658) $ (6,971)
Cash (used in) provided by
discontinued operations 506 (160)
--------- ---------
Net cash used in operating activities (3,152) (7,131)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investment in real estate - 98
Purchases of property and equipment (226) (105)
--------- ---------
Net cash used in continuing activities (226) (7)
Cash used in discontinued operations - (11)
--------- ---------
Net cash used in investing activities (226) (18)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (payments on) factor borrowing 830 (69)
Payments on notes payables and long-term debt - (68)
Payments on note payable officer (333) -
Proceeds from promissory note - former officer 703 -
Exercise of stock options 566 13
Exercise of warrants 2,175 422
Payment of stock issuance expense (2) (117)
--------- ---------
Net cash provided by continuing activities 3,939 181
Cash used by discontinued operations (49) (51)
--------- ---------
Net cash provided by financing activities 3,890 130
NET CHANGE IN CASH AND CASH EQUIVALENTS 512 (7,019)
CASH AND CASH EQUIVALENTS,
at beginning of period 516 7,034
--------- ---------
CASH AND CASH EQUIVALENTS,
at end of period $ 1,028 $ 15
========= =========
Supplemental disclosures of non-cash activities
Convertible notes converted to common stock $ 4,155 $ 12,500
Treasury stock tendered as payment
for stock option exercise 188
About Innovo Group Inc.
Innovo Group Inc., through its operating subsidiaries Innovo Azteca
Apparel, Inc. and Joe's Jeans, is a sales and marketing organization
designing and selling apparel products to the retail and premium markets.
The Company currently produces products under license agreements and other
agreements for private label and branded products. The Company's apparel
products consist of men's and women's denim and denim-related apparel
products, including, women's high-end denim jeans and knit shirts featuring
the Joe's Jeans®, indie(TM) and Betsey Johnson® brand. More
information is available at the company web site at www.innovogroup.com.
Statements in this news release which are not purely historical facts are
forward-looking statements, including statements containing the words
"believe," "estimate, "project," "expect" or similar expressions. These
statements are made pursuant to the safe harbor provisions of Section 21E
of the Securities Exchange Act of 1934, as amended. All forward-looking
statements are based upon information available to Innovo Group Inc. on the
date of this release. Any forward-looking statement inherently involves
risks and uncertainties that could cause actual results to differ
materially from the forward-looking statements. Factors that would cause or
contribute to such differences include, but are not limited to: continued
acceptance of the Company's products in the marketplace, particularly
acceptance and near-term sales of the Company's brands such as indie(TM);
successful implementation of its strategic plan; the extension or
refinancing of its existing bank facility and the restrictions any such
extension or refinancing could place on the company; the ability to obtain
new financing from other financing sources; the ability to generate
positive cash flow from operations and asset sales; competitive factors,
including the possibility of major customers sourcing product overseas in
competition with our products; dependence upon third-party vendors; a
possible oversupply of denim in the marketplace; and other risks detailed
in the Company's periodic report filings with the Securities and Exchange
Commission. By making these forward-looking statements, the Company
undertakes no obligation to update these statements for revisions or
changes after the date of this release. Readers are cautioned not to place
undue reliance on forward-looking statements.
Distributed by Market Wire
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Copyright © 2008, NewsBlaze,
Daily NewsTags: ,Lifestyle and Leisure:Fashion, Retail:Apparel, Retail:CosmeticsandAccessories, ,NASDAQ01,NASDAQ01,CA,LOS ANGELES, CA
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