Published: April 30, 2008
FGX International Reports Sales and Earnings for the First Quarter of Fiscal 2008
SMITHFIELD, R.I., April 30 /PRNewswire-FirstCall/ -- FGX International
(Nasdaq: FGXI), a leading designer and marketer of non-prescription reading
glasses, sunglasses and costume jewelry, today announced financial results for
its first quarter ended March 29, 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20071025/NETH104LOGO )
-- Net sales were $59.2 million in the current quarter compared to $61.1
million in the first quarter of 2007. During the first quarter of 2007
the Company benefited from approximately $3.2 million of incremental
sales related to a non-prescription reading glasses and sunglasses
program launched at a major customer.
-- Net income increased 14% to $2.2 million in the current quarter from
$1.9 million in the first quarter of 2007.
-- Earnings per diluted share were $0.10 in the first quarter of 2008
compared to $0.13 in the first quarter of 2007.
-- Earnings before interest, taxes, depreciation and amortization (EBITDA)
were $10.5 million in the current quarter compared to $12.5 million in
the first quarter of 2007.
-- Gross Margin as a percentage of net sales was 53.8% in the first
quarter of 2008, compared to 52.1% in the first quarter of 2007.
CEO Alec Taylor commented, "We experienced sales and earnings during the
first quarter of 2008 that exceeded our guidance. As expected, sales were down
slightly due to the effect of a major customer rollout in the year ago period,
but net income was up due to lower interest expense and improved gross
margins. Our non-prescription reading glasses business remained strong as we
continued to grow in this dynamic category. Early results for our sunglasses
business were encouraging despite the soft economy."
A reconciliation of EBITDA, which is a non-GAAP measure, to net income is
included in the Consolidated Statements of Income and Other Selected Data, and
related notes thereto, attached to this release.
Net Sales by Segment:
($ amounts in thousands) 1st Quarter 1st Quarter
2008 2007 Variance % Inc/Dec
-----------------------------------------
Non-prescription
Reading Glasses $27,287 $27,575 $(288) (1)%
Sunglasses & Prescription
Frames $18,119 $16,840 $1,279 8%
Costume Jewelry $3,395 $5,973 $(2,578) (43)%
International $10,422 $10,761 $(339) (3)%
--------- --------- ----------- ------
Total: $59,223 $61,149 $(1,926) (3)%
Sales of non-prescription reading glasses were essentially flat quarter
over quarter despite the non-anniversaried roll-out at a major customer that
favorably impacted sales in the first quarter of 2007. Excluding the effect
of this roll-out from the first quarter of 2007, the non-prescription reading
glasses segment increased 18% over the prior year quarter.
The increase in sales in the sunglasses and prescription frame segment for
the first quarter of 2008 was due to new product launches and increased sales
volume at two major customers.
As expected, sales of the Company's costume jewelry segment were down in
the current quarter due to the Company's decision to transition from
promotional programs at mass merchandisers to basic replenishable offerings at
key accounts.
Sales from the Company's international segment decreased slightly in the
current quarter due principally to a non-anniversaried reading glasses roll-
out in the UK in the prior year period.
Additional Results
------------------
The following additional results were experienced in the first quarter of
2008:
-- Gross margin as a percentage of net sales improved to 53.8% from 52.1%
in the comparable prior year period. This increase is attributable to
reductions in cost of goods in the non-prescription reading glasses and
sunglasses segments, which were partially offset by higher material
costs in the jewelry segment.
-- Operating income decreased to $5.6 million in the current quarter from
$8.0 million in the first quarter of 2007. This decrease was the result
of higher operating costs, principally depreciation expense and
additional costs associated with being a public company, partially
offset by higher gross margin.
-- Capital expenditures were $4.0 million compared to $5.6 million in the
first quarter of 2007. This decrease was the result of the capital
investment made in the prior year period to support a new
non-prescription reading glasses and sunglasses program roll-out at a
major customer.
-- Days sales outstanding improved to 72 days in the current quarter from
84 days in the first quarter of fiscal 2007. Inventory days on hand
improved to 111 days in the current quarter from 120 days in the first
quarter of fiscal 2007.
-- Stock compensation expense was $0.5 million, or $0.02 per diluted
share, in the current quarter compared to $0.2 million, or $0.01 per
diluted share, in the first quarter of 2007.
-- The Company repurchased 42,000 of its outstanding ordinary shares at an
average price per share of approximately $12.00 under its stock buyback
program. The Company has approximately $11.5 million of stock buyback
authorization remaining under the previously approved program.
Advertising and Promotion
-------------------------
On April 14th, the Company launched a multi-million dollar television
advertising campaign supporting the Foster Grant sunglasses brand. The
campaign is expected to run for 12 weeks. In commenting on the campaign, CEO
Alec Taylor said, "We are pleased to be back on television again this year
advertising Foster Grant sunglasses. This year's campaign reflects the impact
of our new chief marketing officer, Rick Kornhauser, who arrived in January
2008. More than ever, we are committed to building the equities of our brands,
which excites our retail partners and speaks to our leadership position in the
over-the-counter reading glasses and mass sunglasses categories."
Key Account Update
------------------
During the quarter, the Company added a reading glasses program at
approximately 300 AAFES (military base) stores, a wall of fashion readers in
the lady's accessory department at Target and sunglasses and reading glasses
at an additional 215 Paradies airport gift stores. The Company has not yet
shipped a previously discussed reading glasses program to Borders bookstores,
but currently expects to do so in the second fiscal quarter of 2008. Finally,
following the end of the quarter, Wal-Mart advised the Company that beginning
in September of this year it intends to begin directly importing the non-
branded opening price point portion of its reading glasses program currently
provided by the Company. The Company will continue to supply Wal-Mart with
Magnivision branded reading glasses.
Outlook
-------
For the second quarter of 2008, the Company currently expects net sales in
the range of $70 to $72 million, earnings per diluted share to be in the range
of $0.16 to $0.18 and EBITDA to range between $11 and $13 million.
The Company anticipates stock compensation expense to be approximately
$0.6 million, or $0.02 per diluted share, in the second quarter of 2008.
Full year 2008 guidance remains unchanged from the full year 2008 outlook
given in the Company's fourth quarter and full year 2007 earnings release
dated February 20, 2008. Earnings per diluted share guidance for the second
quarter and full year 2008 are based upon weighted average diluted shares of
21.5 million.
Mr. Taylor concluded, "We were pleased with our first quarter performance
which exceeded guidance. Sales of our core reading glasses business remained
strong, while our sunglasses product line had a solid start to 2008. The
reaffirmation of our 2008 guidance speaks to the confidence we have in our
market leading Foster Grant and Magnivision brands."
Conference Call Information
---------------------------
The Company will host a conference call on Thursday, May 1, 2008 at 8:30AM
ET to discuss its financial results. To access the conference call
information, please visit www.fgxi.com under the tab "Investors". To
participate by telephone please dial 888-680-0894. International callers
please dial 617-213-4860. The access code is 80609794. Investors are advised
to dial into the call at least ten minutes prior to the call.
A replay of the conference call will be available through Thursday, May 8,
2008. To access the replay by phone, the domestic dial-in number is 888-286-
8010 and the international dial-in is 617-801-6888. The access code for the
replay is 24501937. To access the replay via webcast, please visit
www.fgxi.com under the tab "Investors".
About FGX International
-----------------------
FGX International Holdings Limited (Nasdaq: FGXI) is a leading designer
and marketer of non-prescription reading glasses, sunglasses and costume
jewelry with a portfolio of established, highly recognized eyewear brands
including Foster Grant(R), Magnivision(R), Angel(TM), Gargoyles(R) and
Anarchy(R).
Forward-Looking Statements
--------------------------
Statements in this press release that are not statements of historical
fact or that express our confidence, expectations, objectives, intentions,
plans, or strategies or otherwise anticipate the future, including, without
limitation, statements regarding our future prospects, revenues, costs,
results of operations and profitability contained in the Outlook section of
this press release, are forward-looking statements. These forward-looking
statements are not guarantees of future performance, and they are subject to
risks and uncertainties that could cause actual results to differ materially
from those contemplated by the forward-looking statements. These risks and
uncertainties include, but are not limited to: the Company's ability to
achieve its business plans; the Company or others may discover that the
Company's products must be recalled because of defects; consumers, retailers,
shareholders and/or others may bring litigation or other claims against the
Company related to recalled products that may cause it to incur substantial
costs to resolve; customer acceptance of our existing or new products;
interruptions of supply from our Asian product manufacturers; lost production
capacity, production errors and quality control errors, political instability,
or changing conditions in transportation services; other risks associated with
our international operations, including foreign currency exchange rate
fluctuations and the impact of quotas, tariffs, or other restrictions on the
importation or exportation of our products; failure to maintain proper
inventory levels; material changes in customers' inventory and working capital
policies; a material reduction or cessation of purchases by any of our largest
customers; failure to comply with federal or state regulation of the
distribution or sale of our products; the uncertainty of the litigation
process including the risk of an unfavorable result in current or future
litigation; depending upon market conditions, the Company may not complete the
stock buyback program; interest rate fluctuations; the Company may not ship a
reading glasses program to Borders in the second quarter of fiscal 2008; the
Company's credit insurance may not cover all of our outstanding accounts
receivable; and disruption due to weather, fire or other unforeseen
circumstances in our principal distribution center.
These and other risks and uncertainties that could cause our actual
results to differ from those contemplated by any forward-looking statement are
discussed in more detail in Part I, Item 1A - Risk Factors in our Form 10-K
for the year ended December 29, 2007, which we may update in Part II, Item 1A
- Risk Factors in Quarterly Reports on Form 10-Q we have filed or will file
thereafter. Forward-looking statements contained in this press release speak
only as of the date hereof. We undertake no obligation to update or revise
any forward-looking statement, whether as a result of new information, future
events or otherwise.
Contact Information:
Investor Relations: FGXI:
------------------- -----
Idalia Rodriguez Anthony Di Paola
ICR Inc. Chief Financial Officer
203-682-8264 401-719-2253
FGX INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF INCOME AND OTHER SELECTED DATA
(Unaudited, in thousands, except per share data)
Three Months Ended
------------------
March 29, 2008 March 31, 2007
-------------- --------------
Net sales:
Non-prescription Reading Glasses $27,287 $27,575
Sunglasses and Prescription Frames 18,119 16,840
Costume Jewelry 3,395 5,973
International 10,422 10,761
-------- --------
Total net sales 59,223 61,149
Cost of sales 27,346 29,312
-------- --------
Gross profit 31,877 31,837
Operating expenses:
Selling expenses 18,538 17,114
General and administrative
expenses 6,479 5,138
Amortization of acquired
intangibles 1,295 1,543
-------- --------
Total operating expenses 26,312 23,795
Operating income 5,565 8,042
Interest expense, net 1,771 5,498
Other income (expense), net 8 38
-------- --------
Income before income taxes and
minority interest 3,802 2,582
Income tax expense 1,431 536
-------- --------
Income before minority interest 2,371 2,046
Minority interest expense 187 128
-------- --------
Net income $2,184 $1,918
======== ========
EPS: Basic $0.10 $0.13
Diluted $0.10 $0.13
Weighted average shares outstanding:
Basic 21,290 14,838
Diluted 21,446 14,916
Capital expenditures $3,990 $5,596
The table below reconciles EBITDA to
net income, the most directly
comparable GAAP measure.
Net income $2,184 $1,918
Interest expense, net 1,771 5,498
Income tax expense 1,431 536
Depreciation and amortization 5,131 4,574
-------- --------
EBITDA (1) $10,517 $12,526
======== ========
See accompanying Notes to Consolidated Statements of Income and Other
Selected Data.
FGX INTERNATIONAL
NOTES TO CONSOLIDATED STATEMENTS OF INCOME AND OTHER SELECTED DATA
(1) EBITDA represents net income before interest, income taxes,
depreciation and amortization. We believe that EBITDA is a performance
measure that provides securities analysts, investors and other
interested parties with a measure of operating results unaffected by
differences in capital structures, capital investment cycles and ages
of related assets among otherwise comparable companies in our
industry. We further believe that EBITDA is frequently used by
securities analysts, investors and other interested parties in their
evaluation of companies, many of which present an EBITDA measure when
reporting their results.
We believe EBITDA facilitates company to company operating performance
comparisons by adjusting for potential differences caused by
variations in capital structures (affecting net interest expense),
taxation (such as the impact of differences in effective tax rates or
net operating losses) and the age and book depreciation of facilities
and equipment (affecting relative depreciation expense), which may
vary for different companies for reasons unrelated to operating
performance.
EBITDA has limitations, including that it is not necessarily
comparable to other similarly titled financial measures of other
companies due to the potential inconsistencies in the method of
calculation. It should not be considered either in isolation or as a
substitute for analysis of our results as reported under U.S. GAAP.
Because of these limitations, EBITDA should not be considered as a
measure of discretionary cash available to us to invest in the growth
of our business. We compensate for these limitations by relying
primarily on our results presented in accordance with U.S. GAAP and
using EBITDA only supplementally.
FGX INTERNATIONAL HOLDINGS LIMITED
SELECTED BALANCE SHEET DATA
(Unaudited, in thousands)
As of As of
March 29, 2008 December 29, 2007
-------------- -----------------
Cash and cash equivalents $4,424 $4,567
Accounts receivable, net 40,179 53,001
Inventories 33,621 33,226
Accounts payable 29,387 27,363
Revolving line of credit 15,000 20,000
Current maturities of long-term
obligations 7,631 7,661
Long-term obligations less current
maturities 92,765 92,778
Shareholders' equity (deficit) 18,965 17,333
SOURCE FGX International
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