From the Wires
FGX International Reports Strong Sales and Earnings Growth for the Third Quarter and First Nine Months of 2008
Nov. 12, 2008 04:05 PM
SMITHFIELD, R.I., Nov. 12 /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 third quarter and nine months ended October 4, 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20071025/NETH104LOGO )
Highlights for the quarter include:
-- Net sales increased 10% to $59.1 million in the current period from
$53.9 million in the third quarter of 2007.
-- Net income increased to $3.9 million from break even in the third
quarter of 2007.
-- Earnings per diluted share increased to $0.18 in the third quarter of
2008 from break even in the third quarter of 2007.
-- Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased 9% to $12.2 million from $11.2 million in the third quarter
of 2007.
Net Sales by Segment:
3rd Quarter 3rd Quarter $ Inc / % Inc /
2008 2007 (Dec) (Dec)
($ amounts in thousands)
Non-prescription
Reading Glasses $36,501 $30,935 $5,566 18%
Sunglasses &
Prescription Frames $10,425 $8,698 $1,727 20%
Costume Jewelry $5,151 $6,770 $(1,619) (24%)
International $7,026 $7,516 $(490) (7%)
Total $59,103 $53,919 $5,184 10%
CEO Alec Taylor commented, "The momentum we experienced in the first six
months of the year continued into the third quarter despite challenging
economic times in which many of our retail partners experienced sales
softness. Our Foster Grant and Magnivision brands are providing great value
to consumers who look for brand names they know and trust. Additionally, we
continued to maintain our high gross margins in the face of inflationary
pressures while once again improving on key working capital metrics."
Highlights for the nine months include:
-- Net sales increased 7% to $189.9 million in the first nine months of
2008 from $177.7 million in the first nine months of 2007.
-- Net income increased 200% to $10.2 million in the first nine months of
2008 from $3.4 million in the first nine months of 2007.
-- Earnings per diluted share increased to $0.48 in the first nine months
of 2008 from $0.23 in the first nine months of 2007, a 109% increase.
-- EBITDA increased 4% to $35.9 million in the first nine months of 2008
from $34.4 million in the first nine months of 2007.
Net Sales by Segment:
Nine Months Nine Months $ Inc / % Inc /
2008 2007 (Dec) (Dec)
($ amounts in thousands)
Non-prescription
Reading Glasses $95,054 $86,073 $8,981 10%
Sunglasses &
Prescription Frames $54,219 $45,208 $9,011 20%
Costume Jewelry $12,855 $17,804 $(4,949) (28%)
International $27,763 $28,597 $(834) (3%)
Total $189,891 $177,682 $12,209 7%
The increase in non-prescription reading glasses for the third quarter of
2008 was driven by organic growth from new and existing customers. The
increase in the nine month period from the corresponding period a year ago was
due to a combination of organic growth and rollouts to new customers. This
increase was partially offset by a non-anniversaried rollout at a major
retailer in the first quarter of 2007 and the discontinuation of the Company's
opening price point program at Wal-Mart in September 2008.
The increase in sales in the sunglasses and prescription frame segment for
both the quarter and first nine months was due to organic growth at existing
customers and higher sales related to a promotional program at a major
customer.
Declines in the costume jewelry segment for the third quarter and first
nine months of 2008 were principally due to a loss of sales at a major
customer. The Company is continuing its strategic review of its costume
jewelry business and expects to announce the results of that review in its
fourth quarter 2008 earnings release.
Sales in the Company's international segment were down 7% for the third
quarter and 3% for the first nine months when compared to the corresponding
year ago periods due to lower than expected sunglasses sales in the UK and a
non-anniversaried reading glass roll-out in the UK in the first quarter of
2007. These results were once again partially offset by higher sales across
all product categories in Canada for both the third quarter and the first nine
months of 2008.
CEO Alec Taylor commented, "We were pleased with our third quarter 2008
financial results, particularly in light of the current retail environment.
Our non-prescription reading glasses business continued to enjoy strong and
predictable results with double digit year-over-year sales increases while
maintaining high gross margins. Our sunglasses business enjoyed an excellent
summer selling season, once again posting impressive sales growth compared to
the prior year period. We remain on track to complete 2008 within our guidance
announced at the end of last year."
A reconciliation of EBITDA and Free Cash Flow, which are non-GAAP
measures, are included in the Consolidated Statements of Income and Other
Selected Data, and related notes thereto, attached to this release. The
Company believes that non-GAAP measures are useful for an understanding of its
ongoing business.
Additional Results:
The following additional results were experienced in the third quarter and
first nine months of 2008:
-- In the third quarter of 2008, gross margin as a percentage of net sales
was 56.2% versus 54.1% in the comparable period for the prior year. For
the first nine months of 2008, gross margin as a percentage of net
sales was 54.1% compared to 53.4% in the prior year period. The gross
margin increase in the third quarter and first nine months was
principally due to a favorable sales mix compared to the corresponding
period a year ago.
-- In the third quarter of 2008, operating income increased to $7.6
million from $6.5 million in the third quarter of 2007. For the first
nine months of 2008, operating income increased to $21.2 million from
$20.5 million in the comparable period for the prior year. The increase
in operating income for the third quarter of 2008 was driven by
increased sales and higher gross margins. Third quarter 2008 operating
results were partially offset by higher operating costs, principally
fixture depreciation expense, freight costs and costs associated with
being a public company. The increase in operating income for the nine
months of 2008 was driven by higher sales, higher gross margins and a
non-anniversaried $1.9 million abandoned lease charge incurred during
the second quarter of 2007. Nine months operating results were
partially offset by higher operating costs, principally fixture
depreciation expense, freight costs and costs associated with being a
public company.
-- In the third quarter of 2008, interest expense decreased to $1.5
million from $6.0 million in the third quarter of 2007. For the first
nine months of 2008, interest expense decreased to $4.7 million from
$17.4 million in the comparable period for the prior year. The decrease
in interest expense in both periods of 2008 was driven by initial
public offering proceeds which reduced indebtedness in the fourth
quarter of 2007, and a new debt facility entered into in December 2007
which carries lower interest rates.
-- Capital expenditures were $3.6 million in the third quarter of 2008
compared to $3.3 million in the third quarter of 2007 and $10.5 million
in the first nine months of 2008 compared to $11.2 million during the
first nine months of 2007. The increase during the quarter was related
to the purchases of store displays to support new business rollouts.
The decrease in the first nine months of 2008 was the result of a
non-anniversaried capital investment made in the prior year period to
support the rollout of a new non-prescription reading glasses and
sunglasses program at a major customer.
-- Days sales outstanding improved to 76 days in the current quarter from
79 days in the third quarter of fiscal 2007 and improved to 67 days in
the first nine months of 2008 from 79 days in the first nine months of
2007. This improvement was due to a continuing focus on working capital
management.
-- Inventory days on hand improved to 135 days in the current quarter from
137 days in the third quarter of fiscal 2007 and improved to 109 days
in the first nine months of 2008 from 116 days in the first nine months
of 2007. This improvement was due to a concentrated focus on inventory
management.
-- Stock compensation expense was $0.6 million, or $0.02 per diluted
share, in the current quarter compared to $0.2 million, or $0.01 per
diluted share, in the third quarter of 2007. Stock compensation expense
was $1.7 million, or $0.05 per diluted share, in the first nine months
of 2008 compared to $0.5 million, or $0.02 per diluted share, in the
first nine months of 2007.
-- During the third quarter of 2008, the Company did not repurchase any
additional shares under its stock buyback program. For the first nine
months of 2008, the Company repurchased a total of 133,788 of its
outstanding ordinary shares at an average price per share of $11.07
under its stock buyback program. The Company has approximately $10.5
million of stock buyback authorization remaining under the previously
approved program.
Update of Key Accounts
-- During the third quarter the Company entered into a contract with
Hudson News to provide sunglasses and reading glasses at approximately
400 airport and other major transportation hub gift shops. The Company
expects to ship approximately $3-4 million of product in connection
with this program in 2009.
Liquidity and Capital Resources
As of October 4, 2008, the Company had $64.7 million of availability under
its revolving credit facility, which expires in 2012. In addition, through the
first nine months of 2008, FGXI has generated $25.4 million of Free Cash Flow.
The Company believes it has adequate liquidity and capital resources to
operate its business as currently conducted.
Outlook
For the fourth quarter 2008, excluding any unforeseen charges or events,
the Company currently expects net sales in the range of $66-68 million,
earnings per diluted share in the range of $0.29-0.31 and EBITDA in the range
of $18-20 million. These ranges would yield full year 2008 net sales of
$256-258 million, earning per diluted share of $0.77-0.79 and EBITDA of $54-56
million.
The Company anticipates stock compensation expense to be approximately
$0.6 million, or $0.02 per diluted share, in the fourth quarter of 2008.
Actual results may differ materially from these estimates as a result of
various factors, and we refer you to the cautionary language under the heading
"Forward-Looking Statements" when considering this information.
The Company intends to provide its financial outlook for 2009 in its
fourth quarter earnings release. This should allow for greater clarity with
respect to the general retail environment and the Company's prospects for
2009.
Conference Call Information
The Company will host a conference call on Thursday, November 13, 2008 at
8:30AM ET to discuss its financial results. To access the conference call
information, please visit http://www.fgxi.com under the tab "Investors". To
participate by telephone please dial 888-680-0869. International callers
please dial 617-213-4854. The access code is 51663039. 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
November 20, 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 83037080. To access the replay via webcast, please visit
http://www.fgxi.com under the tab "Investors".
About FGX International
FGX International Holdings Limited 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). The Company
does business through offices in Smithfield, Rhode Island, Bentonville,
Arkansas, New York City, Toronto, Canada, Mexico City, Mexico, Stoke-on-Trent,
United Kingdom and Shenzhen, China.
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 failure to execute, or the
timing of execution of, anticipated customer contracts; deteriorating economic
conditions and decreases in consumer spending; 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 its products that may cause it to incur
substantial costs to resolve; interruptions of supply from our Asian product
manufacturers; lost production capacity, production errors and quality control
errors at our product manufacturers; political instability or changing
conditions in transportation services in foreign countries; 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; material
changes in customers' inventory and working capital policies; a material
reduction, cessation, or postponement of purchases by our 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'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.
FGX INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF INCOME AND OTHER SELECTED DATA
(Unaudited, in thousands, except per share data)
Three Months Ended(4)
Oct. 4, 2008 Sept. 29, 2007
Net sales:
Non-prescription Reading Glasses $36,501 $30,935
Sunglasses and Prescription Frames 10,425 8,698
Costume Jewelry 5,151 6,770
International 7,026 7,516
Total net sales 59,103 53,919
Cost of sales 25,880 24,762
Gross profit 33,223 29,157
Operating expenses:
Selling expenses 18,406 16,134
General and administrative expenses 5,927 4,998
Amortization of acquired intangibles 1,295 1,543
Abandoned lease charge - -
Total operating expenses 25,628 22,675
Operating income 7,595 6,482
Interest expense, net 1,478 6,037
Other income (expense), net (198) 56
Income before income taxes and minority
interest 5,919 501
Income tax expense (benefit) 1,909 539
Income (loss) before minority interest 4,010 (38)
Minority interest expense 103 20
Net income (loss) $3,907 $(18)
EPS: Basic $0.18 $(0.00)
Diluted $0.18 $(0.00)
Weighted average shares outstanding:
Basic 21,171 14,638
Diluted 21,316 14,638
Capital expenditures $3,609 $3,282
The table below reconciles EBITDA to
net income, the most directly comparable
GAAP measure.
Net income (loss) $3,907 $(18)
Income tax expense (benefit) 1,909 539
Interest expense, net 1,478 6,037
Depreciation and amortization 4,935 4,611
EBITDA (1) $12,229 $11,169
EBITDA margin (EBITDA / net sales) 20.7% 20.7%
The table below reconciles Free Cash
Flow to the EBITDA table above.
EBITDA $12,229 $11,169
Less: Capital Expenditures (3,609) (3,282)
Free Cash Flow (1) $8,620 $7,887
See accompanying Notes to Consolidated Statements of Income and Other Selected
Data.
FGX INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF INCOME AND OTHER SELECTED DATA
(Unaudited, in thousands, except per share data)
Reconciliation of Results "As Reported" in accordance with GAAP to Results
"Excluding Adjustments" (2), a non GAAP measure
Nine Months Ended (4)
Oct. 4, September 29, 2007
2008
As As Excluding
Reported Reported Adjustments(3) Adjustments
Net sales:
Non-prescription
Reading Glasses $95,054 $86,073 $- $86,073
Sunglasses and Prescription
Frames 54,219 45,208 - 45,208
Costume Jewelry 12,855 17,804 - 17,804
International 27,763 28,597 - 28,597
Total net sales 189,891 177,682 - 177,682
Cost of sales 87,243 82,887 - 82,887
Gross profit 102,648 94,795 - 94,795
Operating expenses:
Selling expenses 58,652 52,797 - 52,797
General and administrative
expenses 18,844 15,033 - 15,033
Amortization of acquired
intangibles 3,886 4,629 - 4,629
Abandoned lease charge - 1,865 (1,865) -
Total operating expenses 81,382 74,324 (1,865) 72,459
Operating income 21,266 20,471 1,865 22,336
Interest expense, net 4,700 17,373 - 17,373
Other income (expense),
net (144) 180 - 180
Income before income taxes
and minority interest 16,422 3,278 1,865 5,143
Income tax expense
(benefit) 5,869 (327) 746 419
Income before minority
interest 10,553 3,605 1,119 4,724
Minority interest expense 370 206 - 206
Net income $10,183 $3,399 $1,119 $4,518
EPS: Basic $0.48 $0.23 $- $0.31
Diluted $0.48 $0.23 $- $0.30
Weighted average shares
outstanding:
Basic 21,225 14,764 14,764
Diluted 21,361 14,826 14,826
Capital expenditures $10,511 $11,220 $11,220
The table below reconciles EBITDA to
net income, the most directly
comparable GAAP measure.
Net income $10,183 $3,399 $- $4,518
Income tax expense
(benefit) 5,869 (327) - 419
Interest expense, net 4,700 17,373 - 17,373
Depreciation and
amortization 15,124 13,979 - 13,979
EBITDA(1) $35,876 $34,424 $- $36,289
EBITDA margin (EBITDA
/ net sales) 18.9% 19.4% 20.4%
The table below reconciles Free Cash
Flow to the EBITDA table above.
EBITDA $35,876 $34,424 $- $36,289
Less: Capital
Expenditures (10,511) (11,220) - (11,220)
Free Cash Flow(1) $25,365 $23,204 $- $25,069
See accompanying Notes to Consolidated Statements of Income and Other
Selected Data.
FGX INTERNATIONAL HOLDINGS LIMITED
SELECTED BALANCE SHEET DATA
(Unaudited, in thousands)
As of As of
Oct. 4, 2008 Dec. 29, 2007
Cash and cash equivalents $ 1,969 $ 4,567
Accounts receivable, net 37,789 53,001
Inventories 34,486 33,226
Accounts payable 21,583 27,364
Revolving line of credit 10,000 20,000
Current maturities of long-term
obligations 13,305 7,661
Long-term obligations less current
maturities 81,666 92,778
Shareholders' equity 27,111 17,333
FGX INTERNATIONAL
NOTES TO CONSOLIDATED STATEMENTS OF INCOME AND OTHER SELECTED DATA
1. EBITDA represents net income before interest, income taxes,
depreciation and amortization. Free Cash Flow represents EBITDA less capital
expenditures. We believe that EBITDA and Free Cash Flow are performance
measures that provide 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.
2. We have presented the "Adjustments" and "Excluding Adjustments"
columnar information because we believe it provides securities analysts,
investors and other interested parties with more insight as to the Company's
results without regard to certain significant events and transactions that
occurred during the fiscal periods presented and that may or may not be
recurring in nature. We believe the presentation of this data provides the
reader with a greater understanding of the impact of certain items on specific
U.S. Generally Accepted Accounting Principles (GAAP), or "as reported,"
measures, including net income, operating income and gross profit. Management
utilizes this information to better understand its operating results as well
as the impact of and progress on certain strategic initiatives. The columnar
information under the caption "Excluding Adjustments" are not substitutes for
analysis of our results as reported under U.S. GAAP and should only be used as
supplemental information.
3. Results for the nine months ended September 29, 2007 include a $1.9
million charge incurred during the second quarter of 2007 in connection with
the vacancy at the Company's Miramar, Florida facility.
4. The Company's current fiscal year will end on January 3, 2009 and will
include 53 weeks. The third quarter of 2008 included 14 weeks while the third
quarter of 2007 included 13 weeks. Accordingly, the nine month period of 2008
included 40 weeks while the nine month period of 2007 included 39 weeks.
Contact Information:
ICR Inc. FGX International
R. Idalia Rodriguez Anthony DiPaola
Investor Relations Chief Financial Officer
203-682-8264 401-719-2253
SOURCE FGX International
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