SPY Inc. Reports Financial Results for the Quarter Ended September 30, 2012

Marketwired

CARLSBAD, CA--(Marketwire - Nov 13, 2012) -  SPY Inc. (OTCBB: XSPY) today announced financial results for the quarter ended September 30, 2012.

Total net sales increased by $0.7 million, or 8%, to $9.9 million for the quarter ended September 30, 2012, compared with total net sales of $9.2 million for the quarter ended September 30, 2011. Total net sales increased by $2.6 million, or 10%, to $27.5 million for the nine months ended September 30, 2012, compared with total net sales of $24.9 million for the nine months ended September 30, 2011.

Sales of our core SPY® brand products increased by $1.4 million, or 17%, to $9.8 million for the quarter ended September 30, 2012, compared with core SPY® brand sales of $8.4 million during the quarter ended September 30, 2011. Other sales of approximately $0.1 million during the quarter ended September 30, 2012, consisted of licensed brand products which are no longer a focus of the Company, compared with licensed product sales of $0.8 million during the quarter ended September 30, 2011.

Sales of our core SPY® brand products increased by $3.9 million, or 17%, to $27.1 million for the nine months ended September 30, 2012, compared with core SPY® brand sales of $23.2 million during the nine months ended September 30, 2011. Other sales were $0.4 million during the nine months ended September 30, 2012, consisting of licensed brand products which are no longer a focus of the Company, compared with licensed product sales of $1.7 million during the nine months ended September 30, 2011.

"With strong SPY® brand sales growth of 17% for 3rd quarter of 2012 over 2011, building on the huge SPY® brand growth rate of 25% for the 3rd quarter of 2011 over 2010, we are happy to have achieved our 6th consecutive quarter of year over year growth of SPY® brand products. We feel this once again demonstrates the strength of our renewed brand positioning and exciting new product collection," said Michael Marckx, President and CEO. "We are especially pleased that we were able to grow our North American snow goggle and sunglass businesses because of such a poor snow season last year that we believe caused many of our retailers to have relatively high inventory levels going into this 2012 fall snow goggle buying season."

We incurred a net loss of $1.8 million during the quarter ended September 30, 2012, which was significantly lower than the net loss of $3.0 million during the quarter ended September 30, 2011. The reduced loss during the quarter ended September 30, 2012 was primarily due to increased gross margin. Total operating expenses were slightly lower during the quarter ended September 30, 2012 compared to 2011; with lower general and administrative expenses due to the level of legal and consulting expenses in 2011 associated with the restructure of management in 2011, offset by increased sales and marketing expenses in 2012 related to our SPY® brand products. Additionally, operating expenses in the quarter ended September 30, 2012 included $0.7 million related to certain restructuring actions which included estimated expenses associated with reducing the number of employees and changing the direct portion of our European business to a distribution model. The restructuring activities together with reducing the level of anticipated spending for marketing programs are intended to lower our future breakeven point on an operating basis.

In August 2012, we increased our borrowing capacity by increasing the maximum principal amount available to us under one of our credit facilities with Costa Brava Partnership III, L.P. ("Costa Brava") by $3.0 million (from $7.0 million to $10.0 million), thereby increasing the aggregate maximum principal amount under all credit facilities from Costa Brava from $14.0 million to $17.0 million (excluding accrued interest which is added to outstanding principal). We also extended the due dates of both of our credit facilities with Costa Brava to be April 1, 2014. In September 2012, we borrowed $1.0 million under a convertible debt arrangement with Harlingwood (Alpha), LLC ("Harlingwood"). Costa Brava and Harlingwood are significant shareholders of the company's common stock.

The results of our operations, liquidity and capital resources during and as of the quarter ended September 30, 2012 and 2011, respectively, are more fully discussed in our Form 10-Q for the quarter ended September 30, 2012.

SPY Inc.:
We design, market and distribute premium products for hardcore participants in action sports, motorsports, snow sports, cycling and multi-sports markets, which embrace their attendant lifestyle subcultures, crossing over into more mainstream fashion, music and entertainment markets. We believe a principal strength is our ability to create distinctive products for active people within the youthful demographics of these subcultures. Our principal products -- sunglasses, goggles and prescription frames -- are marketed under the SPY® brand. During 2011 and 2010, we also designed, manufactured and sold eyewear under the O'Neill®, Melodies by MJB® and Margaritaville® brands and in 2011, we decided to cease any new purchase orders of additional inventory for these licensed eyewear brands and do not expect any significant sales from these brands in the future.

Safe Harbor Statement:
This press release contains forward-looking statements. These statements relate to future events or future financial performance and are subject to risks and uncertainties. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "feel," "estimate," "predict," "hope," the negative of such terms, expressions of optimism or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Factors that could cause actual results to differ from those contained in our forward-looking statements include, but are not limited to lack of continuity and effectiveness of our management team, our ability to generate sufficient incremental sales of our core SPY® brand and new products to recoup our significant investments in sales and marketing, our ability to reduce our breakeven point on an operating basis, our ability to maintain or increase the availability of our existing credit facilities and otherwise finance our strategic objectives, and the other risks identified from time to time in our filings made with the U.S. Securities and Exchange Commission. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results. Moreover, except as required by law, we assume no responsibility for the accuracy or completeness of such forward-looking statements and undertake no obligation to update any of these forward-looking statements.

       
       
       
SPY INC. AND SUBSIDIARIES      
       
CONSOLIDATED BALANCE SHEETS
(Thousands, except number of shares and per share amounts)
  
 
   
   
        September 30,     December 31,  
        2012     2011  
        (Unaudited)        
Assets                
Current assets                
  Cash   $ 953     $ 727  
  Accounts receivable, net     6,125       4,859  
  Inventories, net     7,636       6,190  
  Prepaid expenses and other current assets     526       420  
    Total current assets     15,240       12,196  
Property and equipment, net     510       730  
Intangible assets, net of accumulated amortization of $718 and $688 at September 30, 2012 and December 31, 2011, respectively     105       65  
Other long-term assets     76       50  
    Total assets   $ 15,931     $ 13,041  
                 
Liabilities and Stockholders' Deficit                
Current liabilities                
  Lines of credit   $ 4,577     $ 2,484  
  Current portion of capital leases     56       65  
  Current portion of notes payable     15       500  
  Accounts payable     2,616       1,583  
  Accrued expenses and other liabilities     3,807       2,679  
  Income taxes payable     -       8  
    Total current liabilities     11,071       7,319  
Capital leases, noncurrent     111       150  
Secured notes payable, noncurrent     36       47  
Subordinated stockholder long-term debt, noncurrent     17,530       13,000  
  Total liabilities     28,748       20,516  
Stockholders' deficit                
  Preferred stock: par value $0.0001; 5,000,000 authorized; none issued     -       -  
  Common stock: par value $0.0001; 100,000,000 shares authorized; 13,072,774 and 12,955,438 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively     1       1  
  Additional paid-in capital     44,183       43,492  
  Accumulated other comprehensive income     460       471  
  Accumulated deficit     (57,461 )     (51,439 )
    Total stockholders' deficit     (12,817 )     (7,475 )
    Total liabilities and stockholders' deficit   $ 15,931     $ 13,041  
               
         
               
SPY INC. AND SUBSIDIARIES  
   
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS  
(Thousands, except per share amounts)  
   
   
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2012     2011     2012     2011   
    (Unaudited)     (Unaudited)  
Net sales   $ 9,886       9,186     $ 27,497     $ 24,875  
Cost of sales     5,583       5,941       14,644       13,334  
  Gross profit     4,303       3,245       12,853       11,541  
Operating expenses:                                
  Sales and marketing     3,838       3,421       11,262       8,863  
  General and administrative     1,351       1,972       5,075       6,247  
  Shipping and warehousing     224       164       607       454  
  Research and development     112       130       364       445  
  Other operating expense     -       -       -       1,952  
    Total operating expenses     5,525       5,687       17,308       17,961  
  Loss from operations     (1,222 )     (2,442 )     (4,455 )     (6,420 )
Other income (expense):                                
  Interest expense     (637 )     (413 )     (1,676 )     (964 )
  Foreign currency transaction gain (loss)     42       (81 )     80       (68 )
  Other (expense) income     33       (27 )     29       (26 )
    Total other expense     (562 )     (521 )     (1,567 )     (1,058 )
  Loss before provision for income taxes     (1,784 )     (2,963 )     (6,022 )     (7,478 )
Income tax provision     -       21       -       27  
Net loss   $ (1,784 )   $ (2,984 )   $ (6,022 )   $ (7,505 )
Net loss per share of Common Stock                                
  Basic   $ (0.14 )   $ (0.23 )   $ (0.46 )   $ (0.59 )
  Diluted   $ (0.14 )   $ (0.23 )   $ (0.46 )   $ (0.59 )
Shares used in computing net loss per share of Common Stock                                
  Basic     13,066       12,888       13,037       12,675  
  Diluted     13,066       12,888       13,037       12,675  
Other comprehensive income (loss)                                
  Foreign currency translation adjustment     (125 )     313       34       (113 )
  Unrealized gain on foreign currency exposure of net investment in foreign operations     141       (396 )     (45 )     100  
    Total other comprehensive income (loss)     16       (83 )     (11 )     (13 )
Comprehensive loss   $ (1,768 )   $ (3,067 )   $ (6,033 )   $ (7,518 )
                                 
Contact:
CONTACTS:
Maddy Isbell
PR Manager
760-804-8420
Fax: 760-804-8442
http://investor.spyoptic.com

Rates

View Comments (0)