CARLSBAD, CA -- (Marketwire) -- 11/13/12 -- 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 Nine Months Ended
September 30, 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)
=========== =========== =========== ===========
