Phoenix Gold Reports Second Quarter Results
PORTLAND, Ore., May 8, 2003 -- Phoenix Gold International, Inc. today reported a net loss of $376,000, or $0.12 per diluted share, for the second quarter of fiscal 2003 which ended March 31, 2003 as compared to net earnings of $85,000, or $0.03 per diluted share, in last year's second quarter. Revenue for the second quarter of fiscal 2003 was $5.4 million, a decrease of 32% from revenue of $8.0 million in the second quarter of fiscal 2002.
For the six months ended March 31, 2003, the Company reported a net loss of $730,000, or $0.24 per diluted share, versus net earnings of $91,000, or $0.03 per diluted share, for the comparable period last year. Included in the net loss for the six months ended March 31, 2003 was a non-cash impairment charge of $68,000 (net of tax of $45,000), or $0.02 per share, related to adoption of a new accounting rule on October 1, 2002. Revenue for the six months ended March 31, 2003 decreased 28% to $10.6 million from $14.9 million for the same period in 2002.
"The first half of fiscal 2003 has been much softer than we expected," stated Keith A. Peterson, Chairman and Chief Executive Officer. "This softness precipitated the 22% workforce reduction announced in late February. Further, a company-wide pay reduction was implemented in mid-March. We believe that these steps were necessary to decrease the operating expense structure of the Company while we are faced with such a difficult selling environment."
"We began shipping several new products during the second quarter, including our new Octane-R car audio amplifiers and speakers and Tantrum-X car audio speakers," continued Mr. Peterson. "Further, we began shipping a new entry-level home theater speaker system, while a second new home theater system is scheduled for shipment during the third quarter. The XR and ZRx series of professional sound amplifiers are still scheduled for release during fiscal 2003."
The Company also provided the following information on its second quarter and outlook for the remainder of fiscal 2003: Domestic sales decreased $2.4 million, or 37%, to $4.1 million, as a result of a 38% decrease in sales of electronics, 15% decrease in sales of speakers and a 42% decrease in sales of accessories. Phoenix Gold and AudioSource branded products and OEM products contributed to the decrease. Sales of electronics to a significant customer decreased 73% from a year ago. The amount and timing of purchase orders from this customer may fluctuate from quarter to quarter. International sales decreased 14% to $1.3 million. The Company also currently expects decreased sales in the third quarter of fiscal 2003 as compared to fiscal 2002 due to reduced spending by consumers on discretionary items.
Phoenix Gold confirmed that it remains out of compliance with the market value of publicly held shares requirement for continued listing on the Nasdaq SmallCap Market. On March 27, 2003, the Company reported that the Nasdaq Stock Market, Inc. had notified the Company that its common stock had failed to maintain a minimum market value of publicly held shares of $1 million over the last 30 consecutive trading days as required for continued listing on the Nasdaq SmallCap Market. The Company was provided until June 23, 2003 to regain compliance with this rule or request a hearing with the Nasdaq Listings Qualifications Panel.
"The Board of Directors continues to believe that the current trading price for our shares of common stock does not fairly reflect the value of our enterprise," commented Mr. Peterson. "We remain optimistic, however, that the future trading price may more appropriately reflect the value of Phoenix Gold." Mr. Peterson also noted that the Company's book value per share was more than double the current trading range.
Phoenix Gold International, Inc. designs, manufactures, markets and sells innovative, high quality, high performance electronics, accessories and speakers for the audio market. The Company sells its products under the brand names Phoenix Gold, Carver Professional and AudioSource. The Company's products are used in car audio, professional sound and home audio/theater applications.
PHOENIX GOLD INTERNATIONAL, INC.
BALANCE SHEETS
(Unaudited)
March 31, September 30,
2003 2002
ASSETS
Current assets:
Cash and cash equivalents $1,002 $214,814
Accounts receivable, net 2,981,968 3,610,939
Inventories:
Raw materials and work-in-process 2,722,599 2,924,498
Finished goods 4,762,966 4,841,025
7,485,565 7,765,523
Prepaid expenses 249,179 188,140
Deferred taxes 999,000 572,000
Total current assets 11,716,714 12,351,416
Property and equipment, net 1,082,566 1,102,498
Deferred taxes 536,000 513,000
Other assets 369,543 552,336
Total assets $13,704,823 $14,519,250
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit $497,914 $--
Accounts payable 870,697 1,297,507
Accrued payroll and benefits 359,994 430,048
Accrued customer rebates 321,051 382,972
Other accrued liabilities 523,802 498,684
Total current liabilities 2,573,458 2,609,211
Deferred gain on sale of facility 612,984 662,023
Shareholders' equity:
Preferred stock;
Authorized - 5,000,000 shares; none
outstanding -- --
Common stock, no par value;
Authorized - 20,000,000 shares
Issued and outstanding - 3,006,945 and
3,006,945 shares 6,511,528 6,511,528
Retained earnings 4,006,853 4,736,488
Total shareholders' equity 10,518,381 11,248,016
Total liabilities and shareholders'
equity $13,704,823 $14,519,250
PHOENIX GOLD INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
March 31 March 31
2003 2002 2003 2002
Net sales $5,419,229 $7,993,865 $10,643,163 $14,854,110
Cost of sales 4,264,872 6,126,661 8,373,893 11,538,685
Gross profit 1,154,357 1,867,204 2,269,270 3,315,425
Operating expenses:
Selling 986,097 1,032,058 1,853,896 1,809,925
General and
administrative 767,053 695,606 1,466,776 1,341,320
Total operating
expenses 1,753,150 1,727,664 3,320,672 3,151,245
Income (loss) from
operations (598,793) 139,540 (1,051,402) 164,180
Other income (expense):
Interest income 113 546 745 1,118
Interest expense (3,117) (1,983) (3,131) (16,670)
Other income, net 4,181 2,532 3,153 2,532
Total other income
(expense) 1,177 1,095 767 (13,020)
Earnings (loss) before
income taxes (597,616) 140,635 (1,050,635) 151,160
Income tax benefit
(expense) 222,000 (56,000) 389,000 (60,000)
Earnings (loss) before
cumulative effect of
accounting change (375,616) 84,635 (661,635) 91,160
Cumulative effect of
accounting change,
net of tax -- -- (68,000) --
Net earnings (loss) $(375,616) $84,635 $(729,635) $ 91,160
Earnings (loss)
per share:
Before accounting
change - basic
and diluted $(0.12) $0.03 $(0.22) $0.03
Accounting change
- basic and diluted 0.00 0.00 (0.02) 0.00
Earnings (loss) per
share - basic and
diluted $(0.12) $0.03 $(0.24) $0.03
Average shares
outstanding:
Basic 3,006,945 3,006,945 3,006,945 3,006,945
Diluted 3,006,945 3,007,563 3,006,945 3,006,945