SOURCE: Innovo Group Inc.

April 10, 2007 16:00 ET

Innovo Group Reports Fiscal 2007 First Quarter Results

LOS ANGELES, CA -- (MARKET WIRE) -- April 10, 2007 -- Innovo Group Inc. (NASDAQ: INNO) today announced financial results for the first quarter ended February 24, 2007.

Highlights

--  Net sales increased 32% to $13.8 million compared to $10.4 million in
    the first quarter of 2006.
--  The Company generated positive operating income during the period.
--  The Company experienced positive operating leverage during the first
    quarter, growing sales 32%, improving gross profits by 180% and reducing
    SG&A by 13% from a year ago.
    
For the quarter ended February 24, 2007, total net sales from continuing operations increased 32% to $13.8 million compared to total net sales from continuing operations of $10.4 million in the prior year period. The company reported a loss from continuing operations of $173,000, compared to a loss from continuing operations of $4.1 million in the corresponding period a year ago.

Marc Crossman, President and Chief Executive Officer of Innovo, commented, "Our first quarter results underscore the positive progress we have made broadening the Joe's Jeans brand by continuing to increase our domestic distribution and evolving our product line. Our strong sales results coupled with a reduction in our operating expenses allowed us to dramatically improve our losses from a year ago. We are very pleased with our start to fiscal 2007 and look forward to continuing with this positive momentum across our business."

For the quarter ended February 24, 2007, gross margins for the Company's Joe's Jean business increased to 37% from 29% in the corresponding period a year ago. Selling, general and administrative expense for the first quarter of 2007 decreased 13% to $5.0 million compared to $5.7 million for the first quarter of 2006.

The Company will host a conference call to discuss its first quarter fiscal 2007 results today, April 10, 2007 beginning at 4:30 pm ET. To access the live call, please dial (866) 356-3377 (U.S.) or (617) 597-5392 (international). The conference ID number and participant passcode is 98226508 and is entitled the "Q1 2007 Innovo Group Earnings Conference Call." The information provided on the teleconference is only accurate at the time of the conference call, and Innovo Group will take no responsibility for providing updated information. A telephone replay of the conference call will be available beginning at 6:30 PM Eastern Time on April 10, 2007 until 11:59 PM Eastern Time on April 24, 2007 by dialing (888) 286-8010 (U.S) or (617) 801-6888 (international) and using the conference passcode 56339275. In addition, the conference call will be archived for two weeks on the Company's website at www.innovogroup.com.

About Innovo Group Inc.

Innovo Group Inc., through its operating subsidiary Joe's Jeans, Inc., is a design and sales organization designing, producing and selling apparel products to the retail and premium markets under the Joe's™ and Joe's Jeans® brands. Under these brands, the Company's apparel products consist of men's and women's denim and denim-related apparel products. More information is available at the company web site at www.innovogroup.com or at www.joesjeans.com.

Statements in this news release which are not purely historical facts are forward-looking statements, including statements containing the words "intend," "believe," "estimate, "project," "expect" or similar expressions. Forward-looking statements in this press release include, without limitation, our ability to capture market share in the premium denim category, our ability to achieve long-term profitability, our expectations for our Joe's Jeans® brand in the marketplace and our belief in our growth strategy. These statements are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements are based upon information available to Innovo Group Inc. on the date of this release. Any forward-looking statement inherently involves risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to: continued acceptance of the Company's products in the marketplace, particularly acceptance and near-term sales of the Joe's® brand; successful implementation of its strategic plan to focus its resources on its Joe's® brand; the extension or refinancing of its existing bank facility and the restrictions any such extension or refinancing could place on the company; the ability to obtain new financing from other financing sources; the ability to generate positive cash flow from operations; competitive factors, including the possibility of major customers sourcing product overseas in competition with our products; dependence upon third-party vendors; a possible oversupply of denim in the marketplace; and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release. Readers are cautioned not to place undue reliance on forward-looking statements.


                    INNOVO GROUP INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (in thousands)


                                                   02/24/07      11/25/06
                                                 -----------   -----------
                                                 (unaudited)
                         ASSETS
 Current assets
   Cash and cash equivalents                     $     1,328   $       385
   Accounts receivable, net of allowance for
    customer credits and returns of $753 (2007)
    and $469 (2006)                                    2,447           498
   Inventories, net                                    7,545         6,267
   Due from related parties                            1,061         2,163
   Prepaid expenses and other current assets           1,141           671
                                                 -----------   -----------
       Total current assets                           13,522         9,984

 Property and equipment, net                             762           837
 Goodwill                                                 20            20
 Intangible assets, net                                  188           200
 Other assets                                             56            56
                                                 -----------   -----------

       Total assets                              $    14,548   $    11,097
                                                 ===========   ===========

       LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities
   Accounts payable and accrued expenses         $     6,013   $     6,819
   Due to factor                                       1,652           888
   Due to related parties                                149            82
                                                 -----------   -----------
       Total current liabilities                       7,814         7,789

 Commitments and Contingencies

 Stockholders' equity
   Preferred stock, $0.10 par value: 5,000
    shares authorized, no shares issued
    or outstanding                                         -             -
   Common stock, $0.10 par value: 80,000 shares
    authorized, 41,290 shares issued and
    41,178 outstanding (2007) and 34,455 shares
    issued and 34,343 outstanding (2006)               4,131         3,447
   Additional paid-in capital                         82,678        79,763
   Accumulated deficit                               (77,299)      (77,126)
   Treasury stock, 112 shares                         (2,776)       (2,776)
                                                 -----------   -----------
       Total stockholders' equity                      6,734         3,308
                                                 -----------   -----------

            Total liabilities and stockholders'
             equity                              $    14,548   $    11,097
                                                 ===========   ===========



                    INNOVO GROUP INC. AND SUBSIDIARIES
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in thousands, except per share data)


                                                     Three months ended
                                                 -------------------------
                                                   02/24/07      02/25/06
                                                 -----------   -----------
                                                        (unaudited)

Net sales                                        $    13,814   $    10,427
Cost of goods sold                                     8,719         8,607
                                                 -----------   -----------
   Gross profit                                        5,095         1,820
                                                 -----------   -----------

Operating expenses
   Selling, general and administrative                 4,982         5,733
   Depreciation and amortization                          88            60
                                                 -----------   -----------
                                                       5,070         5,793
                                                 -----------   -----------
Income (loss) from continuing operations                  25        (3,973)
   Interest expense                                     (193)         (129)
   Other income                                            3             -
                                                 -----------   -----------
Loss from continuing operations, before taxes           (165)       (4,102)
   Income taxes                                            8             8
                                                 -----------   -----------
Loss from continuing operations                         (173)       (4,110)

Income from discontinued operations, net of tax            -           418
                                                 -----------   -----------
Net loss                                         $      (173)  $    (3,692)
                                                 ===========   ===========

Earnings (loss) per common share - Basic
   Loss from continuing operations               $     (0.00)  $     (0.12)
   Income from discontinued operations                     -          0.01
                                                 -----------   -----------
Loss per common share - Basic                    $     (0.00)  $     (0.11)
                                                 ===========   ===========

Earnings (loss) per common share - Diluted
   Loss from continuing operations               $     (0.00)  $     (0.12)
   Income from discontinued operations                     -          0.01
                                                 -----------   -----------
Loss per common share - Diluted                  $     (0.00)  $     (0.11)
                                                 ===========   ===========

Weighted average shares outstanding
   Basic                                              39,450        33,302
   Diluted                                            39,450        33,302



                    INNOVO GROUP, INC. AND SUBSIDIARIES
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (in thousands)

                                                     Three months ended
                                                 -------------------------
                                                   02/24/07      02/25/06
                                                 -----------   -----------
                                                        (unaudited)

Cash provided by (used in) continuing activities $    (3,442)  $     2,524
Cash provided by (used in) discontinued
 operations                                                -         1,113
                                                 -----------   -----------
Net cash provided by (used in) operating
 activities                                           (3,442)        3,637

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of property and equipment              2             -
Purchases of property and equipment                       (4)          (65)
                                                 -----------   -----------
Net cash (used in) investing activities                   (2)          (65)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from factor borrowing                           764             -
Payments on factor borrowing                               -        (2,607)
Proceeds from issuance of common stock                 3,623             -
                                                 -----------   -----------
Net cash provided by (used in) continuing
 activities                                            4,387        (2,607)
Cash used by discontinued operations                       -          (826)
                                                 -----------   -----------
Net cash provided by (used in) financing
 activities                                            4,387        (3,433)

NET CHANGE IN CASH AND CASH EQUIVALENTS                  943           139

CASH AND CASH EQUIVALENTS, at beginning of
 period                                                  385           560
                                                 -----------   -----------

CASH AND CASH EQUIVALENTS, at end of period      $     1,328   $       699
                                                 ===========   ===========

Contact Information

  • Contact:
    Innovo Group, Inc.
    Dustine Huffine
    323-837-3700

    Integrated Corporate Relations
    Investors: Brendon Frey/James Palczynski
    203-682-8200