SOURCE: SPY Inc.

SPY Inc.

November 04, 2014 16:05 ET

Spy Inc. Reports Financial Results for the Third Quarter 2014

Third Quarter Year Over Year Growth of 8.1%; SPY Inc. Total Company First Nine Months Net Sales of $28.4 million

CARLSBAD, CA--(Marketwired - November 04, 2014) - SPY Inc. (OTCBB: XSPY) today announced financial results for the three and nine months ended September 30, 2014.

Third quarter sales were $11.0 million in 2014, an increase of 8.1% or $0.8 million more than in the third quarter of 2013. The increase in our net sales was primarily driven by strong goggle sales and continued growth in our prescription frames. Gross profit as a percentage of net sales was 49.2% for the three months ended September 30, 2014, compared to 48.5% for the three months ended September 30, 2013. 

First nine month sales were $28.4 million in 2014, a decrease of 2.7% or $0.8 million less than in the first nine months of 2013. Sales included lower closeout sales of $1.2 million in 2014, compared to $2.0 million in 2013. The decrease in our net sales was primarily driven by an overall decline in the consumer market coupled with several key retailers currently holding lower levels of inventory and fewer closeout sales of our sunglass products. Gross profit as a percentage of net sales was 51.9% for the nine months ended September 30, 2014, compared to 50.8% for the nine months ended September 30, 2013.

"In third quarter, we were happy to get back into our positive sales trend with growth in the quarter in four of our five major categories; RX, moto goggles, snow goggles and sunglasses," said Michael Marckx, president and CEO. "In addition, the continued margin expansion is a direct result of the strategic product sourcing initiatives and our brand's more premium positioning. We achieved a solid operating profit margin along with a very successful launch of our new snow goggle line, including the launch of our proprietary Happy Lens™ in the snow category, which positions us well for the final quarter of 2014. In Q4, we will focus on fulfilling snow goggle orders, further expanding our Happy Lens offering, driving our sales growth, improving our product margins and launching our 2015 product line."

Income from operations increased by $0.1 million to $0.6 million in the third quarter of 2014, compared to income from operations of approximately $0.5 million in the third quarter of 2013. The $0.1 million increase was partially due to the increase in sales and a 70 basis point improvement in gross profit as a percent of sales. Additionally, total operating expenses in the third quarter of 2014 were higher by $0.3 million, compared to the third quarter of 2013.

Income from operations remained constant and was $0.8 million and $0.8 million for the nine months ended in 2014 and 2013. Although sales decreased it was offset with a 110 basis point improvement in gross profit as a percent of sales. Additionally, total operating expenses in the first nine months of 2014 were lower by $0.1 million, compared to the same period in 2013. Cash flow used in operating activities was less than $0.1 million in the first nine months of 2014.

The Company incurred a net loss of less than $0.1 million and $0.3 million during the third quarter of 2014 and 2013, respectively.

The Company incurred a net loss of $1.5 million and $1.6 million during the first nine months of 2014 and 2013, respectively.

SPY Inc. invites you to join the investor conference call on November 4, 2014, at 1:30 p.m. PST. The dial-in number for the call in North America is 1-877-703-6105 and 1-857-244-7304 for international callers. The participant pass code is 73675276. The call will also be webcast live on the internet and can be accessed by logging on at investor.spyoptic.com.

The results of our operations for the quarters ended September 30, 2014 and 2013 are more fully discussed in our Form 10-Q for the quarter ended September 30, 2014, filed with the Securities and Exchange Commission on November 4, 2014.

SPY Inc.:
We have a happy disrespect for the usual way of looking (at life) and the need to SEE HAPPY. It is this mindset that drives us to design, market, and distribute premium products for people who "live" to be outdoors, pushing the boundaries in action sports, motorsports, snow sports, cycling and multi-sports. We actively support the lifestyle subcultures that surround these pursuits, and as a result our products serve the broader fashion, music and entertainment markets of the youth culture. Our reason for being is to create the unusual and this is what helps us deliver distinctive products to people who are active, fun and a bit irreverent, like us. Our principal products-sunglasses, goggles and prescription frames-are marketed with fun and creativity under the SPY® brand. More information about SPY may be obtained from: www.spyoptic.com, www.facebook.com/spyoptic, Twitter @spyoptic and Instagram @spyoptic.

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 lower our expenses or otherwise 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,  
   2014   2013  
   (Unaudited)      
Assets           
 Current assets           
Cash  $894   $686  
Accounts receivable, net   6,529    6,543  
Inventories, net   7,529    5,872  
Prepaid expenses and other current assets   670    680  
Income taxes receivable   -    3  
            
  Total current assets   15,622    13,784  
 Property and equipment, net   422    438  
Intangible assets, net of accumulated amortization of $809 and $782 at September 30, 2014 and December 31, 2013, respectively   45    72  
 Other long-term assets   34    63  
            
  Total assets  $16,123   $14,357  
            
Liabilities and Stockholders' Deficit           
 Current liabilities           
Lines of credit  $4,395   $4,024  
Current portion of capital leases   72    77  
Current portion of notes payable   16    16  
Accounts payable   2,463    1,302  
Accrued expenses and other liabilities   4,197    3,069  
            
  Total current liabilities   11,143    8,488  
 Capital leases, less current portion   40    92  
 Notes payable, less current portion   4    16  
 Notes payable to stockholders   21,582    21,452  
            
  Total liabilities   32,769    30,048  
 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; 13,375,627 and 13,184,876 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively   1    1  
Additional paid-in capital   45,927    45,331  
Accumulated other comprehensive income   472    520  
Accumulated deficit   (63,046 )  (61,543 )
            
  Total stockholders' deficit   (16,646 )  (15,691 )
              
  Total liabilities and stockholders' deficit  $16,123   $14,357  
         
  
SPY INC. AND SUBSIDIARIES 
  
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS 
(Thousands, except per share amounts) 
  
   Three Months Ended 
September 30,
  Nine Months Ended 
September 30,
 
   2014   2013   2014   2013  
   (Unaudited)   (Unaudited)  
Net sales  $10,977   $10,152   $28,353   $29,154  
Cost of sales   5,579    5,225    13,632    14,350  
                      
 Gross profit   5,398    4,927    14,721    14,804  
Operating expenses:                     
 Sales and marketing   3,071    2,963    8,717    8,767  
 General and administrative   1,417    1,269    4,287    4,505  
 Shipping and warehousing   145    121    418    379  
 Research and development   172    120    521    343  
                       
  Total operating expenses   4,805    4,473    13,943    13,994  
                      
 Income from operations   593    454    778    810  
Other income (expense):                     
 Interest expense   (494 )  (745 )  (2,004 )  (2,229 )
 Foreign currency transaction loss   (108 )  (12 )  (106 )  (174 )
 Other income (expense)   (10 )  1    (169 )  (4 )
                      
  Total other expense   (612 )  (756 )  (2,279 )  (2,407 )
                      
 Loss before provision for income taxes   (19 )  (302 )  (1,501 )  (1,597 )
Income tax provision   -    -    3    -  
                      
Net loss  $(19 ) $(302 ) $(1,504 ) $(1,597 )
                      
Net loss per share of Common Stock                     
 Basic  $(0.00 ) $(0.02 ) $(0.11 ) $(0.12 )
                       
 Diluted  $(0.00 ) $(0.02 ) $(0.11 ) $(0.12 )
                      
Shares used in computing net loss per share of Common Stock                     
 Basic   13,373    13,165    13,312    13,143  
                       
 Diluted   13,373    13,165    13,312    13,143  
                      
Other comprehensive income (loss):                     
Foreign currency translation adjustment  $(51 ) $(225 ) $(238 ) $(132 )
Unrealized gain on foreign currency exposure of net investment in foreign operations   9    246    190    148  
                      
 Total other comprehensive income (loss)   (42 )  21    (48 )  16  
                      
Comprehensive loss  $(61 ) $(281 ) $(1,552 ) $(1,581 )
                      
                      

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