SOURCE: SPY Inc.

SPY Inc.

March 20, 2014 16:05 ET

SPY Inc. Reports Financial Results for the Year Ended December 31, 2013

SPY® Brand Products Achieved Annual Growth of 8% in 2013 Over 2012; 11th Consecutive Quarter of Year Over Year Growth of SPY® Brand Products; Total Company Net Sales Reported as $37.8 million

CARLSBAD, CA--(Marketwired - Mar 20, 2014) - SPY Inc. (OTCBB: XSPY) today announced financial results for the three months and year ended December 31, 2013.

Annual sales of our SPY® brand products were $37.7 million in 2013, an increase of 8% or $2.6 million, compared to $35.1 million in 2012. SPY® brand annual sales included slightly higher closeout sales of $2.8 million in 2013, compared to $2.6 million in 2012. Sales from our discontinued licensed brand products, which are no longer a focus of the Company, were less than $0.1 million in 2013, compared $0.5 million in 2012. Total Company net sales increased by 6% or $2.2 million, to $37.8 million for the year ended December 31, 2013, compared to $35.6 million for the year ended December 31, 2012, primarily as a result of increased sales of our snow goggle and optical products. 

Fourth quarter sales of our SPY® brand products were $8.6 million in 2013, an increase of 7% or $0.5 million over the fourth quarter of 2012. The fourth quarter SPY® brand sales included higher closeout sales of $0.7 million in the fourth quarter of 2013 compared to $0.6 million in the fourth quarter of 2012, or a $0.1 million increase. Total Company net sales increased by 6% or $0.5 million, to $8.6 million in the fourth quarter of 2013, compared to $8.1 million in the fourth quarter of 2012, primarily as a result of higher sales of our snow goggle and optical products.

"With continued strong SPY® brand sales and an annual SPY® brand growth of 8% for 2013 over 2012, we are happy to once again generate annual growth and achieve our 11th quarter in a row of year over year growth of our SPY® brand products. What is also noteworthy is we had income from operations of $0.4 million during 2013 compared to an operating loss of $5.0 million in 2012," said Michael Marckx, President and CEO. "We not only managed to significantly reduce our operating expenses for 2013, but also increased our margin to 50% in 2013 from 46% in 2012, which is a dramatic positive shift for us. This directly reflects the strong demand for our product offering as well as the operational and manufacturing efficiencies that we have achieved over the past year. I'd like to mention that this is a definitive culmination of SPY's efforts to reduce costs, which has helped solidify our operating cost structure. Achieving operating profit along with our expanding portfolio of products, including our successful Happy Lens™ Collection, positions us well for 2014 as we continue to focus on disruptive strategies, driving sales, improving our product margins and managing our operating costs."

During 2013 the Company had income from operations of $0.4 million compared to a loss from operations of $5.0 million in 2012 or an improvement of $5.4 million. Our loss from operations was $0.4 million in the fourth quarter of 2013 compared to $0.6 million in the fourth quarter of 2012, or an improvement of $0.2 million.

We incurred an annual net loss of $2.9 million in 2013 compared to a net loss of $7.2 million in 2012. We incurred a net loss of $1.3 million in the fourth quarter of 2013 compared to a net loss of $1.2 million in the fourth quarter of 2012. The primary difference between the net loss and income and loss from operations was due to interest expense on our long-term debt. 

SPY Inc. invites you to join the investor conference call on Thursday, March 20, 2014, at 1:30 p.m. PDT. The dial-in number for the call in North America is 1-866-515-2911 and 1-617-399-5125 for international callers. The participant pass code is 18230516. 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 years ended December 31, 2013 and 2012 are more fully discussed in our Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission on March 20, 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)  
   
             
    December 31,  
    2013     2012  
Assets            
Current assets                
  Cash   $ 686     $ 818  
  Accounts receivable, net     6,543       5,611  
  Inventories, net     5,872       6,274  
  Prepaid expenses and other current assets     680       770  
  Income taxes receivable     3       16  
    Total current assets     13,784       13,489  
Property and equipment, net     438       446  
Intangible assets, net of accumulated amortization of $782 and $727 at December 31, 2013 and 2012, respectively     72       127  
Other long-term assets     63       85  
    Total assets   $ 14,357     $ 14,147  
                 
Liabilities and Stockholders' Deficit                
Current liabilities                
  Lines of credit   $ 4,024     $ 4,591  
  Current portion of capital leases     77       49  
  Current portion of notes payable     16       15  
  Accounts payable     1,302       1,459  
  Accrued expenses and other liabilities     3,069       2,604  
  Income taxes payable     --       --  
    Total current liabilities     8,488       8,718  
Capital leases, less current portion     92       102  
Notes payable, less current portion     16       32  
Notes payable to stockholders     21,452       19,078  
    Total liabilities     30,048       27,930  
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; 13,184,876 and 13,098,374 shares issued and outstanding at December 31, 2013 and 2012, respectively     1       1  
  Additional paid-in capital     45,331       44,403  
  Accumulated other comprehensive income     520       494  
  Accumulated deficit     (61,543 )     (58,681 )
    Total stockholders' deficit     (15,691 )     (13,783 )
    Total liabilities and stockholders' deficit   $ 14,357     $ 14,147  
                 
   
SPY INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS  
(Thousands, except per share amounts)  
   
                         
    Three Months Ended
December 31,
    Year Ended
December 31,
 
    2013     2012     2013     2012  
    (Unaudited)        
Net sales   $ 8,627     $ 8,112     $ 37,782     $ 35,609  
Cost of sales     4,571       4,545       18,921       19,189  
  Gross profit     4,056       3,567       18,861       16,420  
Operating expenses:                                
  Sales and marketing     2,547       2,552       11,314       13,814  
  General and administrative     1,607       1,211       6,112       6,285  
  Shipping and warehousing     155       159       534       767  
  Research and development     158       222       502       587  
  Other operating expense     -       -       -       -  
    Total operating expenses     4,467       4,144       18,462       21,453  
  Loss from operations     (411 )     (577 )     399       (5,033 )
Other income (expense):                                
  Interest expense     (737 )     (712 )     (2,966 )     (2,388 )
  Foreign currency transaction gain (loss)     (116 )     57       (290 )     137  
  Other (expense) income     (2 )     21       (5 )     50  
    Total other expense     (855 )     (634 )     (3,261 )     (2,201 )
  Loss before provision for income taxes     (1,265 )     (1,211 )     (2,862 )     (7,234 )
Income tax provision     -       8       -       8  
Net loss   $ (1,265 )   $ (1,219 )   $ (2,862 )   $ (7,242 )
Net loss per share of Common Stock                                
    Basic   $ (0.10 )   $ (0.09 )   $ (0.22 )   $ (0.56 )
    Diluted   $ (0.10 )   $ (0.09 )   $ (0.22 )   $ (0.56 )
Shares used in computing net loss per share of Common Stock                                
    Basic     13,185       13,544       13,155       13,047  
    Diluted     13,185       13,544       13,155       13,047  
Other comprehensive income (loss)                                
  Foreign currency translation adjustment     (107 )     (144 )     (239 )     (109 )
  Unrealized gain (loss) on foreign currency exposure of net investment in foreign operations     118       177       265       132  
    Total other comprehensive income (loss)     11       33       26       23  
Comprehensive loss   $ (1,254 )   $ (1,186 )   $ (2,836 )   $ (7,219 )
                                 

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