PURCHASE, N.Y.--(BUSINESS WIRE)--Dec. 16, 1999--Candie's, Inc. (Nasdaq NMS symbol: CAND) ("the Company") today announced financial results for the third quarter fiscal 2000 ended October 31, 1999. These results are included in the Company's form 10-Q that has been filed with the Securities and Exchange Commission.
THIRD QUARTER OPERATING RESULTS: (unaudited)
For the third quarter fiscal 2000 ended October 31, 1999, net revenues declined by $6.7 million or 23.3% to $22.2 million from $28.9 million in the prior year third quarter results. The decline in net revenues stemmed from lower wholesale sales of women's footwear and a decline in private label sales. Gross profit before licensing income was $3.3 million and gross margin of 14.8% compared to a gross profit of $5.6 million and gross margin of 19.3% in the prior year third quarter results. The decline in gross profit was primarily related to decreased wholesale sales of women's footwear and an increase in markdowns taken to reduce excess inventory. Licensing income reached $1.2 million compared to licensing income of $100,000 in the results in the prior year third quarter.
Selling, general and administrative expenses rose to $8.3 million in the third quarter fiscal 2000 from $6.2 million in the results of the prior year third quarter. As a percent of net revenues, selling, general and administrative expenses increased to 37.3% from 21.5% for the comparable period of the prior year. The increase in selling, general and administrative expenses, as a percentage of net revenues, was due to the decline in net revenues, as well as costs associated with implementation of the Company's strategic plan to strengthen its management team and infrastructure, the expansion outside of its core footwear products to include, acquiring the Bongo brand and starting an apparel joint venture involving Azteca Productions, Inc., starting a handbag division, the opening of company-owned retail stores, licensing the Candie's brand, and expanding our wholesale presence through international distribution. Also contributing to the rise in expenses was increased advertising expenditures and an increase in intangible amortization costs related to the Company's fiscal 1999 acquisitions. Additionally, the Company incurred $1.1 million in special charges for the three months ended October 31, 1999, relating to professional fees and payments to financial institutions in connection with the restatement of its financial statements, evaluating various potential borrowing arrangements, the investigation by the Special Committee, the class action lawsuit and the Securities and Exchange Commission ("SEC") investigation".
Operating losses after special charges was $5.0 million compared to operating losses of $519,000 in the results of the prior year third quarter. Loss before income taxes after special charges was $5.4 million compared to loss before income taxes of $808,000 in the results of the prior year third quarter. Excluding special charges, the loss before income taxes was $4.3 million in the third quarter fiscal 2000. The net loss after special charges was $5.7 million or $0.32 per diluted share on 17,896,000 shares compared to a net loss of $502,000, or $0.03 per diluted share on 15,841,000 shares, in the prior year third quarter.
NINE MONTHS OPERATING RESULTS: (unaudited)
For the nine months ended October 31, 1999, net revenues declined approximately 15.6% to $76.5 million from $90.6 million in the comparable restated period of the prior year. The decline in net revenues stemmed from decreased wholesale sales of women's footwear and a reduction in private label sales. The gross profit before licensing income was $15.0 million and gross margin of 19.6% from a gross profit of $21.6 million and gross margin of 23.8% in the comparable period of the prior year. The decline in gross profit was primarily related to decreased wholesale sales of women's footwear and an increase in markdowns taken to clear excess inventory. Licensing income reached $2.0 million in the first nine months of fiscal 2000 compared to licensing income of $100,000 in the first nine months of the results of fiscal 1999. Selling, general and administrative expenses were $24.4 million and represented 31.8% of net revenues compared to 20.7% of net revenues in the comparable prior year. The percentage increase in selling, general and administrative expenses was due to lower net revenues and an increase in spending for new initiatives, as well as increased advertising expenditures and intangible amortization relating to the Company's fiscal 1999 acquisitions. The Company incurred $2.3 million in special charges in the first nine months of fiscal 2000, relating to professional fees and payments to financial institutions in connection with the restatement of its financial statements, evaluating various potential borrowing arrangements, the investigation by the Special Committee, the class action lawsuit and the SEC investigation. Operating losses after special charges was $9.7 million compared to operating profit of $3.0 million in the results of the prior year. Loss before income taxes after special charges was $11.1 million compared to income before income taxes of $2.2 million in the prior year. Loss before income taxes excluding special charges was $8.8 million in the first nine months of fiscal 2000. Net loss after taxes was $10.0 million, or $0.56 per diluted share on 17,742,000 shares compared to net income after tax of $1.3 million, or $0.08 on 16,723,000 shares.
In commenting on the results, Neil Cole, Chairman and CEO stated, "We continued to experience challenging results in the third quarter due to lower than anticipated sales in our Candie's women's footwear division. Also contributing to our losses in the period were higher expenses for new initiatives and special charges. Each of the key executives at Candie's has made improving the sales and profitability of women's footwear a top priority. By focusing our efforts on Candie's and streamlining our operations we are hopeful that we will return to profitability in the near future."
"Our brand awareness continues to grow, which is illustrated by the strong performance of our new product launches. In fact, our fragrance launch with licensing partner, Liz Claiborne, has been a success and has exceeded our expectations. We are also pleased to announce that on November 4, 1999, the Company launched its web site www.candies.com. The site marks the beginning of an aggressive effort to create a destination site for millions of young women providing them with a forum for self-expression, a place to interact with each other, and be informed and entertained. As we look forward to the millennium, we believe that our efforts to bring about positive change within our organization will benefit our Company and shareholders greatly."
"The Company has had settlement discussions with the plaintiffs in the pending class action lawsuit and hopes to reach a timely resolution."
"The Company has adequate capital to fund its operations. I along with the management team at Candie's are ready to tackle the challenges that the Company faces with a goal of making Candie's a profitable growth company in the future," Neil Cole concluded.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. The statements which are not historical facts contained in this press release are forward looking statements that involve a number of known and unknown risks, uncertainties and other factors all of which are difficult or impossible to predict and many of which are beyond the control of the Company, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements.
Such factors include, but are not limited to, uncertainty regarding continued market acceptance of current products and the ability to successfully develop and market new products particularly in light of rapidly changing fashion trends, the impact of supply and manufacturing constraints or difficulties relating to the Company's dependence on foreign manufacturers, uncertainties relating to customer plans and commitments, competition, uncertainties relating to economic conditions in the markets in which the Company operates, the ability to hire and retain key personnel, the ability to obtain capital if required, the risks of litigation, the risks of uncertainty of trademark protection, Year 2000 compliance, the uncertainty of marketing and licensing the trademarks acquired during fiscal 1999 and other risks detailed and in the Company's Securities and Exchange Commission filings, and uncertainty associated with the impact on the Company in relation to recent events discussed in the Company's Form 10-K for fiscal 1999. The words "believe", "expect", "anticipate", "seek" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date the statement, was made.
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Candie's, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(000's omitted, except per share data)
Three Months Ended Nine Months Ended
October 31, October 31,
------------------- -------------------
1999 1998 1999 1998
------ ------ ------ ------
Net revenues $ 22,175 $ 28,919 $ 76,483 $ 90,627
Cost of goods sold 18,877 23,330 61,516 69,042
-------- -------- -------- --------
Gross profit 3,298 5,589 14,967 21,585
Licensing income 1,151 100 2,009 100
-------- -------- -------- --------
4,449 5,689 16,976 21,685
Operating expenses:
Special charges 1,144 - 2,310 -
Selling, general and
administrative 8,281 6,208 24,359 18,728
-------- -------- -------- --------
9,425 6,208 26,669 18,728
Operating (loss) income (4,976) (519) (9,693) 2,957
Other expenses:
Interest expense - net 307 289 958 786
Equity loss in joint
venture 116 - 453 -
-------- -------- -------- --------
423 289 1,411 786
-------- -------- -------- --------
(Loss) income before
income taxes (5,399) (808) (11,104) 2,171
(Benefit) provision for
income taxes 346 (306) (1,090) 862
-------- -------- -------- --------
Net (loss) income $ (5,745) $ (502) $(10,014) $ 1,309
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(Loss) earnings per share:
- Basic $ (0.32) $ (0.03) $ (0.56) $ 0.09
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- Diluted $ (0.32) $ (0.03) $ (0.56) $ 0.08
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Weighted average # of
common shares:
- Basic 17,896 15,841 17,742 14,577
======== ======== ======== ========
- Diluted 17,896 15,841 17,742 16,723
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Selected Balance Sheet Data: 1/31/99 10/31/99
---------------------------- -------- --------
Current Assets $ 45,216 $ 33,427
Current Liabilities $ 22,330 $ 19,071
Stockholders' Equity $ 51,849 $ 42,075
Working Capital $ 22,886 $ 14,356
Current Ratio 2.02:1 1.75:1
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CONTACT: Allison Malkin - VP Investor Relations
914/694-8600 Ext. 619