NEW YORK and POZNAN, Poland, May 25, 2010 (GLOBE NEWSWIRE) -- Sunset Suits Holdings, Inc. (OTCBB:SNSX),a leading designer and retailer of high quality menswear, today provided a business update and reported financial results for the quarter ended March 31, 2010.
Mr. Miroslaw Kranik, Chief Executive Officer of Sunset Suits, commented, "Against the backdrop of a prolonged global recession, Sunset Suits has charted a new course for 2010 that is expected to increase sales per store and reduce our cost of operations. We have already begun to implement some of these initiatives."
"The most important change occurred in March 2010 with the sale of Fashion Services Sp., our manufacturing facility in Poland, which had been a large cost center for the company. We have adopted an outsourcing model for the manufacture of menswear whereby we will be working with companies in the Far East to achieve greater efficiencies while still maintaining our high standards of quality. We are also expanding our line of casual clothing to fit today's more relaxed lifestyle. Our shift toward casual clothing plays into trends we have been experiencing over the past couple of years."
"We are engaging in a cost-cutting drive that entails negotiations of rent agreements with our landlords and raw materials suppliers in addition to other measures. These initiatives combined with a broader restructuring of our operations and a change in product mix should enable us to reach our goal of 70% gross margins in 2010, up from less than 60% gross margins in 2009.
"On the revenue side of the business, we plan to open up to 10 new retail outlets per year in prime mall locations while simultaneously closing unprofitable stores. During the first quarter ended March 31, 2010, we closed 8 unprofitable stores and opened 2 new stores. Our long term plans are to double the number of Sunset Suits retail locations and to expand our operations globally through direct marketing and partnerships with licensees. To help drive our sales and sourcing initiatives, we recently hired a sales director, Walery Lach, to handle all facets of planning, marketing and sales and Dominik Zhang, a sourcing director, who will be responsible for our outsourced manufacturing operations in China. Both men have extensive backgrounds in the industry.
"With broader economic trends in Poland showing signs of improvement during the first quarter of 2010, we are cautiously optimistic about the near-term prospects for the company. Nevertheless, we believe we are taking all the right steps to weather the storm."
We maintain our net income guidance of at least $2.0 million, or $0.16 per share for 2010 and $3.4 million, or $0.27 per share for 2011.
Revenue for the three months ended March 31, 2010 was $4.4 million, as compared to $5.7 million for the three months ended March 31, 2009, a decrease of 23%. The difference in revenue primarily reflects lower sales volume due to overall economic factors and a decrease of average retail prices. Gross profit was $2.3 million for the first quarter of 2010, as compared to $3.5 million for the first quarter of 2009. Operating loss was $1.6 million for the first quarter of 2010, as compared to an operating loss of $416,000 for the first quarter of 2009. Net loss from continuing operations was $1.4 million for the first quarter of 2010 compared to a net loss of $473,000 in the comparable period last year. Net income from discontinued operations was $6.3 million versus a net loss from discontinued operations of $1.1 million in the first quarter of 2009. Net income from discontinued operations in 2010 included a $6.8 million gain on the disposal of the production facility held for sale, net of taxes, and a net operating loss of $509,000. Net income for the first quarter of 2010 was $5.0 million, or $0.40 per share versus a net loss of $1.5 million, or $0.12 per share in the first quarter of 2009. Shares outstanding at March 31, 2010 totaled 12,499,645 versus 12,499,645 at March 31, 2009.
About Sunset Suits Holdings
Sunset Suits is a designer and retailer of high quality menswear based in Poland. The company's merchandise includes suits, sport coats, slacks, dress shirts and ties. Sunset Suits distributes its clothing primarily through its sales outlets. The company operates 82 domestic retail stores in Poland, 3 stores in Latvia, 8 stores in the Czech Republic, and 5 stores in Lithuania. Sunset Suits targets men in the 18 to 35 year-old age group, one of the most rapidly developing demographics in the industry.
This press release may contain forward looking statements. These forward looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, forward-looking statements contain terms such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "should," "would" and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect the Company's current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, readers should not place undue reliance on these forward-looking statements. These forward-looking statements include, among other things, statements relating to: general economic conditions; expectations regarding the Company's ability to maintain and grow its business; expectations regarding the continued growth of the Polish clothing industry; beliefs regarding the competitiveness of the Company's products; expectations with respect to increased revenue growth and the ability to achieve increased profitability; future business development, results of operations and financial condition; and competition from other apparel companies. Also, forward-looking statements represent the Company's estimates and assumptions only as of the date of this press release and actual future results may be materially different from what the Company expects. Readers are encouraged to review the "Risks Factors" section in the Company's Registration Statement on Form S-1/A filed on January 12, 2010. The Company assumes no obligation, and does not intend, to update any forward-looking statements, except as required by law.
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Sunset Suits Holdings, Inc. Consolidated Statement of Operations (All amounts in thousands except per share data) |
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| Statement of Operations for the period of | ||||||
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Three Months Ended March 31, 2010 unaudited |
Three Months Ended March 31, 2009 unaudited |
Twelve Months Ended December 31, 2009 |
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| Net sales, retail shops | $4,414 | $5,695 | $26,586 | |||
| Net sales | 4,414 | 5,695 | 26,586 | |||
| Cost of goods sold | 2,100 | 2,157 | 11,319 | |||
| Gross profit | 2,314 | 3,538 | 15,267 | |||
| Operating expenses: | ||||||
| Sales and marketing, including: | 3,464 | 3,573 | 16,463 | |||
| expenses from related parties | 345 | 620 | 1,871 | |||
| expenses from unrelated parties | 3,119 | 2,953 | 14,592 | |||
| General and administrative, including: | 410 | 381 | 2,075 | |||
| Total operating expenses | 3,874 | 3,954 | 18,538 | |||
| Operating income (loss) | (1,561) | (416) | (3,271) | |||
| Gain (loss) on disposal of fixed assets, net | (60) | (4) | (647) | |||
| Interest income | 1 | 19 | 4 | |||
| Interest expense | 274 | 177 | 554 | |||
| Gain (loss) on transaction in foreign currency | (37) | (21) | (74) | |||
| Income (loss) before income taxes | (1,931) | (599) | (4,542) | |||
| Income tax expense (benefit) | 570 | 126 | 468 | |||
| Income (loss) from Continuing Operations | $(1,361) | $(473) | $(4,073) | |||
| Discontinued Operations: | ||||||
| Income (loss) from discontinued operations, net of tax of $ 87 (benefit) | (509) | (1,062) | (961) | |||
| Gain on disposal of production facility held for sale, net of tax | 6,831 | 0 | 0 | |||
| Income (loss) from Discontinued Operations | $6,321 | $(1,062) | $(961) | |||
| Net Income (Loss) | $4,960 | $(1,534) | $(5,034) | |||
| Earnings (loss) per share | ||||||
| Continuing operations | $(0.11) | $(0.04) | $(0.33) | |||
| Discontinued operations | $0.51 | $(0.08) | $(0.08) | |||
| Earnings (loss) per share (basic and diluted) | $0.40 | $(0.12) | $(0.40) | |||
| Shares used in computing per share amounts: | ||||||
| Weighted average common shares outstanding | 12,499,645 | 12,499,645 | 12,499,645 | |||
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Sunset Suits Holdings, Inc. Consolidated Balance Sheets (All amounts in thousands except per share data) |
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| Balance Sheet as of | ||||
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March 31, 2010 unaudited |
December 31, 2009 |
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| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $169 | $379 | ||
| Accounts receivable | 2,154 | 1,261 | ||
| Receivables from related parties | 1,874 | 815 | ||
| Other trade receivables | 280 | 446 | ||
| Inventories | 2,495 | 3,220 | ||
| Deferred taxes | 726 | 734 | ||
| Prepaid expenses and other current assets | 776 | 235 | ||
| Assets held for sale | 0 | 3,653 | ||
| Total current assets | 6,320 | 9,482 | ||
| Non-current assets | ||||
| Property and equipment, less accumulated depreciation and amortization | 3,718 | 3,767 | ||
| Other intangible assets, net | 2,124 | 2,140 | ||
| Deferred taxes | 24 | 24 | ||
| Long term investments | 2,282 | 2,538 | ||
| Assets held for sale | 0 | 7,694 | ||
| Total non-current assets | 8,148 | 16,164 | ||
| Total assets | $14,468 | $25,646 | ||
| LIABILITIES AND STOCKHOLDERS EQUITY | ||||
| Current liabilities: | ||||
| Short-term borrowings | $38 | $41 | ||
| Current portion of finance lease payable | 5 | 3 | ||
| Current portion of long-term debt | 2,024 | 1,823 | ||
| Accounts payable | 4,408 | 3,335 | ||
| Income and other taxes payable | 3,489 | 3,300 | ||
| Accrued employee compensation and benefits | 554 | 414 | ||
| Accrued liabilities and other | 251 | 296 | ||
| Liabilities associated with assets held for sale | 0 | 9,808 | ||
| Total current liabilities | 10,768 | 19,020 | ||
| Non-current liabilities: | ||||
| Provisions | 211 | 138 | ||
| Long-term debt | 4,754 | 4,942 | ||
| Liabilities associated with assets held for sale | 0 | 7,753 | ||
| Total non-current liabilities | 4,965 | 12,832 | ||
| Stockholders equity: | ||||
| Preferred stock $0.001 par value, shares authorized and issued: none | 0 | 0 | ||
| Common stock, $0.001 par value, shares authorized: 12,499,645 shares issued 12,499,645 | 12 | 12 | ||
| Additional paid-in capital | 11,883 | 11,883 | ||
| Net income (loss) | 4,960 | (5,034) | ||
| Retained earnings (deficit) | (9,976) | (4,942) | ||
| Accumulated other comprehensive income (loss) | (8,143) | (8,125) | ||
| Total stockholders equity | (1,265) | (6,207) | ||
| Total liabilities and stockholders' equity | $14,468 | $25,646 | ||
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Sunset Suits Holdings, Inc. Cash Flow Statement (All amounts in thousands) |
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| Cash Flow for the period of | ||||||
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Three Months Ended March 31, 2010 unaudited |
Three Months March 31, Ended 2009 unaudited |
Twelve Months Ended December 31, 2009 |
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| Cash flows from operating activities: | ||||||
| Net income (loss) | $4,960 | $(1,534) | $(5,034) | |||
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Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: |
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| Depreciation and amortization | 265 | 191 | 1,017 | |||
| Loss (gain) on property and equipment disposals | 0 | 0 | 589 | |||
| Gain on sale of production facility held for sale | (6,831) | 0 | 0 | |||
| Deferred income taxes | (101) | (112) | (766) | |||
| Changes in assets and liabilities: | ||||||
| Accounts receivable | (556) | 772 | 2,858 | |||
| Inventories | 409 | (355) | 351 | |||
| Prepaid expenses and other current assets | (280) | (969) | (1,629) | |||
| Accounts payable | 1,011 | 1,015 | 1,636 | |||
| Other liabilities | 1,267 | 797 | 2,835 | |||
| Net cash provided by (used in) operating activities | 144 | (193) | 1,857 | |||
| Cash flows from investing activities: | ||||||
| Purchases of investments | (68) | 0 | (01) | |||
| Proceeds from the sale of production facility held for sale | 16 | 0 | 0 | |||
| Purchases of property and equipment | (128) | (385) | (1,372) | |||
| Net cash provided by (used in) investing activities | (180) | (385) | (1,373) | |||
| Cash flows from financing activities: | ||||||
| Principal payments under capital lease | (154) | (26) | (142) | |||
| Proceeds from long term debt | 0 | 5 | 26 | |||
| Repayments of borrowings | (26) | (194) | (1,001) | |||
| Net cash provided by (used in) financing activities | (180) | (216) | (1,117) | |||
| Effect of exchange rate changes on cash and equivalents | 6 | (13) | (80) | |||
| Net change in cash and equivalents during period | (210) | (807) | (713) | |||
| Cash and equivalents, beginning of period | 379 | 1,081 | 1,102 | |||
| Cash and equivalents, end of period | $169 | $274 | $388 | |||
| Less asset held for sale (discontinued operation) | $0 | $0 | $9 | |||
| Cash and equivalents, end of period | $169 | $274 | $379 | |||