NEW YORK and POZNAN, Poland, Aug. 18, 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 June 30, 2010.
Mr. Miroslaw Kranik, Chief Executive Officer of Sunset Suits, commented, "Implementation of our strategic initiatives to reduce costs while maximizing sales per square foot at our retail locations are well underway. Although not yet reflected in our second quarter financial results, we have been successful in putting the pieces in place to enhance our company's performance in the second half of the year and to achieve our target of 70% gross margins by December 2010."
"In the second quarter of 2010, we closed nine underperforming stores (in Poland) located on the streets of small cities in favor of mall locations where pedestrian traffic is much higher. We opened four such stores in the second quarter and indications are very favorable for this strategy as we enter the third quarter of 2010. We are continuously monitoring the performance of our various store locations and will likely move other stores into mall locations after evaluating them on a case-by-case basis. In total, we have closed seventeen stores and opened six over the past six months. The reduction in store locations was a factor in the revenue reduction for the company year-over-year, but these steps are part of a broader plan to make Sunset Suits a more profitability entity in 2011 and beyond. As of June 30, 2010, we are operating 77 stores as compared to 88 stores as of June 30, 2009."
"We had mixed results in our operations in Lithuania, Latvia and the Czech Republic as there were various factors in play that were specific to each region, including economic factors, store closings, store openings, cost and credit term negotiations with landlords and vendors as well as the implementation of cost-saving initiatives. We had closed three stores in the Czech Republic in the second half of 2009 causing a reduction in sales volume year-over-year and we opened a new store in Lithuania this year which had associated costs. While each of these Baltic states experienced steep declines in GDP over the past couple of years, GDP is expected to improve in 2011. Even given the weak economy, our net revenue in Lithuania and Latvia increased in the second quarter of 2010.
"Our shift to a cost-effective outsourced manufacturing model earlier this year combined with more desirable store locations is setting the stage for a stronger second half of the year. The Polish economy overall has been experiencing the effects of the global financial crisis, but over the past couple of months, we have seen a favorable trend in sales developing, indicating that consumption is recovering after a significant slow down at the beginning of the year."
"By changing our organizational structure for greater efficiency and providing our sales team with attractive bonus incentives, we have created an environment for increasing revenue and profits for the company and financial rewards for our dedicated sales force. We have already succeeded in reducing administrative costs by 11% in the second quarter of 2010 compared to the same period last year and have reduced cost of operations in Poland by decreasing the average total space in our retail outlets. We are confident that the strategies we have implemented will help us to weather the financial storm and re-emerge a much stronger company."
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 June 30, 2010 was $4.7 million, as compared to $7.4 million for the three months ended June 30, 2009, a decrease of 36.3%. The difference in revenue primarily reflects the closing of 17 unprofitable retail outlets. Gross profit was $2.6 million for the second quarter of 2010, as compared to $4.8 million for the second quarter of 2009. Operating loss was $1.5 million for the second quarter of 2010, as compared to operating income of $337,000 for the second quarter of 2009. Net loss from continuing operations was $1.7 million for the second quarter of 2010 compared to a net loss of $167,000 in the comparable period last year. Net income from discontinued operations was $0 versus income from discontinued operations of $80,000 in the second quarter of 2009. Net loss for the second quarter of 2010 was $1.7 million, or $0.14 per share versus a net loss of $87,000, or $0.01 per share in the second quarter of 2009. Shares outstanding at June 30, 2010 totaled 12,499,645 versus 12,499,645 at June 30, 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 77 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.
| Sunset Suits Holdings, Inc. | ||||
| Consolidated Statement of Operations | ||||
| (All amounts in thousands except per share data) | ||||
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2010 | 2009 | 2010 | 2009 | |
| unaudited | unaudited | unaudited | unaudited | |
| (all amounts in thousands of U.S. dollars) | ||||
| Net sales, retail shops | $4,738 | $7,436 | $9,152 | $13,131 |
| Cost of goods sold | 2,128 | 2,660 | 4,227 | 4,817 |
| Gross profit | 2,611 | 4,775 | 4,924 | 8,313 |
| Operating expenses: | ||||
| Sales and marketing, including: | 3,376 | 3,976 | 6,840 | 7,548 |
| expenses from related parties | 299 | 443 | 644 | 1,063 |
| expenses from unrelated parties | 3,077 | 3,533 | 6,196 | 6,486 |
| General and administrative | 401 | 465 | 811 | 846 |
| Total operating expenses | 3,777 | 4,441 | 7,652 | 8,395 |
| Gain (loss) on disposal of fixed assets, net | (375) | 2 | (435) | (2) |
| Operating income (loss) | (1,542) | 337 | (3,163) | (83) |
| Interest income | 28 | 0 | 29 | 10 |
| Interest expense | 38 | 559 | 241 | 287 |
| Gain (loss) on transaction in foreign currency | (749) | 9 | (857) | (11) |
| Income (loss) before income taxes | (2,301) | (213) | (4,232) | (372) |
| Income tax (expense) benefit | 598 | 46 | 1,168 | 172 |
| Income (loss) from Continuing Operations | ($1,703) | ($167) | ($3,064) | ($200) |
| Discontinued Operations: | ||||
|
Income (loss) from discontinued operations, net of tax benefit of $87, $190 and $165, respectively |
0 | 80 | (509) | (1,421) |
|
Gain on disposal of production facility held for sale, net of tax |
0 | 0 | 6,831 | 0 |
| Income (loss) from Discontinued Operations | $0 | $80 | $6,321 | ($1,421) |
| Net Income (Loss) | (1,703) | (87) | 3,257 | (1,621) |
| Earnings (loss) per share | ||||
| Continuing operations | ($0.14) | ($0.01) | ($0.25) | ($0.05) |
| Discontinued operations | $0.00 | $0.00 | $0.51 | ($0.08) |
| Earnings (loss) per share (basic and diluted) | ($0.14) | ($0.01) | $0.26 | ($0.13) |
| Shares used in computing per share amounts: | ||||
| Weighted average common shares outstanding | 12,499,645 | 12,499,645 | 12,499,645 | 12,499,645 |
| Sunset Suits Holdings, Inc. | ||
| Consolidated Balance Sheets | ||
| (All amounts in thousands of U.S. dollars) | ||
| Balance Sheet as of |
June 30, 2010 |
December 31, 2009 |
| unaudited | ||
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $167 | $379 |
| Accounts receivable | 1,612 | 1,261 |
| Receivables from related parties | 1,181 | 815 |
| Other trade receivables | 431 | 446 |
| Inventories | 2,028 | 3,220 |
| Deferred taxes | 616 | 734 |
| Prepaid expenses and other current assets | 1,223 | 235 |
| Assets held for sale | 0 | 3,653 |
| Total current assets | 5,647 | 9,482 |
| Non-current assets | ||
| Property and equipment, less accumulated depreciation and amortization | 3,219 | 3,767 |
| Other intangible assets, net | 1,797 | 2,140 |
| Deferred taxes | 5 | 24 |
| Long term investments | 1,890 | 2,538 |
| Assets held for sale | 0 | 7,694 |
| Total non-current assets | 6,911 | 16,164 |
| Total assets | $12,558 | $25,646 |
| LIABILITIES AND STOCKHOLDERS EQUITY | ||
| Current liabilities: | ||
| Short-term borrowings | $254 | $41 |
| Current portion of finance lease payable | 4 | 3 |
| Current portion of long-term debt | 2,143 | 1,823 |
| Accounts payable | 4,540 | 3,335 |
| Income and other taxes payable | 3,084 | 3,300 |
| Accrued employee compensation and benefits | 515 | 414 |
| Accrued liabilities and other | 167 | 296 |
| Liabilities associated with assets held for sale | 0 | 9,808 |
| Total current liabilities | 10,707 | 19,020 |
| Non-current liabilities: | ||
| Provisions | 185 | 138 |
| Long-term debt | 4,247 | 4,942 |
| Liabilities associated with assets held for sale | 0 | 7,753 |
| Total non-current liabilities | 4,437 | 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) | 3,257 | (5,034) |
| Retained earnings (deficit) | (9,976) | (4,942) |
| Accumulated other comprehensive income (loss) | (7,762) | (8,125) |
| Total stockholders equity | (2,586) | (6,207) |
| Total liabilities and stockholders' equity | $12,558 | $25,646 |
| Sunset Suits Holdings, Inc. | |||
| Cash Flow Statement | |||
| (all amounts in thousands of U.S. dollars) | |||
| Cash Flow for the period of |
Six Months Ended June 30, 2010 |
Six Months Ended June 30, 2009 |
Twelve Months Ended December 31, 2009 |
| unaudited | unaudited | ||
| Cash flows from operating activities: | |||
| Net income (loss) | $3,257 | ($1,621) | ($5,034) |
|
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: |
|||
| Depreciation and amortization | 338 | 410 | 1,017 |
| Loss (gain) on property and equipment disposals | 435 | 0 | 589 |
| Gain on sale of production facility held for sale | (6,831) | 0 | 0 |
| Deferred income taxes | (73) | (420) | (766) |
| Changes in assets and liabilities: | |||
| Accounts receivable | (444) | 479 | 2,858 |
| Inventories | 509 | (514) | 351 |
| Prepaid expenses and other current assets | (883) | (445) | (1,629) |
| Accounts payable | 1,895 | 1,181 | 1,636 |
| Other liabilities | 1,874 | 1,465 | 2,835 |
| Net cash provided by (used in) operating activities | 78 | 534 | 1,857 |
| Cash flows from investing activities: | |||
| Purchases of investments | (65) | 0 | (01) |
| Proceeds from the sale of production facility held for sale | 16 | 0 | 0 |
| Purchases of property and equipment | (452) | (893) | (1,372) |
| Net cash provided by (used in) investing activities | (501) | (893) | (1,373) |
| Cash flows from financing activities: | |||
| Principal payments under capital lease | (32) | (45) | (142) |
| Proceeds from short and long term debt | 248 | 5 | 26 |
| Repayments of borrowings | (52) | (313) | (1,001) |
| Net cash provided by (used in) financing activities | 165 | (352) | ($1,117) |
| Effect of exchange rate changes on cash and equivalents | 47 | (06) | (80) |
| Net change in cash and equivalents during period | (212) | (718) | (713) |
| Cash and equivalents, beginning of period | 379 | 1,081 | 1,102 |
| Cash and equivalents, end of period | $167 | $363 | $388 |
| Less asset held for sale (discontinued operation) | 0 | 0 | 9 |
| Cash and equivalents, end of period | $167 | $363 | $379 |