SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
|X| Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2002
|_| Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________________ to __________________
Commission file number 0-774
PHOENIX FOOTWEAR GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 15-0327010
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
450 North Main Street, Old Town, Maine 04468
(Address of Principal Executive Offices) (Zip Code)
(207) 827-4431
(Registrant's Telephone Number, Including Area Code)
DANIEL GREEN COMPANY
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes |_| No |_|
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT SEPTEMBER 30, 2002
Common, $0.01 par value 1,771,756
1
PHOENIX FOOTWEAR GROUP, INC.
INDEX
Page
Number
Index ..................................................................... 1
PART I - Financial Information
Consolidated Balance Sheets, Assets
September 30, 2002 and December 31, 2001 ......................... 3
Consolidated Balance Sheets, Liabilities & Stockholders' Equity
September 30, 2002 and December 31, 2001 ......................... 4
Consolidated Statements of Operations for the three and nine months ended
September 30, 2002 and 2001 ...................................... 5
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2002 and 2001 ...................................... 6
Notes to Consolidated Financial Statements ................................ 7
Management Discussion & Analysis of Financial Condition and Results
of Operations .................................................... 10
PART II - Other Information ............................................... 16
2
PHOENIX FOOTWEAR GROUP, INC.
Consolidated Balance Sheets
ASSETS
September 30, December 31,
2002 2001
(Unaudited) (*)
----------- -----------
Current Assets:
Cash $ 392,291 $ 1,161,101
Accounts Receivable, trade
less allowances of $717,006 in 2002
and $1,468,000 in 2001 6,997,621 8,197,086
Deferred Income Tax Asset 636,470 636,470
Finished Goods Inventories, at lower of
cost (FIFO) or market: 7,118,517 10,453,420
Notes Receivable 341,827 1,577,698
Other Current Assets 349,940 204,162
----------- -----------
Total Current Assets 15,836,666 22,229,937
Property, plant & equipment:
Real Estate and Water Power, at cost 1,423,581 1,628,581
Machinery & Equipment at cost 1,010,036 754,595
----------- -----------
2,433,617 2,383,176
Less: Accumulated Depreciation 732,719 625,887
----------- -----------
Property, plant & equipment, net 1,700,898 1,757,289
Other Assets:
Other Assets, net 172,424 251,528
Goodwill, net 1,645,476 1,645,476
Other Receivable 1,693,103 1,693,103
----------- -----------
Total Other Assets 3,511,003 3,590,107
----------- -----------
Total Assets $21,048,567 $27,577,333
=========== ===========
(*) Derived from audited consolidated financial statements.
See notes to consolidated financial statements.
3
PHOENIX FOOTWEAR GROUP, INC.
Consolidated Balance Sheets
LIABILITIES & STOCKHOLDERS' EQUITY
September 30, December 31,
2002 2001
(Unaudited) (*)
------------ ------------
Current Liabilities:
Notes Payable, line of credit $ 744,262 $ 8,200,365
Notes Payable, current 0 4,016,485
Accounts Payable, trade 3,250,167 1,586,384
Liability to former stockholder 1,805,951 1,805,951
Income Tax Payable 972,501 15,447
Other Accrued Liabilities 928,348 1,248,407
------------ ------------
Total Current Liabilities 7,701,229 16,873,039
Deferred Income Taxes 641,090 641,090
Notes Payable, non-current 3,000,000 2,611,645
------------ ------------
Total Other Liabilities 3,641,090 3,252,735
Total Liabilities 11,342,319 20,125,774
Stockholders' Equity:
Common Stock 5,735,450 5,224,065
Paid-in-excess of par value 2,333,030 2,088,977
Retained Earnings 4,175,413 2,676,162
------------ ------------
12,243,893 9,989,204
Less: Treasury Stock (2,537,645) (2,537,645)
------------ ------------
Total Stockholders' Equity 9,706,248 7,451,559
------------ ------------
Total Liabilities & Stockholders'
Equity $ 21,048,567 $ 27,577,333
============ ============
(*) Derived from audited consolidated financial statements.
See notes to consolidated financial statements.
4
PHOENIX FOOTWEAR GROUP, INC.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
------------- ------------- ------------- -------------
Net Sales $9,520,562 $12,925,823 $28,759,925 $ 32,243,138
Costs and Expenses
Cost of Goods Sold 5,702,866 8,953,625 18,026,796 21,259,221
Selling, General &
Administrative 2,620,577 2,848,179 7,621,193 8,457,298
Other Expense 205,000 0 205,000 1,713,710
Interest Expense 73,159 297,910 408,025 1,307,644
---------- ----------- ----------- ------------
Total Costs and Expenses 8,601,602 12,099,714 26,261,014 32,737,873
Income before Income Tax
Expense 918,960 826,109 2,498,911 (494,735)
Income Tax Expense 367,583 8,398 999,660 (309,525)
---------- ----------- ----------- ------------
Net Income $ 551,377 $ 817,711 $ 1,499,251 $ (185,210)
========== =========== =========== ============
Net Income (Loss) per Share:
Basic $ 0.31 $ 0.52 $ 0.88 $ (0.12)
Diluted $ 0.28 $ 0.49 $ 0.78 $ (0.12)
Shares Outstanding:
Basic 1,770,605 1,568,173 1,702,337 1,570,658
Diluted 1,943,247 1,725,697 1,936,181 1,570,658
See notes to consolidated financial statements.
5
PHOENIX FOOTWEAR GROUP, INC.
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30, September 30,
2002 2001
------------ -----------
Operating Activities:
Net Income $ 1,499,251 $ (185,210)
Adjustments to reconcile net income
to net provided by operating activities:
Depreciation and amortization 204,943 611,378
Impairment Loss 205,000 0
Changes in assets & liabilities:
(Increases) decreases in:
Accounts Receivable, trade 1,199,465 5,000,167
Finished Goods Inventories 3,334,903 (4,449,694)
Other Current Assets (145,778) 104,788
Other Assets 1,235,871 (17,909)
Increases (decreases) in:
Accounts Payable, trade 1,663,783 (2,047,304)
Other Accrued Liabilities (320,059) (281,693)
Income Taxes Payable 957,054 (879,286)
Deferred Income Taxes 0 (387,304)
Prepaid Pension 0 3,610,518
------------ -----------
Net cash provided by Operating Activities 9,834,433 1,078,451
Investing Activities:
Purchase of property & equipment (255,441) 0
------------ -----------
Net cash provided by Investing Activities (255,441) 0
Financing Activities:
Net Paydown on Line of Credit (7,456,103) (2,399,635)
Net Paydown of Notes Payable (2,878,130) 1,875,758
Purchase of Treasury Stock 0 (51,461)
Issuance of Common Stock 5,438 0
Debt Issuance Costs (19,007) 0
------------ -----------
Net cash used in financing activities (10,347,802) (575,338)
------------ -----------
Net Increase (Decrease) in Cash (768,810) 503,113
Cash at Beginning of Period 1,161,101 1,395
------------ -----------
Cash at End of Period $ 392,291 $ 504,508
============ ===========
6
PHOENIX FOOTWEAR GROUP, INC.
Notes to Consolidated Financial Statements
Note 1.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain adjustments, all of which are of a normal and
recurring nature, necessary to present fairly the financial position as of
September 30, 2002 and the results of operations and cash flows for the three
and nine months then ended. The results of operations for the nine months ended
September 30, 2002 are not necessarily indicative of the results to be expected
for the full year.
Note 2.
The accounting policies used in preparing these statements are the same as
those used in preparing the Company's consolidated financial statements for the
year ended December 31, 2001. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's annual report to stockholders for the
year ended December 31, 2001.
7
Note 3.
Effective January 1, 2002, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets". SFAS No. 142 discontinues the practice of amortizing goodwill and
indefinite-lived intangible assets and initiates an annual review for
impairment. Impairment would be examined more frequently if certain indicators
are encountered. Intangible assets with a determinable useful life will continue
to be amortized over their useful lives. SFAS No. 142 applies to goodwill and
intangible assets acquired after June 30, 2001.
Goodwill amortization totaling $30,453 and $172,988 for the quarter and nine
months ended September 30, 2001, respectively was not recognized in the quarter
and nine months ended September 30, 2002. There was no impact of impairment
during the quarter ended September 30, 2002. The following summary presents
unaudited pro-forma consolidated results of operations as if SFAS No. 142 had
been adopted at the beginning of 2001 and includes an adjustment for the amount
of goodwill amortization. The pro-forma results are for illustrative purposes
only.
In thousands, except for per share amounts (unaudited)
Three Months Ended Nine Months Ended
September 30, 2001 September 30, 2001
------------------ ------------------
Reported net income(loss) $ 818 $ (185)
Add back: goodwill amort 30 173
------- -------
Adjusted net income(loss) $ 848 $ (12)
------- -------
Net Income (Loss) per share:
Basic earnings (loss) per share $ .52 $ (.12)
Add back: goodwill amort .02 .11
------- -------
Adjusted earnings (loss) per share $ .54 $ (.01)
------- -------
Diluted earnings (loss) per share $ .49 $ (.12)
Add back: goodwill amort .02 .11
------- -------
Adjusted earnings (loss) per share $ .51 $ (.01)
------- -------
8
Note 4.
In addition to shares outstanding held by the public, the Company's defined
contribution 401(k) savings plan holds approximately 390,000 shares which were
issued during 2001 in connection with the termination of the defined benefit
pension plan. These shares, while eligible to vote, are classified as treasury
stock and therefore are not outstanding for purpose of determining per share
earnings until the time that such shares are vested in employee accounts. This
vesting is occurring over the course of the next six years. For basic income per
share for the three months ended September 30, 2002, the shares outstanding
include the weighted average number of issued common shares, 2,294,180, less the
shares held in treasury, 523,575. For basic income per share on a year to date
basis, the shares outstanding include the weighted average number of issued
common shares of 2,225,912, less the shares held in treasury, 523,575. For
diluted income per share, the shares outstanding include the aforementioned
shares for basic income per share as well as dilutive stock options totaling
172,642 shares for the three months ended September 30, 2002 and 233,844 on a
year to date basis.
Note 5.
Included in other expenses for the third quarter of 2002 is a $205,000
impairment loss on the Company's Dolgeville facilities. Included in other
expenses for the second quarter of 2001 are costs associated with the
termination of the Penobscot Shoe Company Retirement Plan, totaling $1,713,710.
During the quarter ended June 30, 2001, the Company completed the termination of
its defined benefit pension plan. On the date of termination, the Company
received cash totaling $2,377,600, which was less than the carrying value of the
prepaid pension cost asset of $3,734,670, resulting in a loss of $1,357,070.
This loss was increased by an excise tax totaling $356,640, which resulted in a
total loss on this transaction totaling $1,713,710.
9
PHOENIX FOOTWEAR GROUP, INC.
Management Discussion & Analysis of Financial Condition and
Results of Operations
Results of Operations
Nine Months and Quarter Ended September 30, 2002 compared to the Nine Months and
Quarter Ended September 30, 2001:
Net sales for the third quarter of 2002 were $9.5 million compared to $12.9
million for the same period in the prior year. Net sales in the third quarter of
2001 included $3.2 million in sales generated by previously divested brands. Net
sales in the Trotters(R) and SoftWalk(R) brands in the third quarter of 2002
versus the third quarter of 2001 declined approximately 2.2%.
Gross profit in the third quarter of 2002 was $3.8 million or 40.1% of net sales
as compared to $4.0 million or 30.7% of net sales in the third quarter of 2001.
The main reason for the improvement in the gross profit % in the third quarter
of 2002 versus the third quarter of 2001 relates to the improved gross profit %
in the Trotters(R) and SoftWalk(R) shoe brands versus the gross profit %
attributed to the previously divested slipper brands and the fact that the third
quarter of 2001 included a higher percentage of closeout sales than the third
quarter of 2002.
Selling, general and administrative expenses as a percentage of net sales was
27.5% or $2.6 million for the quarter ended September 30, 2002, as compared to
22.1% or $2.9 million for the same quarter in fiscal 2001. The costs in 2001
include amounts associated with supporting the sales of the previously divested
brands. Included in other expenses in the quarter ended September 30, 2002 is a
charge of $205,000 associated with the impairment of property.
Net sales for the nine months ended September 30, 2002 were $28.8 million
compared to $32.2 million for the same period in the prior year. Net sales in
the nine months ended September 30, 2001 included $5.3 million in sales
generated by previously divested brands. The growth rate in the Trotters(R) and
SoftWalk(R) brands in the nine months ended September 30, 2002 versus the nine
months ended September 30, 2001 was approximately 7.1%.
Gross profit in the nine months ended September 30, 2002 was $10.7 million or
37.3% of net sales as compared to $11.0 million or 34.1% of net sales in the
nine months ended September 30, 2001. The main reason for the improvement in the
gross profit % in the nine months ended September 30, 2002 versus the nine
months ended September 30, 2001 relates to the improved gross profit % in the
Trotters(R) and SoftWalk(R) shoe brands versus gross profit attributed to the
previously divested slipper brands.
10
Selling, general and administrative expenses as a percentage of net sales was
26.5% or $7.6 million for the nine months ended September 30, 2002, as compared
to 26.4% or $8.5 million for the same period in fiscal 2001. The costs in 2001
include amounts associated with supporting the sales of the previously divested
brands. Included in other expenses in the nine months ended September 30, 2002
is a charge of $205,000 associated with the impairment of property.
Included in other expenses for the nine months ended September 30, 2001 are
costs associated with the termination of the Penobscot Shoe Company Retirement
Plan, totaling $1,713,710. During the quarter ended June 30, 2001, the Company
completed the termination of its defined benefit pension plan. On the date of
termination, the Company received cash totaling $2,377,600, which was less than
the carrying value of the prepaid pension cost asset of $3,734,670, resulting in
a loss of $1,357,070. This loss was increased by an excise tax totaling
$356,640, which resulted in a total loss on this transaction totaling
$1,713,710.
During the third quarter of 2002, interest expense amounted to $73,159 as
compared to $297,910 in the same period in 2001. This decrease is a result of
the lower outstanding indebtedness. For the nine months ended September 30, 2002
interest expense amounted to $408,025 compared to $1,307,644 for the same period
last year. The reason for the decrease is the decrease in outstanding debt
versus last year. For the nine months ended September 30, 2002, the interest
expense includes $31,250 related to a note paid April 11, 2002 and $45,000
relating to non-recurring costs associated with financing inventory purchases.
The Company's effective tax rate for the third quarter of 2002 is 40% as
compared to 1.0% in the third quarter of 2001. In 2001 the Company reduced its
valuation allowance for its deferred income tax assets, resulting in a lower
effective tax rate.
During what has been described as a continued "very tough" year by the industry,
both Trotters(R) and SoftWalk(R) brands of the Company have continued to perform
well, although revenues in the third quarter of 2002 were impacted by the
economic slowdown and continued weakness in the retail sector. Several of our
key retailers reduced their basic inventory levels during the third quarter,
adversely impacting our reorder business. For both brands we will continue to
maintain a focused channel of distribution, growing the business with
non-promotional retailers. Management anticipates that the Company will
experience continued growth in total net sales in the subsequent quarters as
compared to the same periods in the previous year.
11
Liquidity and Capital Resources
As of September 30, 2002 Phoenix Footwear had working capital of $8,135,437
versus working capital of $5,356,898 at December 31, 2001. Working capital may
vary from time to time as a result of seasonal requirements, which are
heightened during the first and third quarters, the timing of factory shipments
and the need to increase inventories and support an in-stock position in
anticipation of customers' orders, and the timing of accounts receivable
collections.
The consolidated statement of cash flows for the nine months ended September 30,
2002 shows a decrease of cash since December 31, 2001. Net cash provided by
operations was approximately $9,834,433, primarily due to the decrease in
inventories and accounts receivable.
At the end of the third quarter of 2002, total bank indebtedness was $3,744,000,
and total indebtedness was $5,549,951, which consisted of: line of credit
balance of $744,000, notes payable non-current of $3,000,000, and a liability
relating to the dissenting shareholders of Penobscot of $1,805,951.
The current loan agreement with the existing bank is comprised of a term loan in
the amount of $3,000,000 and a revolving line of credit ("revolver") with a
maximum credit amount of $11,000,000. As of the end of September 2002 the amount
outstanding on the revolver was $744,000.
The Company must meet certain restrictive financial covenants as agreed upon in
the facility. Depending on the Company's future growth rate, funds may be
required by operating activities. Management is not aware of any known demands,
commitments, or events that would materially affect its liquidity. With
continued use of its revolving credit facility and internally generated funds,
the Company believes its present and currently anticipated sources of capital
are sufficient to sustain its anticipated capital needs for the remainder of
2002.
CONTRACTUAL OBLIGATIONS:
Contractual obligations as of September 30, 2002 relate to the long-term debt,
which is summarized in the table below:
Long-Term Debt:
Total: $3,000,000
Payments Due in One Year: $750,000
Payments Due in Two Years: $750,000
Payments Due in Three Years: $750,000
Payments Due in Four Years: $750,000
12
ACCOUNTING POLICIES:
Management's discussion and analysis of the Company's financial condition
and results of operations are based upon the Company's Condensed Consolidated
Financial Statements, which have been prepared in accordance with the rules and
regulations of the United States Securities and Exchange Commission. The
preparation of these financial statements requires management to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent assets and liabilities. On an
ongoing basis, the Company evaluates these estimates, including those related to
bad debts, inventories, intangible assets, post-retirement benefits, income
taxes, and contingencies and litigation. The Company bases these estimates on
historical experiences and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
The Company believes the following critical accounting policies affect
management's more significant judgements and estimates used in the preparation
of its Consolidated Financial Statements. For a detailed discussion on the
application of these and other accounting policies, see Note 1 in the December
31, 2001 Consolidated Financial Statements included in the Company's 2001 annual
report on Form 10-K.
Accounts receivables:
The Company maintains allowances for doubtful accounts, discounts and
claims resulting from the inability of customers to make required payments,
projected cash discounts to be taken in the months following the end of the
accounting period, and any claims customers may have for merchandise. If the
financial condition of customers were to deteriorate, resulting in an impairment
of their ability to make payments, additional allowances may be required.
Inventory:
The Company writes down inventory for estimated obsolescence or
unmarketable inventory equal to the differences between the cost of the
inventory and the estimated market value based upon assumptions about future
demand and market conditions. If actual market conditions are less favorable
than those projected by management, additional inventory write-downs may be
required.
Notes Regarding Forward-Looking Statements and Analyst Reports
"Forward-looking statements", within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Act"), include certain written and oral
statements made, or incorporated by reference, by the Company or its
representatives in this report, other reports, filings with the Securities and
Exchange Commission (the "S.E.C."), press releases, conferences or otherwise.
Such forward-looking statements include, without limitation, any statement that
may predict, forecast, indicate, or imply future results, performance, or
achievements, and may contain the words "believe", "anticipate", "expect",
"estimate"' "intend", "plan", "project", "will be", "will continue", "will
likely result", or any
13
variations of such words with similar meaning. These statements are not
guarantees of future performance and are subject to certain risks, uncertainties
and assumptions that are difficult to predict; therefore, actual results may
differ materially from those expressed or forecasted in any such forward-looking
statements. Investors should carefully review the risk factors set forth in
other reports or documents the Company files with the S.E.C., including Forms
10-Q, 10-K, and 8-K. Some of the other risks and uncertainties that should be
considered include, but are not limited to, the following: international,
national and local general economic and market conditions; the inability to
source the Company's products because of adverse political and economic factors
or the imposition of trade or duty restrictions; changing consumer preferences;
changing fashion trends; intense competition among other footwear brands;
demographic changes; popularity of particular designs and products; seasonal and
geographic demand for the Company's products; fluctuations and difficulty in
forecasting operating results, including without limitation, the ability of the
Company to continue, manage and forecast its growth and inventories; risk of
unavailability or price increase in raw materials needed to make the Company's
products; new product development and commercialization; the ability to secure
and protect trademarks; performance and reliability of products; customer
service; adverse publicity; the loss of significant customers or suppliers;
increase cost of freight and transportation to meet delivery deadlines; changes
in business strategy or development plans; general risks of doing business
outside the United States; including without limitation, import duties, quotas,
tariffs, and political and economic instability; changes in government
regulation; liability and other claims asserted against the Company; the ability
to attract and retain qualified personnel; the risk of the Company's customers
filing bankruptcy and other factors referenced or incorporated by reference in
this report and other reports.
The Company operates in a very competitive and rapidly changing environment. New
risk factors can arise and it is not possible for management to predict all such
risk factors, nor can it assess the impact of all such risk factors on the
Company's business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any
forward-looking statements. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements.
Investors should also be aware that while the Company does, from time to time,
communicate with securities analysts, it is against the Company's policy to
disclose to them any material non-public information or other confidential
commercial information. Accordingly, investors should not assume that the
Company agrees with any statement or report issued by any analyst irrespective
of the content of the statement or report.
14
Furthermore, the Company has a policy against issuing or confirming financial
forecasts or projections issued by others. Thus, to the extent that reports
issued by securities analysts contain any projections, forecasts or opinions,
such reports are not the responsibility of the Company.
The Company undertakes no obligation to release publicly the results of any
revisions to these forward looking statements that may be made to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes since December 31, 2001.
Item 4. Controls and Procedures
We have for many years had procedures in place for gathering the information
that is needed to enable us to file required quarterly and annual reports with
the Securities and Exchange Commission ("SEC"). However, because of additional
disclosure requirements imposed by the SEC in August 2002, as required by the
Sarbanes-Oxley Act of 2002, we formed a committee consisting of the people who
are primarily responsible for preparation of those reports, including our
general counsel and our principal accounting officer, to review and formalize
our procedures, and to have ongoing responsibility for designing and
implementing our disclosure controls and procedures (i.e., the controls and
procedures by which we ensure that information we are required to disclose in
the annual and quarterly reports we file with the SEC is processed, summarized
and reported within the required time periods). On October 11, 2002, our chief
executive officer and our chief financial officer met with that committee to
evaluate the disclosure controls and procedures we had in place and the steps
that are being taken to formalize those procedures and to introduce some
additional steps to the information-gathering process. Based upon that
evaluation, our chief executive officer and our chief financial officer
concluded that, while the procedures we have had in place appear to have
provided all the information we have needed to date, the committee should
proceed to formalize and supplement our disclosure controls and procedures in
order to ensure that all the information required to be disclosed in our reports
is accumulated and communicated to the people responsible for preparing those
reports, and to our principal executive and financial officers, at times and in
a manner that will allow timely decisions regarding required disclosures.
15
We constantly review the internal controls we have in place to ensure that all
transactions in which we are involved are properly recorded and to safeguard our
assets. This includes reviews and evaluations by our accounting department,
discussions with our outside auditors and discussions with members of our
internal audit group. While we are constantly taking steps to improve our
internal controls and to apply our internal controls to new types of
transactions or situations in which we are involved, we have not since October
11, 2002 (the day on which our chief executive officer and chief financial
officer met with the committee that has on-going responsibility for designing
and implementing our disclosure controls and procedures), or at any other time
within 90 days before the filing of this report, made any significant changes in
our internal controls or in other factors that could significantly affect these
controls, including taking any corrective actions with regard to significant
deficiencies or material weaknesses. This has been confirmed by our chief
executive officer and our chief financial officer.
16
Part II - Other Information
1. Legal Proceedings - None.
2. Changes in Securities - None.
3. Default upon Senior Securities - None.
4. Submission of matters to a vote of security holders. - None
5. Other Information - None.
6. Exhibits and Reports on Form 8K
a) Certification of Chief Financial Officer on Controls and Procedures
b) Certification of Chief Executive Officer on Controls and Procedures
c) Exhibit 99.1 - Certification of Chief Executive Officer
d) Exhibit 99.2 - Certification of Chief Financial Officer
e) Forms 8-K - None
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto, duly authorized.
PHOENIX FOOTWEAR GROUP, INC.
Registrant
Date:
------------------ -------------------------
Robert M. Pereira
Chief Financial Officer
/s/ James R. Riedman
-------------------------
James R. Riedman
Chief Executive Officer
17
CERTIFICATION OF DISCLOSURE CONTROLS AND PROCEDURES
I, Robert M. Pereira, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Phoenix Footwear
Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
_________________________________
Name: Robert M. Pereira
Title: Chief Financial Officer &
Treasurer
Date:____________________________
18
CERTIFICATION OF DISCLOSURE CONTROLS AND PROCEDURES
I, James R. Riedman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Phoenix Footwear
Group, Inc..;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
_______________________________
Name: James R. Riedman
Title: Chief Executive Officer
Date:__________________________
19