Costa Inc. Reports Strong Third Quarter 2013 Results

Costa Company Logo

  • Subsequent to the September 2013 divestiture of the Cross Accessories Division, the A.T. Cross Company renamed itself Costa Inc.
  • Sales for the third quarter 2013 increased 26.3% to $24.6 million
  • Sales for the nine months ended September 28, 2013 increased 20.7% to $80.8 million
  • Non-GAAP proforma EPS from continuing operations increased 29% and 25% for the three and nine months ended September 28, 2013, respectively

LINCOLN, R.I., Oct. 30, 2013 (GLOBE NEWSWIRE) -- Costa Inc. (Nasdaq:ATX) today announced financial results for the third quarter and nine months ended September 28, 2013. The consolidated statements of income included herein, present the former Cross Accessories Division as Discontinued Operations.

Third Quarter 2013 Results

Sales by Costa Inc., the former Cross Optical Group, (the "Company") increased by 26.3% during the third quarter of 2013 to $24.6 million compared to $19.4 million in the third quarter of 2012. Sunglass sales increased by 24.1% while sales of accessories and apparel increased by 46.6%.

Gross margins in the third quarter of 2013 were 58.6%, compared to 59.0% in the third quarter of 2012.

Operating income in the third quarter of 2013 decreased to $0.2 million, compared to $1.4 million in the third quarter of 2012. Included in the 2013 third quarter results for continuing operations was approximately $2.1 million of non-cash compensation expense associated with equity awards that vested upon the sale of the Cross Accessory Division.

Net loss from continuing operations for the third quarter of 2013 was a loss of $0.2 million or $0.01 per basic share compared to net income from continuing operations of $0.9 million, or $0.07 per basic and diluted share in the third quarter of 2012.

Net loss from discontinued operations, net of tax, for the third quarter of 2013 was $10.1 million, or $0.81 per basic share, compared to net income from discontinued operations, net of tax, of $1.1 million, or $0.09 per basic share and $0.08 per diluted share in the third quarter of 2012. Loss from discontinued operations primarily includes the operating results of the former Cross Accessories Division, as well as certain tax related items associated with the divestiture.

Net loss for the third quarter of 2013 was $10.2 million, or $0.82 per basic share, compared to net income of $2.0 million, or $0.16 per basic share and $0.15 per diluted share, in the third quarter of 2012.

Nine Month 2013 Results

Sales by Costa Inc., the former Cross Optical Group, increased by 20.7% during the nine months ended September 28, 2013 to $80.8 million compared to $67.0 million for the same period of 2012. Sunglass sales increased by 17.2% while sales of accessories and apparel increased by 55.2%.

Gross margins during the nine month 2013 period were 58.9%, similar to the same period in 2012.

Operating income during the nine month 2013 period was $8.9 million, compared to $8.4 million for the same period in 2012. Included in the nine month 2013 period for continuing operations was approximately $2.1 million of non-cash compensation expense associated with equity awards that vested upon the sale of the Cross Accessory Division.

Net income from continuing operations for the nine month 2013 period was $5.4 million, or $0.43 per basic share and $0.40 per diluted share, compared to net income of $5.3 million, or $0.43 per basic share and $0.40 per diluted share, for the same period in 2012.

Net loss from discontinued operations, net of tax, for the nine month 2013 period was $10.9 million, or $0.88 per basic share, compared to net income from discontinued operations, net of tax, of $2.0 million, or $0.16 per basic and diluted share for the same period in 2012. Loss from discontinued operations primarily includes the operating results of the former Cross Accessories Division, as well as certain tax related items associated with the divestiture.

Net loss for the nine month 2013 period was $5.5 million, or $0.45 per basic share and $0.42 per diluted share, compared to net income of $7.2 million, or $0.59 per basic share and $0.56 per diluted share, for the same period in 2012.

David G. Whalen, Chief Executive Officer of Costa Inc. stated, "We are certainly pleased with our third quarter and year to date performance. Our sunglass business has momentum as it enters the fourth quarter as all of the Costa brand's revenue sources; including prescription and non-prescription sunglasses, as well as apparel and accessories are performing very well. As we move through the last quarter of this year and head into 2014, our confidence in our business model and its growth potential is high. Every day, our authentic brands and products are attracting new consumers in both existing markets as well as new ones."

Cross Accessory Division Sale

On September 6, 2013, the Company completed the sale of its Cross Accessory Division and activity associated with that division is classified as Discontinued Operations in the accompanying financial information.

Conference Call

The Company's management will host a conference call today, October 30, 2013 at 4:30 PM Eastern Time. Parties interested in participating in the conference call may dial in at 877-312-5845, while international callers may dial in at 970-315-0470. The conference call will be webcast and can be accessed at www.costabrands.com. A replay of the webcast will be archived on the Company's website.

Non-GAAP Measures

This release contains non-GAAP measures of operating income and diluted earnings per share that are provided as a complement to results provided in accordance with generally accepted accounting principles. These non-GAAP results are among the indicators management uses as a basis for evaluating financial performance as well as for forecasting future periods. For these reasons, management believes these non-GAAP measures can be useful to investors, potential investors and others. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or earnings per share prepared in accordance with GAAP.

About Costa Inc.

Costa Inc. owns and manages the Costa and Native Eyewear brands. Known best for its premium sport sunglasses tailored to those sports enthusiasts who play on the water, the Costa Brand is rapidly expanding into prescription sunglasses and sports apparel. Likewise, the Native Eyewear brand is becoming the brand of choice for mountain locals and those who aspire to the mountain way of life. Costa Inc. is the successor company of A.T. Cross. For more information, visit the Costa Inc. website at www.costabrands.com.

Statements contained in this release that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995( including but not limited to statements related to the expected performance of Costa brand's revenue sources and the expected growth potential for the brand and business model). In addition, words such as "believes," "anticipates," "expects," and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including but not limited to continued consumer demand across all Costa revenue sources and the ability of the business to continue to successfully manage operations as it gains scale. Actual results could differ materially from those expressed or implied in the forward-looking statements. The information contained in this document is as of October 28, 2013. The Company assumes no obligation to update any forward-looking statements contained in this document as a result of new information or future events or developments. Additional discussion of factors that could cause actual results to differ materially from management's expectations is contained in the Company's filings under the Securities Exchange Act of 1934.

COSTA INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 28, September 29, September 28, September 29,
2013 2012 2013 2012
Net sales $ 24,569 $ 19,449 $ 80,824 $ 66,952
Cost of goods sold 10,156 7,978 33,187 27,493
Gross Profit 14,413 11,471 47,637 39,459
Selling, general and administrative expenses 12,328 8,722 33,648 27,049
Service and distribution costs 1,519 1,063 4,000 3,225
Research and development expenses 373 255 1,106 813
Operating Income 193 1,431 8,883 8,372
Interest and other expense (128) (102) (404) (522)
Income Before Income Taxes 65 1,329 8,479 7,850
Income tax provision 240 432 3,123 2,597
Net (Loss) Income From Continuing Operations (175) 897 5,356 5,253
Net (Loss) Income From Discontinued Operations, net of Taxes (10,064) 1,142 (10,867) 1,984
Net (Loss) Income $ (10,239) $ 2,039 $ (5,511) $ 7,237
Net (Loss) Income per Share:
Basic
Continuing Operations $ (0.01) $ 0.07 $ 0.43 $ 0.43
Discontinued Operations (0.81) 0.09 (0.88) 0.16
Total $ (0.82) $ 0.16 $ (0.45) $ 0.59
Diluted
Continuing Operations $ (0.01) $ 0.07 $ 0.40 $ 0.40
Discontinued Operations (0.81) 0.08 (0.82) 0.16
Total $ (0.82) $ 0.15 $ (0.42) $ 0.56
Weighted Average Shares Outstanding:
Basic 12,501 12,729 12,359 12,357
Diluted 12,501 13,326 13,266 12,978
Reconciliation of GAAP to Non-GAAP Measurements
Reconciliation of GAAP and Non-GAAP Operating Income From
Continuing Operations and Diluted Earnings Per Share:
GAAP Operating Income From Continuing Operations $ 193 $ 1,431 $ 8,883 $ 8,372
Non-Cash Compensation Associated With The Sale of CAD 2,100 -- 2,100 --
Non-GAAP Operating Income From Continuing Operations $ 2,293 $ 1,431 $ 10,983 $ 8,372
GAAP Diluted Earnings Per Share $ (0.01) $ 0.07 $ 0.40 $ 0.40
Non-Cash Compensation Associated With The Sale of CAD 0.11 -- 0.10 --
Non-GAAP Diluted Earnings Per Share $ 0.10 $ 0.07 $ 0.50 $ 0.40
COSTA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
September 28, 2013 September 29, 2012
Assets
Cash and cash equivalents $ 63,876 $ 20,599
Short-term investments 292 226
Accounts receivable 12,060 29,650
Inventories 17,900 39,449
Deferred income taxes 2,950 5,978
Other current assets 2,766 5,914
Total Current Assets 99,844 101,816
Property, plant and equipment, net 4,329 14,165
Goodwill 15,279 15,279
Intangibles and other assets 8,859 10,567
Deferred income taxes 4,114 11,325
Total Assets $ 132,425 $ 153,152
Liabilities and Shareholders' Equity
Accounts payable and other current liabilities $ 11,231 $ 25,474
Line of credit 15,000 17,000
Retirement plan obligations 2,360 2,600
Income taxes payable 1,067 1,299
Total Current Liabilities 29,658 46,373
Retirement plan obligations 18,095 17,974
Other long-term liabilities 1,157 3,641
Shareholders' equity 83,515 85,164
Total Liabilities and Shareholders' Equity $ 132,425 $ 153,152

CONTACT: Company Contact: Kevin F. Mahoney Senior Vice President, Finance and Chief Financial Officer 401-335-3918 Investor Relations: Dave Mossberg Three Part Advisors, LLC 817-310-0051

Source:Costa Inc.