Ashworth, Inc. Reports Second Quarter and YTD Fiscal 2007 Financial Results.CARLSBAD, Calif. -- Ashworth, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : ASHW), a leading designer of on-course golf apparel and golf-inspired lifestyle sportswear, today announced unaudited financial results for its second quarter ended April 30, 2007. Peter M. Weil, Chief Executive Officer of Ashworth, said, "Throughout the second quarter, we continued to execute on the strategic initiatives our Board and management team identified during the second half of 2006. While we continue to face challenges, we believe the initiatives being implemented will help better position the Company for sustainable and profitable growth." "Despite the challenges in the second quarter, we are excited about the future of Ashworth. We have taken a number of steps that are designed to build a more efficient and effective organization, including the recently announced personnel changes." Summary of Second Quarter Results: Consolidated net revenue for the second quarter ended April 30, 2007 decreased 9.3% to $59.9 million as compared to $66.0 million for the second quarter of 2006. The Company reported consolidated second quarter net loss of $2.5 million, or $0.17 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to net income of $4.7 million, or $0.32 per diluted share, for the same quarter of the prior year. In the second quarter, the Company recorded a tax charge of $2.9 million or $0.20 per diluted share to establish a valuation allowance against deferred tax assets. Net revenue for the domestic segment (including Gekko Brands, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control ) decreased 10.7% to $47.2 million from $52.8 million for the same period of the prior year. Net revenue from the international segment (including Ashworth, U.K., LTD LTD 1 Laron-type dwarfism 2 Leukotriene D 3 Long-term depression, see there 4. Long-term disability .) decreased 3.7% to $12.7 million from $13.2 million for the same period of the prior year. In the second quarter of fiscal 2007, the Company's consolidated gross margin decreased 650 basis points to 38.8% as compared to 45.3% in the second quarter of fiscal 2006. The decrease in margins was due to the costs associated with the underutilization of the Company's Embroidery embroidery, ornamental needlework applied to all varieties of fabrics and worked with many sorts of thread—linen, cotton, wool, silk, gold, and even hair. Decorative objects, such as shells, feathers, beads, and jewels, are often sewn to the embroidered piece. and Distribution Center's (EDC EDC See: Export Development Corp. ) embroidery capacity. This is a direct result of lower sales associated with the Company's domestic golf channel as well as higher markdown Markdown The difference between the highest current bid price among broker-dealers in the market and the lower price that a dealer charges a customer. Notes: The broker offers a lower price to try stimulate trading in hopes that they will make the money back on the extra and other allowances granted to customers in the domestic golf, retail and corporate channels as compared to the same period of the prior year. Consolidated selling, general and administrative ("SG&A") expenses increased 1.5% to $21.8 million for the second quarter of fiscal 2007 as compared to $21.5 million for the second quarter of fiscal 2006. As a percent of net revenues, SG&A expenses were 36.5% for the second quarter of fiscal 2007 as compared to 32.6% for the same period of the prior fiscal year. The increase in SG&A expenses was primarily due to the effect of the addition of four new outlet stores An outlet store or factory outlet is a retail store in which manufacturers sell their stock directly to the public through their own branded stores. The stores can be can be brick and mortar or online. during the second half of fiscal 2006. These increases were partially offset with reductions in legal and consulting fees associated with the Company's 2006 annual meeting of shareholders and strategic alternatives process, as well as a reduction in costs related to the Company's compliance with Sarbanes-Oxley and its annual audit. Revenues by Channel/Segment: Golf Total revenues in the domestic golf channel in the second quarter declined 21.9% to $21.8 million as compared to the same period last year. Sales in the golf distribution channel for the second quarter were affected by continuing competitive pressure, market consolidation in specialty golf retail and an overall softness in the golf market. The Company believes the repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. of its green grass sales management Sales Management Role and Goal Importance of sales management is critical for any commercial organization. Expanding business in not possible without increasing sales volumes, and effective sales management goal is to organize sales team work in such a manner that ensures a team, together with other brand development initiatives implemented during the past few months will help to improve sales in the golf channel. Corporate Revenues for the corporate distribution channel were $6.6 million, a decrease of 10.2% as compared to the same period last year. The decrease in sales resulted primarily from missed sales opportunities due to out of stock positions in selected styles. The Company believes that the narrowing of Corporate assortments and the use of its new data warehouse technology will improve its inventory productivity and customer in-stock position. Retail Revenues for the retail distribution channel were $6.4 million, a decrease of 8.5% from second quarter 2006. The retail channel experienced a decline in the second quarter primarily due to account consolidation in the channel as well as a reduction of underperforming doors. The Company will seek to continue to improve its brand positioning by focusing on premium retail accounts and doors within the channel. Collegiate/Racing (The Game[R]/Kudzu[R]) Second quarter revenues for Gekko Brands, LLC were $9.8 million, an increase of 20.8% over the second quarter 2006. The increase was primarily due to higher revenues in the collegiate col·le·giate adj. 1. Of, relating to, or held to resemble a college. 2. Of, for, or typical of college students. 3. Of or relating to a collegiate church. bookstore channel driven by higher apparel sales, higher sales to Game Select Dealers and higher event sales such as the Kentucky Derby Kentucky Derby One of the classic U.S. Thoroughbred horse races. It was established in 1875 and run annually on the first Saturday in May at Churchill Downs track in Louisville, Ky. With the Preakness and the Belmont Stakes, it makes up U.S. racing's coveted Triple Crown. . Revenues from the NASCAR/racing channel and the outdoors channel also increased as compared to the second quarter of fiscal 2006. Company-owned Outlet Stores Revenues from the Company-owned stores were $2.6 million, an increase of 3.3% over second quarter 2006. Since the second quarter of 2006, the Company added four new outlet stores bringing the Company's total number of outlet stores to 18. The new outlet stores contributed $0.6 million in sales in the second quarter of fiscal 2007 while sales on a comparative store basis were down 16.9%. Much of the decline was due to reduced foot traffic in the outlet stores resulting from colder weather. International Revenues from the international segment decreased 3.7% to $12.7 million, a decrease of $0.5 million over the same period last year. Revenues were slightly lower in both Europe and Canada. Balance Sheet: Net accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying decreased 9.6% from the prior year, commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. with the 9.3% decrease in revenues for the second quarter. Net inventory remained flat at $53.1 million as of April 30, 2007 as compared with the same period last year. On June 15, 2007, the Company obtained a written waiver The voluntary surrender of a known right; conduct supporting an inference that a particular right has been relinquished. The term waiver is used in many legal contexts. of the fixed charge coverage ratio and minimum tangible net worth Tangible Net Worth Total assets less intangible assets and total liabilities. Notes: In terms of a consumer, tangible net worth is the sum of all your tangible assets (cash, home, cars, etc). covenant requirements from its lenders for the period ended April 30, 2007 and therefore as a result have reclassified the long-term portion of the credit facility as current. Income Taxes: During the financial close for the quarter ended April 30, 2007, the Company performed its quarterly assessment of its net deferred tax assets in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Statement of Financial Accounting Standard No. 109, Accounting for Income Taxes ("SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 109"). SFAS 109 limits the ability to use future taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. to support the realization of deferred tax assets when a company has experienced recent losses even if the future taxable income is supported by detailed forecasts and projections. As a result of the quarterly assessment, the Company recorded a tax charge in the second quarter of 2007 of $2.9 million or $0.20 per diluted share to establish a valuation allowance against deferred tax assets. Embroidery and Distribution Center (EDC): The Company is continuing to evaluate various options for its EDC including, among others: developing a joint venture to better utilize available embroidery capacity; and selling the EDC and utilizing external distribution providers and contract embroiderers. The Company is evaluating all available options and noted that there is no guarantee that any agreement will be reached as a result of this process. Personnel Changes In addition to adding a new Chief Financial Officer at the end of March 2007, the Company announced a series of personnel changes on May 23, 2007, including the return of Eddie Fadel as President. Mr. Fadel will oversee all of Ashworth's sales, customer service and sourcing and will have shared responsibility for design with John Ashworth. In addition, on April 19, 2007 the Company announced that Eric Salus has joined the Company's Board of Directors and will stand for election at the Company's 2007 Annual Meeting of Stockholders. Mr. Salus has also entered into an agreement with The Company to provide certain consulting services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.) service - work done by one person or group that benefits another; "budget separately for goods and services" to assist Management as it strives to improve operating results. The Company is pleased to have Messrs. Fadel and Salus as part of the team - they each possess deep knowledge of the retail space and have more than 60 years of combined experience. Ashworth also recently announced that, as part of its ongoing cost reduction initiatives and in an effort to streamline the Company, 16 staff positions have been eliminated. The Company implemented this workforce reduction to better align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. its cost structure with its core business strategy. Conference Call: Investors and all others are invited to listen to a conference call discussing second quarter results, today at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time). Domestic participants can access the conference call by dialing 888-344-1107. International participants should dial 973-582-2859. Callers should ask to be connected to Ashworth's second quarter earnings teleconference or provide the conference ID number 8916226. The call will also be broadcast live over the Internet and can be accessed by visiting the Company's investor information page at www.ashworthinc.com. About Ashworth, Inc. Ashworth, Inc. (NASDAQ: ASHW) is a leading designer of men's and women's golf-inspired lifestyle sportswear distributed domestically and internationally in golf pro shops, resorts, upscale department and specialty stores Noun 1. specialty store - a store that sells only one kind of merchandise shop, store - a mercantile establishment for the retail sale of goods or services; "he bought it at a shop on Cape Cod" and to corporate customers. Ashworth's three market-leading brands include: Ashworth Collection (TM), a range of upscale sportswear designed to be worn on and off-course; Ashworth Authentics (TM), which showcases popular items from the Ashworth line; and Ashworth Weather Systems[R], a technical performance line. Ashworth is also an Official Apparel Licensee licensee n. a person given a license by government or under private agreement. (See: license, licensor) LICENSEE. One to whom a license has been given. 1 M. Q. & S. 699 n. of Callaway Golf Company Callaway Golf Company is an American golf company based in Carlsbad, California. They manufacture woods, irons, wedges, putters and golf balls and license its name for apparel, footwear, timepieces and accessories. . Ashworth is also a leading designer, producer and distributor of headwear head·wear n. A hat or other covering for the head. and apparel under The Game[R] and Kudzu kudzu (k  d`z ), plant of the family Leguminosae (pulse family), native to Japan. [R] brands. The Game is
a leading headwear brand in collegiate bookstores and Kudzu products are
sold into the NASCAR/racing markets and through outdoors sports
distribution channels, including fishing and hunting. Ashworth is also
the exclusive on-site event merchandiser for the Kentucky Derby.
For more information, please visit the Company's Web site at www.ashworthinc.com. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains forward-looking statements related to the Company's market position, finances, operating results, marketing and business plans and strategies within the meaning of Section 27A of the Securities Act, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may contain the words "believes," "anticipates," "expects," "predicts," "estimates," "projects," "will be," "will continue," "will likely result," or other similar words and phrases Words and Phrases® A multivolume set of law books published by West Group containing thousands of judicial definitions of words and phrases, arranged alphabetically, from 1658 to the present. . Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, changed circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or or unanticipated events unless required by law. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks include the uncertainties associated with implementing a successful transition in executive leadership, the continued willingness of our lenders to provide waivers of compliance with financial covenants, the evaluation of strategic alternatives that may be presented, timely development and acceptance of new products, as well as strategic alliances, the integration of the Company's acquisition of Gekko Brands, LLC, the impact of competitive products and pricing, the success of the Callaway Golf apparel product line, the preliminary nature of bookings information, the ongoing risk of excess or obsolete inventory Obsolete Inventory Term that refers to inventory that is at the end of its product life cycle and has not seen any sales or usage for a set period of time usually determined by the industry. This type of inventory has to be written down and can cause large losses for a company. , the potential inadequacy of booked reserves, the successful operation of the distribution facility in Oceanside, CA, the successful implementation of the Company's ERP (Enterprise Resource Planning) An integrated information system that serves all departments within an enterprise. Evolving out of the manufacturing industry, ERP implies the use of packaged software rather than proprietary software written by or for one customer. system, and other risks described in Ashworth, Inc.'s SEC reports, including the annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended October 31, 2006, quarterly reports on Form 10-Q Form 10-Q See 10-Q. filed thereafter and amendments to any of the foregoing reports, including the Form 10-K/A for the year ended October 31, 2006.
[TABLE OMITTED]
ASHWORTH, INC. > >
Consolidated Balance Sheets > >
As of April 30, 2007 and 2006 > >
(Unaudited) > >
> > April 30,
April 30,
ASSETS > > 2007
2006
> >
CURRENT ASSETS > >
Cash and Cash Equivalents > > $ 4,227,000
$ 5,950,000
Accounts Receivable-Trade, net > > 45,874,000
50,740,000
Inventories, net > > 53,125,000
53,099,000
Other Current Assets > > 8,990,000
11,046,000
Total Current Assets > > 112,216,000
120,835,000
> >
Property and Equipment, net > > 38,802,000
38,967,000
Other Assets, net > > 25,694,000
24,607,000
Total Assets > > $ 176,712,000
$ 184,409,000
> >
LIABILITIES AND STOCKHOLDERS' EQUITY > >
> >
CURRENT LIABILITIES > >
Line of Credit Payable > > $ 29,470,000
$ 29,050,000
Current Portion of Long-Term Debt > > 6,039,000
2,098,000
Accounts Payable - Trade > > 11,514,000
15,137,000
Other Current Liabilities > > 11,082,000
8,593,000
Total Current Liabilities > > 58,105,000
54,878,000
> >
Long-Term Debt > > 11,456,000
16,879,000
Other Long-Term Liabilities > > 2,032,000
2,129,000
Stockholders' Equity > > 105,119,000
110,523,000
Total Liabilities and Stockholders' Equity > > $ 176,712,000
$ 184,409,000
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