Ashworth, Inc. Reports Third Quarter and YTD Fiscal 2008 Financial Results.* Ashworth Also Announces That It Is Exploring Strategic Alternatives Including a Potential Sale or Merger of the Company 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 third quarter ended July 31, 2008. Summary of Third Quarter Results: Consolidated net revenue for the third quarter ended July 31, 2008 decreased 8.7% to $45.2 million as compared to $49.5 million for the third quarter of 2007. The Company reported consolidated third quarter net loss of $9.6 million, or $0.65 per basic and 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 a net loss of $5.7 million, or $0.39 per basic and diluted share, for the same quarter of the prior year. Included in the third quarter fiscal 2008 quarterly loss is a non-cash tax charge of $1.3 million or $0.09 per basic and diluted share as compared to a non-cash tax charge of $1.4 million or $0.10 per basic and diluted share in the third quarter fiscal 2007, to increase the valuation allowance against the Company's deferred tax assets. The quarterly loss for the 2008 period also reflects an increase in inventory write-down taken in the United Kingdom of $0.6 million. In the third quarter of fiscal 2008, the Company's consolidated gross margin decreased 330 basis points to 34.9% as compared to 38.2% in the third quarter of fiscal 2007. The decrease in consolidated gross margin was driven by increased discounting, higher product costs as a result of fixed overhead allocated to lower sales volumes, higher material and transportation costs, a higher volume of off-price sales, and increased inventory reserves. The Company's off-price sales were at significantly higher discounts during the third quarter of 2008 as compared to the same quarter of the prior year. In addition, the European channel experienced larger discounts within its resort, golf and retail customers. Consolidated selling, general and administrative ("SG&A") expenses increased 4.4% to $22.8 million for the third quarter of fiscal 2008 as compared to $21.8 million for the third quarter of fiscal 2007. The increase is largely due to increased consulting fees, primarily associated with a review of the Company's operations, cost structures and strategic plans. Also contributing to higher SG&A expenses were increases in tradeshow/tournaments/sales meeting expenses and an increase in royalties as a result of a higher concentration of revenues from licensed products, partially offset by lower commissions. Revenues by Channel/Segment: Golf Total revenues in the domestic golf channel in the third quarter increased 5.5% to $18.2 million from $17.2 million for same period last year. This is the fourth consecutive quarter in which revenues in the golf channel have increased. In the third quarter of fiscal 2008, net revenues increased from both on-course and off-course golf retailers over the comparable prior year quarter. This growth is the result of the implementation of new 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 processes, in both the on-course and off-course channels of distribution, and a strengthening of the sales team in both quantity and quality. However, as a result of the difficult economy, retail sell-through during the third quarter of 2008 has been below expectations and we expect revenues from this channel to decrease for the remainder of the fiscal year as compared to prior year periods. Corporate Revenues for the corporate distribution channel were $4.3 million, a decrease of 31.5% as compared to the same period last year. This distribution channel has been adversely affected by reduced corporate spending and unusually high levels of discounted merchandise in the marketplace due to the economy. Retail Revenues for the retail distribution channel were $1.1 million, a decrease of 30.9% from $1.7 million in the third quarter 2007. This decrease was driven by a consolidation of retail accounts and their associated location closures, a challenging retail environment as well as a decision by the Company's management team to strategically exit a number of large accounts. Collegiate/Racing (The Game[R]/Kudzu[R]) Third quarter revenues for Gekko Brands, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control were $11.7 million, a decrease of 7.2% over the third quarter 2007. The decrease was primarily due to softness in the collegiate/bookstore channel as well as continued deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. from the Outdoor Direct catalog catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. sales and the timing of certain events in the golf and NASCAR/racing channels. Company-owned 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. Revenues from the Company-owned stores were $2.6 million, a decrease of 19.8% over third quarter 2007. The decrease in revenues from the Company-owned outlet stores was primarily due to the difficult economic environment combined with product assortment and merchandizing issues. International Revenues from the international segment decreased 14.4% to $7.3 million, a decrease of $1.2 million over the same period last year. Revenues were significantly lower in Europe largely due to reduced in-season replenishment replenishment the addition of an appropriate quantity of properly prepared solution containing the correct concentration of chemicals to the developer solutions used in radiography. orders from the Company's resort, golf and retail customers as well as lower corporate revenues, due in part to the slowing economy in Europe. 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 increased 3.7% from the prior year, while revenues decreased 8.7% for the third quarter. The $1.2 million increase in net accounts receivable was primarily due to a reduction in reserves for 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 allowances of $0.8 million and an increase in trade receivables of $0.4 million due to the timing of shipments during the three months ended July 31, 2008 as compared to the same period of the prior year. Net inventory increased 3.3% to $55.4 million as of July 31, 2008 as compared with the same period last year primarily due to the addition of the Sun Ice[R] brand. Income Taxes: The effective tax rate for the income tax provision for the three months ended July 31, 2008 and 2007 was a negative 22% and a negative 48%, respectively. The increase in the effective rate for the current period as compared to the same period of the prior fiscal year is due to discrete one-time charges in the third quarter of the current fiscal year of $4.3 million to increase the valuation allowance against the Company's net deferred tax assets, primarily consisting of estimated net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. . Exploration of Strategic Alternatives: Ashworth is exploring strategic alternatives to enhance shareholder value and, in particular, capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the global strength of the Ashworth[R] brand. These alternatives include, but are not limited to, a sale or merger of the Company. The Company has retained Kurt Salmon Associates Capital Advisors as its financial advisor. Conference Call: Investors and all others are invited to listen to a conference call discussing third 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 800-762-8779. International participants should dial 480-248-5081. Callers should ask to be connected to Ashworth's third quarter earnings teleconference or provide the conference ID number 3918102. 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 under the Ashworth[R] brand. Ashworth is also an Official Apparel Licensee 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 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. 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 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. . 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, 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. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, changed circumstances 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 a potential liquidity shortfall in the first half of fiscal 2009, implementing a successful transition in executive leadership, successful resolution of the current dispute with Callaway Golf, the evaluation of strategic alternatives that may be presented, timely development and acceptance of new products, as well as strategic alliances, the impact of competitive products and pricing, the success of the Sun Ice[R] and Callaway Golf apparel product lines, 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, 2007, 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, 2007. [TABLE OMITTED] [TABLE OMITTED] |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion