Ashworth, Inc. announced financial results for its first quarter ended January 31, 2005. In addition, the Company reported that it received a strong response to the new Ashworth(R) and Callaway Golf apparel lines during the recent PGA Show in Orlando and Market Week in New York.
Consolidated net revenue for the first quarter ended January 31, 2005 increased 33.6% to $36.5 million as compared to $27.3 million for the first quarter of 2004. The company reported consolidated first quarter net income of $83,000, or 1 cent per diluted share, compared to net income of $134,000, or 1 cent per diluted share, for the same quarter of the prior year. Net revenue for the domestic segment increased 37.1% to $31.6 million from $23.0 million for the same period of the prior year. Net revenue from the international segment increased 14.6% to $4.9 million from $4.3 million for the same period of the prior year. Currency fluctuations had a favorable impact of $0.2 million on fiscal 2005 first quarter net revenues. First quarter revenue from Ashworth branded merchandise decreased 6.5% to $19.3 million while revenue from Callaway Golf apparel increased 28.3% to $8.6 million for the quarter.
Randall L. Herrel, Sr., Chairman and Chief Executive Officer, stated, “We are encouraged to report that first-quarter earnings were within analysts expectations considering the generally slow golf industry during the period. The net income in the first quarter of fiscal 2005 was impacted by approximately 2 cents per diluted share due to incremental fixed costs related to the new embroidery and distribution center. Management currently anticipates that expected cost savings from our new distribution center will start to materialize in the second half of fiscal 2005. Overall, we believe these results are due in part to the addition of new brands and three new distribution channels to our multi-brand, multi-channel business strategy.”
Mr. Herrel continued, “Net revenues for the first quarter of fiscal 2005 compared to first quarter fiscal 2004 were up 14.6% for our international segment and up 1.3% for our retail channel, with Men’s business in the retail channel growing approximately 20% as compared to last year. Our corporate channel was down 8.6% and our core golf and off-course specialty channel was down 1.2%. Our corporate distribution channel was affected by a delay in the launch of our 2005 Authentics(TM) product line. Our golf related distribution channel was affected by the generally slow golf industry conditions and pro shop buyers placing their orders closer to the start of the golf season versus last year. The Game(R) and Kudzu(R) brands contributed $8.6 million in revenues in the first quarter of fiscal 2005.”
In reviewing the company’s financial position, Terence Tsang, Executive Vice President and Chief Financial Officer, stated, “Our gross margins increased 100 basis points to 40.1% for the first quarter of fiscal 2005, due primarily to the addition of The Game and Kudzu brands, partially offset by the additional costs of our new embroidery and distribution center.”
Mr. Tsang continued, “Our net accounts receivable increased 11.2% over the prior year, which is a much slower rate of increase than our 33.6% increase in net revenues for the first quarter, resulting in an improvement in our DSOs to 77 days from 92 days in last year’s first quarter. Our inventory increased 11.6% to $59.2 million as of January 31, 2005 as compared to $53.1 million as of January 31, 2004, primarily due to the addition of the Gekko Brands inventory.”
The company also reiterated and maintained its revenue and earnings guidance for fiscal 2005. Based on current information, the Company expects consolidated net revenues for fiscal 2005 of $207.0 million to $215.0 million and earnings of 76 cents to 82 cents per diluted share.
Based on current business trends, the company expects fiscal 2005 second quarter net revenues of $65 million to $67 million and earnings of 38 cents to 40 cents per diluted share. The company currently expects to report fiscal 2005 second quarter results on Thursday, June 9th at market close.
Mr. Herrel concluded, “Synergies between our apparel and headwear operations and product lines have begun to appear earlier than expected, and we should start to see further positive effects in the second half of fiscal 2005. Our collegiate headwear reps are beginning to sell our apparel lines into new distribution channels, and our golf apparel reps are beginning to sell headwear into our current apparel channels. We believe our multi-brand, multi-channel business model has new potential and positions us well for the future.”
ASHWORTH, INC.
Consolidated Statements of Income
First Quarter ended January 31, 2005 and 2004
(Unaudited)
Summary of Results of
Operations
2005 2004
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First Quarter
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Net Revenue $36,513,000 $27,338,000
Cost of Sales 21,878,000 16,647,000
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Gross Profit 14,635,000 10,691,000
Selling, General and Administrative Expenses 14,091,000 10,405,000
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Income from Operations 544,000 286,000
Other Income (Expense):
Interest Income 20,000 21,000
Interest Expense (533,000) (169,000)
Other Income, net 107,000 85,000
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Total Other Expense, net (406,000) (63,000)
Income Before Provision for Income Taxes 138,000 223,000
Provision for Income Taxes (55,000) (89,000)
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Net Income $83,000 $134,000
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Income Per Share - BASIC $0.01 $0.01
Weighted Average Common Shares Outstanding 13,726,000 13,302,000
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Income Per Share - DILUTED $0.01 $0.01
Adjusted Weighted Average Shares and Assumed
Conversions 14,110,000 13,644,000
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