Adams Golf saw third quarter weakness in two categories lead to an increase in cost of sales and a resulting 440 basis point gross margin decline, forcing net income to dip below the break-even line for the period.
Total net sales declined 7.3% to $10.2 million from $11.0 million last year as a result of decreases in irons and fairway woods, offset by a large increase in drivers.
Drivers sales jumped 57.1% to $3.3 million for the quarter from $2.1 million, accounting for 32.6% of total net sales for the quarter, up from 19.3% last year, a large portion of which was generated by the RPM and Ovation driver product lines, introduced in the fourth quarter of 2004 and the first quarter of 2005, respectively.
Net sales of Irons decreased 12.5% to $4.2 million from $4.8 million for the third quarter of 2004, caused by lower sales of maturing product lines.
Fairway Woods were also down for the quarter, posting a 53.8% decrease to $2.6 million from $4.0 million last year. Management attributed the slump to the decline in sales of the Ovation family of fairway woods, which was introduced in the first quarter of 2004.
International sales for Adams Golf doubled during the third quarter to $1.2 million from $0.6 million last year. The segment also saw its share of total sales more than double, accounting for 11.9% of total sales, up from 5.3% last year.
The overall sales declined, combined with the decrease in gross margin as a percentage of sales, led to Adams Golf income falling to a loss of $404,000 from a net gain of $61,000 during last years third quarter. Diluted earnings per share reflected this decrease, at a loss of 2 cents per share compared with 0 cents per share last year.
