Ashworth Inc. announced consolidated net revenue for the first quarter of 2003 ended Jan. 31, 2003 increased 32.3% to $26.6 million as compared to $20.1 million for the first quarter of 2002. The company reported consolidated first quarter net income of $106,000 or $0.01 per diluted share, compared to a net loss of $966,000 or $0.07 per diluted share, for the same quarter of the prior year.
Net revenue for the domestic segment increased 31.8% to $23.6 million from $17.9 million for the same period of the prior year. Net revenue from the international segment increased 36.4% to $3.0 million from $2.2 million for the same period of the prior year. First quarter revenue from Ashworth-branded merchandise increased 2.5% to $20.6 million and revenue from Callaway Golf apparel, which was introduced in April 2002, totaled $6.0 million for the quarter.
Randall L. Herrel, Sr., chairman and chief executive officer, stated, “We are very pleased to report a significant improvement in first quarter revenues and a profitable quarter as well, which exceeded the analysts estimates by 2 cents. This performance is notable in light of the generally weak industry and economic environment during the period. We believe these favorable results are due in part to our multi-brand, multi-channel business strategy, which will be fully implemented in fiscal 2003. During the first quarter of 2003, the company’s revenues grew significantly in all of our primary distribution channels as compared to the first quarter of 2002. Our core golf and off-course specialty channel was up 28.5%, the corporate channel was up 42.0%, the retail channel was up 79.8% and international increased 36.4% as compared to the first quarter of fiscal 2002.”
Herrel continued, “The response to our Spring/Summer 2003 Ashworth and Callaway Golf apparel lines has been very positive. We believe we are on plan to increase penetration and grow market share in all of our primary distribution channels including green grass, department stores, off-course specialty retailers and corporate, as our first quarter operating results indicate.”
In reviewing the company’s financial position, Terence Tsang, chief operating officer and chief financial officer, stated, “During the quarter we continued to improve our organization and operations. Our gross margins improved to 37.5% for the first quarter of fiscal 2002 from 36.4% for the same period last year, due primarily to our improved sourcing and inventory management systems as well as positive leverage resulting from higher revenues.”
Tsang continued, “Net accounts receivable increased 1.8% over the prior year while revenues increased 32.3% in the first quarter. The Ashworth brand inventory increased approximately 12.1% over the prior year. The Callaway Golf apparel brand inventory is approximately $11.9 million in the current year as compared to $0.1 million in the prior year. Our total inventory increased 44.4% to $52.7 million as compared to the prior year of $36.5 million. Some of the February inventory receipts were accelerated and received in January to avoid delays due to the Chinese New Year celebration falling during the first week of February 2003.”
Based on current business trends the company expects fiscal 2003 second quarter net revenues of $50.6 million to $51.9 million, an increase of 18% to 21% compared to the same quarter of fiscal 2002, and earnings per share of $0.32 to $0.35 per diluted share, an increase in the range of 23% to 35% compared to the same quarter of fiscal 2002. The company currently plans to report second quarter 2003 results on Thursday, June 5th at market close.
The company reiterated and maintained its revenue and earnings guidance for the balance of fiscal 2003. Based on current information including the uncertainty of war and other external factors, the company expects consolidated net revenues of $146.0 million to $150.0 million, an increase in the range of 15% to 18% compared to fiscal 2002 and earnings per share of $0.54 to $0.59 per diluted share, an increase in the range of 184% to 211% compared to fiscal 2002. Excluding the effect of the additional bad debt reserve taken in fiscal 2002, the increase in earnings per diluted share is expected to be in the range of 42% to 55%.
Mr. Herrel concluded, “We are enthusiastic about the future of Ashworth. We have two strong brands to grow our business. As evidenced by our strong 2003 Spring/Summer booking trends and the results for the fourth quarter of fiscal 2002 and first quarter of fiscal 2003, our new business model, which includes multi-brand and multi-channel strategies, is starting to work well. This, plus our continued efforts to improve gross profit margins and control expenses, should enable us to generate both revenue and earnings growth over the next several years and beyond.”
ASHWORTH INC.
Consolidated Statements of Income
First Quarter ended January 31, 2003 and 2002
(Unaudited)
Summary of Results of
Operations
2003 2002
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First Quarter
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Net Revenue $26,563,000 $20,104,000
Cost of Sales 16,596,000 12,793,000
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Gross Profit 9,967,000 7,311,000
Selling, General and Administrative Expenses 9,682,000 8,790,000
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Income (Loss) from Operations 285,000 (1,479,000)
Other Income (Expense):
Interest Income 10,000 7,000
Interest Expense (192,000) (151,000)
Other Income, net 73,000 13,000
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Total Other Expense, net (109,000) (131,000)
Income (Loss) Before Provision for
Income Tax (Expense) Benefit 176,000 (1,610,000)
Provision for Income Tax (Expense) Benefit (70,000) 644,000
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Net Income (Loss) $106,000 ($966,000)
