Ashworth, Inc. reported that consolidated net revenue for the first quarter ended January 31, 2003 increased 2.6% to $27.3 million as compared to $26.6 million for the first quarter of 2003. Consolidated first quarter net income increased to $134,000, or $0.01 per diluted share, compared to net income of $106,000, or $0.01 per diluted share, for the same quarter of the prior year.
Net revenue for the domestic segment decreased 2.5% to $23.0 million from $23.6 million for the same period of the prior year. Net revenue from the international segment increased 43.3% to $4.3 million from $3.0 million for the same period of the prior year. Currency fluctuations had a favorable impact on fiscal 2004 first quarter net revenues of $0.4 million. First quarter revenue from Ashworth branded merchandise increased 3.1% to $21.2 million and revenue from Callaway Golf apparel increased 2.3% to $6.1 million for the quarter.
Randall L. Herrel, Sr., Chairman and Chief Executive Officer, stated, “We are pleased to report first quarter revenues and net income met management's expectations. This performance is notable in light of the generally weak industry environment during the period. We believe these favorable results are due in part to our multi-brand, multi-channel business strategy, which was fully implemented in fiscal 2003. During the first quarter of 2004, the Company's revenues grew in our retail, corporate and international distribution channels but decreased in our golf and off-course specialty channel as compared to the first quarter of 2003. Net revenues for the first quarter fiscal 2004 compared to first quarter fiscal 2003 were up 88.6% for our retail channel, up 5.9% for our corporate channel and up 43.3% for our international segment but down 13.0% for our core golf and off-course specialty channel. While the number of accounts shipped in the fiscal 2004 first quarter was up from the same period in fiscal 2003, the primary reason for the decline in net revenues from our core golf and off-course specialty channel was the decrease in average order size due to what we believe is the overall weakness in the golf industry.”
In reviewing the Company's financial position, Terence Tsang, Chief Operating Officer and Chief Financial Officer, stated, “Our gross margins increased 160 basis points to 39.1% for the first quarter of fiscal 2004, due primarily to our continuing initiative to improve sourcing as well as a more favorable product sales mix.”
Mr. Tsang continued, “Our balance sheet continues to strengthen as we manage our working capital and seek to optimize our financial leverage. Net accounts receivable decreased 2.9% over the prior year while net revenues increased 2.6% for the first quarter. Our inventory increased 0.8% to $53.1 million as of January 31, 2004 as compared to $52.7 million as of January 31, 2003 and is in line with the increase in net revenues. Finally, we utilized our positive cash flow to reduce our total debt by 68.0% to $6.6 million from $20.6 million as of January 31, 2004 and 2003, respectively.”
The Company also reiterated and maintained its revenue guidance for fiscal 2004. Based on current information, the Company expects consolidated net revenues for fiscal 2004 of $155.0 million to $162.0 million and earnings of $0.71 to $0.77 per diluted share. This guidance includes an expected gain of approximately $1.6 million or $0.12 per diluted share on sale of the distribution center buildings in Carlsbad, California.
Based on current business trends the Company expects fiscal 2004 second quarter net revenues of $54 million to $57 million and earnings of $0.45 to $0.48 per diluted share with the inclusion of the gain on sale of the distribution center buildings noted above. The Company currently expects to report fiscal 2004 second quarter results on Thursday, June 10th at market close.
Mr. Herrel concluded, “Though we remain prudently conservative in our guidance due to the uncertainty of the economy as well as challenges in the golf industry, we continue to be optimistic about the future of Ashworth. In 2004, we have two strong brands to grow our business and we are encouraged by recent strong results in the department store channel. As evidenced by our positive operating results starting in the fourth quarter of fiscal 2002 and continuing into fiscal 2004, our new business model, which includes multi-brand and multi-channel strategies, is a key driver of this success.”
ASHWORTH, INC.
Consolidated Statements of Income
First Quarter ended January 31, 2004 and 2003
(Unaudited) Summary of Results of
Operations
2004 2003
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First Quarter
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Net Revenue $27,338,000 $26,563,000
Cost of Sales 16,647,000 16,596,000
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Gross Profit 10,691,000 9,967,000
Selling, General and Administrative Expenses 10,405,000 9,682,000
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Income from Operations 286,000 285,000
Other Income (Expense):
Interest Income 21,000 10,000
Interest Expense (169,000) (192,000)
Other Income, net 85,000 73,000
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Total Other Expense, net (63,000) (109,000)
Income Before Provision for Income Tax
Expense 223,000 176,000
Provision for Income Tax Expense (89,000) (70,000)
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Net Income $134,000 $106,000
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Income Per Share - BASIC $0.01 $0.01
Income Per Share - DILUTED $0.01 $0.01
