Adams Golf reported sales inched up 1% to $28 million for the first quarter ended March 31, compared to $27.8 million a year ago. The company reported net income of $0.8 million, or 11 cents a share, for the first quarter compared to net income of $3.8 million, or $0.49 per diluted share, for the comparable period of 2007.
“We delivered mixed results in the first quarter,'' said Mr. Chip Brewer, CEO and President of Adams Golf. “Our revenue growth and overall financial performance were below our expectations but our organization, our brand and our market shares continued to strengthen.
Revenues in fairway woods and drivers increased 19% and 4%, respectively for the first quarter of 2008 compared to the comparable period of 2007. These gains were driven by good acceptance of our Insight XTD line of woods and increased sell-through in our Idea hybrid product lines. Improving these positions has been a key corporate objective and we're pleased with our progress here. These gains occurred despite supply issues for both the Insight XTD hybrid-fairway wood and driver product which constrained our growth in these product categories. Sell-through for the Insight XTD product lines and our Idea hybrids continues to be positive and we appear to be achieving modest market share gains.
Revenues in irons decreased 5% for the first quarter of 2008 compared to the comparable period of 2007. However, we were pleased with our iron sell-through performance during the quarter and we believe we strengthened our market positions in this category. Our Idea a3/a3OS line of irons ended the first quarter as the # 1 brand of irons at off course golf shops, with 7.4% share, and were tied for # 1 at combined on- and off-course golf shops, with 6.9% share, according to Golf Datatech. Idea remains the # 1 selling hybrid iron set brand in golf.
As previously communicated, we have recently made considerable investments in our organization, marketing and tour and although we believe these investments will deliver long-term growth and shareholder value, they were expected to have a negative impact on earnings until the point we generate revenue growth sufficient to cover them. This was clearly the case in the first quarter of this year. We remain committed to our investment strategy and although we expect year-over-year costs will remain higher through 2008, we do not expect our operating cost growth in subsequent quarters of 2008 to be as high as in the first quarter. A front-loaded marketing plan and several one-time events combined to skew our first quarter operating expense growth rate. We continue to believe that our strategy of investing in our brand, the professional golf tours, and our overall organization is appropriate and will lead to long-term shareholder value,'' Mr. Brewer added.
The first quarter was clearly a challenging quarter,'' Brewer concluded. “We were not satisfied with our financial results and we are committed to improving on them. At the same time, we remain pleased with our progress in developing our market positions, organization and brand. Looking forward, we believe market conditions may remain challenging for the balance of 2008 but it is our perception that they are currently somewhat improved relative to the first quarter. Looking further forward, we remain firmly optimistic regarding our long-term prospects for growth and creation of shareholder value.''
