Golfsmith International said net revenues for the third quarter ended Oct. 2, 2010 increased 3% to $93.3 million as compared to $90.6 million for the prior year quarter. The net revenue increase was driven by sales from new store openings and a 5.8% increase in net revenues from its direct-to-consumer channel, partially offset by a 1.7% decrease in comparable store sales.

Third Quarter Highlights:

  • Operating loss totaled $1.1 million compared to operating income of $1.4 million for the same period last year. Third quarter 2010 operating loss included $1.6 million in charges related to store closings and lease termination costs. Third quarter 2009 operating income included a $0.4 million charge related to litigation settlement costs.
  • Net loss totaled $1.1 million, or 7 cents per share, as compared to net income of $1.1 million or 7 cents per diluted share for the same period last year. Excluding the store closing charges, net income for the third quarter of fiscal 2010 would have been $500,000 or 3 cents per diluted share. Excluding the litigation settlement charge, net income for the third quarter of fiscal 2009 would have been $1.5 million or 9 cents per diluted share.
  • As of Oct. 2, 2010, the company had $42.6 million of outstanding borrowings under its credit facility and borrowing availability of $18.4 million. This compares to $33.7 million of outstanding borrowings under its credit facility, and $22.5 million of borrowing availability at Oct. 3, 2009.
  • Average store inventory remained flat at Oct. 2, 2010 as compared to Oct. 3, 2009.

Martin Hanaka, chairman and chief executive officer of Golfsmith, commented, “Despite lower than expected comparable store sales performance, we continue to see solid evidence from industry data sources of market share gains as we execute on our strategic plan. Our initiatives have led to a sequential increase in conversion rates, improvement in our direct-to consumer business, and a stronger overall store base due to recent store closures.

As we continue to operate in an inconsistent retail environment, we will remain diligent in maintaining disciplined inventory management and expense controls, while at the same time making strategic investments to drive sales. Looking ahead, I am confident that we are well positioned for future growth when the macro-economic environment improves.”

Year-to-Date Results

  • Net revenues were $279.0 million for the nine-month period ended October 2, 2010 as compared to net revenues of $274.2 million for the same period last year. The 1.7% increase was driven by sales from new store openings, partially offset by a 1.0% decrease in comparable store sales and a 2.2% decrease in net revenues from its direct-to-consumer channel.
  • Operating income totaled $900,000 as compared to operating income of $4.3 million for the first nine months of last year. Operating income for the nine-month period ended Oct. 2, 2010 included the $1.6 million in store closing costs as discussed above. Operating income for the first nine months of fiscal 2009 included the $400,000 litigation settlement charge recorded in the third quarter, stated above, and a $500,000 charge related to severance associated with organizational changes reported in last year’s first quarter.
  • Net income totaled $200,000, or 1 cents per diluted share compared to net income of $2.8 million, or 17 cents per diluted share for the nine-month period ended Oct. 3, 2009. Excluding the above-mentioned charges, net income would have been 11 cents per diluted share for the first nine months of fiscal 2010 as compared to 22 cents per diluted share for the same period last year.

Golfsmith International Holdings, Inc.

Condensed Consolidated Statements of Operations

(unaudited)


 
 
 

 
 




Three Months Ended

Nine Months Ended




October 2,
 
 October 3,

October 2,
 
 October 3,




2010
2009

2010
2009












 












 

Net revenues



$
93,272,151


$
90,586,270



$
278,966,906

$
274,176,044

Cost of products sold



 
61,187,785
 

 
59,534,966
 


 
182,790,788

 
180,166,834
  

Gross profit




32,084,366



31,051,304




96,176,118


94,009,210












 

Selling, general and administrative




31,529,010



29,490,794




93,163,244


89,481,609

Store pre-opening/closing expenses




262,198



144,400




719,864


255,011

Lease termination and impairment charges



 
1,349,970
 

 
–
 


 
1,349,970

 
–
  

Total operating expenses




33,141,178



29,635,194




95,233,078


89,736,620












 

Operating income (loss)




(1,056,812
)


1,416,110




943,040


4,272,590












 

Interest expense




356,806



268,340




806,111


1,060,203

Other income, net



 
40,310
 

 
3,828
 


 
64,856

 
50,191
  

Income (loss) before income taxes




(1,373,308
)


1,151,598




201,785


3,262,578












 

Income tax benefit (expense)



 
229,430
 

 
(51,967
)


 
20,886

 
(507,556
 )












 

Net income (loss)



$
(1,143,878
)

$
1,099,631
 


$
222,671

$
2,755,022
 &nb

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