Ashworth, for the fourth quarter ended October 31, 2004,
reported that consolidated net revenue increased 49.3% to a record $48.3 million as compared to $32.3 million for the fourth quarter of fiscal 2003. Consolidated fourth quarter net income increased 116.4% to $1.9 million or 14 cents per diluted share as compared to $877,000 or 7 cents per diluted share in the same quarter of the prior year. Net revenue for the domestic segment increased 48.2% to $41.1 million from $27.7 million reported the same quarter of the prior year. Net revenue from the international segment increased
56.1% to $7.2 million from $4.6 million in the same period of the previous year. Fourth quarter revenue from Ashworth branded merchandise increased 9.1% to $27.6 million and revenue from Callaway Golf apparel increased 49.9% to $10.5 million during the quarter.
For fiscal 2004, consolidated net revenue increased 15.8% to a
record $173.1 million as compared to $149.4 million for fiscal 2003.
Consolidated net income for fiscal 2004 was a record $8.2 million or
$0.60 per diluted share compared to $7.3 million or $0.56 per diluted
share in fiscal 2003. In the second quarter of 2004, the Company sold
its existing distribution center facility located in Carlsbad,
California and recorded a pre-tax gain on disposal of fixed assets of
$1.6 million. Additionally, during the third quarter of fiscal 2004,
the Company incurred a $3.0 million pre-tax charge related to a
settlement to conclude a 1999 securities class action lawsuit against
the Company and certain current and former directors and officers.
Without the pre-tax gain on the sale of the distribution center and
the pre-tax charge in connection with the settlement, the Company
would have reported consolidated net income of $9.1 million or $0.66
per diluted share for fiscal 2004 which would have reflected a 23.5%
increase in net income for fiscal 2004 over fiscal 2003. The Company
believes that excluding the effects of these non-recurring items
provides additional information to investors to better understand the
impact the transactions had on the Company’s performance for fiscal
2004 as compared to fiscal 2003 and, therefore, the adjusted
consolidated net income measure is useful to investors.
For fiscal 2004, net revenue for the domestic segment increased
14.3% to $144.4 million from $126.4 million in the prior year. Net
revenue from the international segment increased 24.5% to $28.7
million from $23.1 million in the prior year. Fiscal 2004 revenue from
Ashworth branded merchandise increased 1.5% to $120.3 million and
revenue from Callaway Golf apparel increased 27.1% to $39.2 million
for the twelve-month period.
Randall L. Herrel, Sr., Chairman and Chief Executive Officer,
stated, “Adding new brands and three new distribution channels to our
multi-brand, multi-channel growth strategy has given us record results
for this fiscal year and sets the stage for an even stronger fiscal
2005 performance. With growth momentum from the Ashworth and Callaway
Golf apparel brands and the acquisition of Gekko Brands, LLC (“Gekko”)
headwear, as well as expected cost savings from our U.S. distribution
center, we are entering fiscal 2005 with a stronger company. The
addition and integration of the Gekko headwear (The Game® and
Kudzu®) brands is already bringing additional revenues and margin
improvements which should be a key factor for us going forward.”
Ashworth’s July 2004 acquisition of Gekko added popular lines of
headwear and apparel under The Game and Kudzu brands to the Company’s
product offerings. The acquisition also provides the Company the
opportunity in 2005 to distribute Ashworth sportswear into The Game’s
and Kudzu’s three channels of distribution and existing account base
which includes over 1,000 colleges and universities, resorts, sporting
goods team dealers that serve the high school and college markets and
Kudzu’s outdoor and NASCAR-related customers. Additionally, Gekko is
designing Ashworth-branded and Callaway Golf apparel-branded headwear
for sale into Ashworth’s existing green grass and retail channels in
2005.
Mr. Herrel continued, “Our quarterly sales increase of 18%, not
counting any contribution from Gekko, proves to us that our
multi-channel strategy is the right approach in today’s golf
environment. We are successfully strengthening our brands so that they
can grow independently of the relative performance of any one
distribution channel. The strong growth from the Ashworth brand in the
fourth quarter and the continued strong performance of our Callaway
Golf apparel lines, with a 50% sales increase in our fourth quarter
versus last year, shows that our multi-brand strategy is also
winning.”
In reviewing the Company’s financial position, Terence Tsang,
Executive Vice President and Chief Financial Officer, stated, “Our
operating margin has increased to 7.3% in the fourth quarter of fiscal
2004 as compared to 4.9% in the same period last year. This
improvement was driven by a higher gross margin as well as lower
selling, general and administrative (“SG&A”) expense as a percent of
sales due to the leverage generated by including Gekko’s peak selling
season in the current quarter. We have moved into our new U.S.
distribution center in Oceanside, California and it is operational. We
are currently finalizing the systems integration and acceptance
testing process and expect it to generate per-unit cost reductions in
the latter half of fiscal year 2005.”
Mr. Tsang continued, “Our accounts receivable increased 26.7%,
which is a much slower rate of increase than our 49.3% fourth quarter
revenue increase, resulting in improvement in our DSOs to 74 days.
Consolidated inventories increased 10.7% but were essentially flat
excluding Gekko. In addition, we continue to improve our trade credit
terms with our overseas vendors and have reduced our need for bank
financing for ongoing operations.”
The Company confirmed its previously expanded revenue and earnings
guidance for fiscal 2005. Based on current trends, the Company expects
consolidated net revenues for fiscal 2005 of $207.0 million to $215.0
million versus $173.1 million in fiscal 2004 and earnings of $0.76 to
$0.82 per diluted share versus $0.60 per diluted share in fiscal 2004.
For the first quarter of fiscal 2005, which is traditionally a
relatively low-volume sales quarter, the Company expects to see less
in labor savings from its new distribution center than in later,
higher-volume quarters. In the first quarter, the higher fixed costs
associated with the new distribution center will be spread over
seasonally low production volume. Based on these factors and current
business trends, the Company expects fiscal 2005 first quarter net
revenues of $36.7 million to $38.3 million versus $26.6 million and
earnings of zero to $0.02 per diluted share versus $0.01 per diluted
share. The Company currently expects to report fiscal 2005 first
quarter results on Thursday, March 3, 2005 at market close.
Mr. Herrel concluded, “Ashworth is now executing an exciting
strategy for the future. With our unmatched heritage in golf, our
proven ability to successfully manage leading sports-inspired apparel
lines, and with cross-selling into an expanded array of distribution
channels, Ashworth has the opportunity to grow its portfolio of
product lines and strengthen sales across all our brands and
distribution channels.”
ASHWORTH, INC.
Consolidated Statements of Income
Fourth Quarter ended October 31, 2004 and
2003
Summary of Results of Operations
(Unaudited) 2004 2003
------------- -------------
FOURTH QUARTER
--------------
Net Revenue $48,267,000 $32,320,000
Cost of Sales 28,164,000 19,112,000
------------- -------------
Gross Profit 20,103,000 13,208,000
Selling, General and Administrative
Expenses 16,560,000 11,635,000
------------- -------------
Income from Operations 3,543,000 1,573,000
Other Income (Expense):
Interest Income 14,000 12,000
Interest Expense (505,000) (193,000)
Other Income, net 111,000 70,000
------------- -------------
Total Other Expense, net (380,000) (111,000)Income Before Provision for Income Taxes 3,163,000 1,462,000
Provision for Income Taxes (1,265,000) (585,000)
------------- -------------
Net Income $1,898,000 $877,000
============= =============Net Income Per Share - BASIC $0.14 $0.07
Weighted Average Common Shares Outstanding 13,513,000 13,107,000
============= =============Net Income Per Share - DILUTED $0.14 $0.07
Adjusted Weighted Average Shares and
Assumed Conversions 13,826,000 13,428,000
============= =============
