Sport-Haley, Inc. reported that net sales for the fiscal quarter ended March 31, 2004 decliend 2.5% to $5.4 million from net sales of $5.5 million for the same quarter in the prior fiscal year. Net sales for the nine months ended March 31, 2004, were $14,440,000, an increase of $1,114,000 or 8%, from net sales of $13,326,000 for the same nine-month period in the previous fiscal year.
Net sales for the fiscal quarter ended March 31, 2004 differ in comparability from net sales for the March 31, 2003 fiscal quarter, in part because invoiced sales to the Company's independent sales representatives were not recorded in the March 2004 fiscal quarter due to a prospective change in internal policy with regard to the acceptance of returns of that merchandise after the conclusion of the advance marketing period for each selling season. Because of the change in internal policy, prospectively, the independent sale representatives have no obligation to purchase sample garments used to solicit sales if the sample garments are returned to the Company within a reasonable amount of time following the conclusion of the advance marketing period for each selling season. Accordingly, the Company has altered its accounting for sales of sample garments to its independent sales representatives to prospectively account for invoiced sales of those garments in a manner consistent with consigned inventories.
Management primarily attributes the increase in net sales for the nine-month period to the continued growth of its Ben Hogan® apparel collections within upscale golf apparel markets. Net sales of Ben Hogan® apparel for the fiscal quarter and nine months ended March 31, 2004, totaled $1,608,000 and $4,349,000, or 30% of total net sales for the quarterly and nine-month periods, respectively. Comparatively, net sales of Ben Hogan® apparel for the fiscal quarter and nine months ended March 31, 2003, totaled approximately $1,341,000, or 24% of total net sales for the fiscal quarter, and $2,754,000, or 21% of total net sales for the nine-month period, respectively.
“Based on advance bookings for the fall 2004 selling season, we anticipate continued increases of Ben Hogan® apparel sales,” stated Kevin M. Tomlinson, President and Chief Executive Officer. “We're also pleased with the increase in advance bookings we've received for our HALEY® women's apparel for the fall 2004 season.”
The Company's gross profit, as a percentage of sales, was approximately 39% for the quarterly and nine-month periods ended March 31, 2004, and 40% and 42% for the same periods in the prior fiscal year, respectively.
Selling, general and administrative expenses for the fiscal quarter ended March 31, 2004, increased by approximately $129,000, or 5%, to $2,534,000 from $2,405,000 for the same three-month period in the prior fiscal year. Selling, general and administrative expenses for the nine months ended March 31, 2004, increased by approximately $567,000, or 10%, to $6,380,000 from $5,813,000 for the same nine-month period in the prior fiscal year. Selling, general and administrative expenses were approximately 47% and 44% of net sales for the fiscal quarter and nine months ended March 31, 2004, as compared with 44% for the same periods in the prior fiscal year, respectively.
“A large portion of the increase in selling, general and administrative expenses is directly related to increases in sales commissions and royalties associated with the corresponding increase in Ben Hogan® apparel sales,” stated Mr. Tomlinson. “When compared with the same periods last year, selling, general and administrative expenses increased by 5% and 10% for the quarterly and nine-month periods, respectively, while the corresponding Ben Hogan® sales increased by 30% for the same periods.”
Net loss for the fiscal quarter and nine months ended March 31, 2004 were $693,000 and $843,000, greater losses of $614,000 and $601,000, than the comparative net losses of $79,000 and $242,000 for the same fiscal quarter and nine-month period in the prior fiscal year. The net loss for the fiscal quarter ended March 31, 2004 was accentuated by several causes, including the following. As a result of an analysis of discontinued or aging inventories, performed by management, the Company increased its inventories valuation allowance by $288,000 during the fiscal quarter ended March 31, 2004. The Company did not record such an increase it its valuation allowance during the fiscal quarter ended March 31, 2003. The Company also recorded a charge of $150,000 in severance costs upon the resignation of the Company's former President at the effective date of his termination on March 31, 2004. Management also performed an analysis of the recoverability of the Company's deferred tax assets, which caused the Company to record deferred tax expense of $231,000 for the fiscal quarter ended March 31, 2004 on its loss before provision for income taxes of $462,000. Comparatively, the Company recorded a $41,000 benefit from income taxes for the fiscal quarter ended March 31, 2003 on its loss before provision for income taxes of $120,000.
“The Company continues to experience a build-up in finished goods inventories primarily related to prior selling seasons,” continued Mr. Tomlinson. “Management is making concerted efforts to liquidate a significant amount of our excess inventories prior to the end of calendar year 2004. We are setting a strong inventory reduction target, and will implement procedures to reduce and maintain our inventories within an acceptable range.”
SPORT-HALEY, INC.
Consolidated Unaudited Financial Information
(In thousands, except per share data)
Three Months Ended Nine Months Ended
March 31, March 31,
2004 2003 2004 2003
Statements of Income Data: ---- ---- ---- ----
Net sales $ 5,365 $ 5,504 $14,440 $13,326
Gross profit 2,090 2,289 5,588 5,325
Loss from operations (444) (116) (792) (488)
(Provision for) benefit from
income taxes (231) 41 (158) 145
Net loss (693) (79) (843) (242)
Basic and diluted loss
per common share ($ 0.28) ($ 0.03) ($ 0.34) ($ 0.09)
