True
Temper Sports reported first-quarter sales dropped 48.5%, to $18.4 million from
the $35.8 million level in 2008. The golf company recorded a net loss of $11.5
million during the first quarter of 2009, compared to a net loss of $1.6
million the first quarter of 2008.
Gross
profit decreased to $2.7 million from $12.5 million, and SG&A was reduced
by 22% to $3.0 million, resulting in Adjusted EBITDA (defined below) for the
first quarter of $0.5 million compared to $9.6 million in the first quarter of
2008.
In his
comments about the company's performance, Scott Hennessy, President and CEO
said, “Coming into 2009, we certainly expected that our results would be
negatively impacted by the challenging global economic environment, and in
particular the unfavorable retail landscape for discretionary consumer goods.
Our first quarter results clearly reflect this weaker environment, along with
the significant decrease in the retail and wholesale channel inventories
throughout the global golf and sporting goods industry. These factors combined
to deliver a pronounced decline in revenue for True Temper, as compared to the
record top line results that we reported in the first quarter of 2008. The
level of quarterly decline was also an issue of timing, influenced by the
strong results we posted during the second half of 2008, when our volume
certainly outpaced the industry and that of our competitors. It is clear that
those products are now being distributed and sold through the retail market,
and we remain confident that True Temper has maintained its market share in our
core golf business as the supply base adjusts its carrying levels of channel
inventories.”
Hennessy
continued, “While the overall retail landscape and golf market are
somewhat out of our control, we have taken a very aggressive approach to cost
containment and cash management in this difficult operating environment. Our
overall EBITDA for the first quarter of 2009 of $0.5 million was clearly at an
unsatisfactory level, but through our aggressive cost reductions we were able
to weather a nearly 50% drop in revenue and still report positive Adjusted
EBITDA for the quarter. These cost control actions affect every area of our
operation, and include a
workforce reduction, suspension of certain expense and employee benefit
programs, and fixed cost initiatives intended to reduce infrastructure costs
for years to come. In addition, we continue to manage our working capital very
closely, and during the first quarter of 2009 we reduced our inventory level by
nearly $2.0 million. We were particularly pleased with this working capital
improvement given the backdrop of a significant decline in unit sales
volume.”
Outlook
Commenting
about the company's outlook for the future, Hennessy said, “Short-term
forecasting remains very challenging in this uncertain economic and retail
environment. While we are confident that the long-term outlook for the golf
industry is strong and stable, there are certainly a number of near-term market
forces that will result in a substantial decline in revenue for the industry
and True Temper during the remainder of 2009. These forces include both a
weaker retail consumer sales environment, and the continued reduction in
channel inventory which was initiated during the first quarter. Our operational
objectives during this time are focused on reducing variable costs in line with
unit sales volume, and to aggressively attack our fixed cost infrastructure to
remove any expenditures that are not absolutely necessary. Executing on these
key business initiatives during 2009 will ensure that we are well positioned to
maintain share and take advantage of the golf market growth that should
accompany an overall economic recovery in the future. In addition, we will
continue to work with our lenders to arrive at a financing arrangement that
addresses the company's current leverage, ensuring that our capital structure
is consistent with the current retail and credit market landscape. We remain in
active, collaborative discussions with our financing partners related to the
non-compliance on our various debt agreements disclosed during the first
quarter, and we do not expect this process to impact our company's ongoing
operations, customers, vendors or employees.”
