Ashworth, Inc. (NASDAQ: ASHW), a leading designer of on-course golf
apparel and golf-inspired lifestyle sportswear, today announced
unaudited financial results for its first quarter ended January 31,
2008. Summary of First Quarter Results: Consolidated net revenue
for the first quarter ended January 31, 2008 decreased 9.8% to
$34.5 million as compared to $38.3 million for the first quarter of
2007. The Company reported a consolidated first quarter net loss of
$7.4 million, or $0.50 per diluted share, compared to a net loss of
$2.4 million, or $0.17 per diluted share, for the same quarter of
the prior year. Net revenue for the domestic segment (including
Gekko Brands, LLC) decreased 5.8% to $30.1 million from $32.0
million for the same period of the prior year. Net revenue from the
international segment (including Ashworth, U.K., Ltd.) decreased
30.1% to $4.4 million from $6.3 million for the same period of the
prior year. In the first quarter of fiscal 2008, the Company�s
consolidated gross margin decreased 460 basis points to 36.2% as
compared to 40.8% in the first quarter of fiscal 2007. The decrease
in consolidated gross margin was driven by the deleveraging effects
of the decrease in revenue and an increase in product costs not
offset by price increases. In addition, as a result of a labor
stoppage at a key headwear vendor, the Company incurred additional
costs to divert the production of its NASCAR products to alternate
manufacturing facilities and expedite manufacturing and
transportation. Consolidated selling, general and administrative
(�SG&A�) expenses increased 1.3% to $19.4 million for the first
quarter of fiscal 2008 as compared to $19.1 million for the first
quarter of fiscal 2007. As a percent of net revenues, SG&A
expenses were 56.1% for the first quarter of fiscal 2008 as
compared to 50.0% for the same period of the prior fiscal year. The
expense increase is largely due to increased consulting fees,
primarily associated with product design and supplementing the
Company�s accounting function during the executive transition
period, combined with the expense related to the employment and
non-compete agreements entered into with the principals of Gekko on
June 4, 2007. These increases were partially offset by a decrease
in commission expense primarily as a result of the reduction in
revenues. Analysis of First Quarter Fiscal Year 2008 Revenues by
Channel The Company�s first quarter fiscal 2008 revenues decreased
in all distribution channels except for the Company�s domestic golf
and Collegiate/Racing distribution channels. Golf Total revenues in
the domestic golf channel in the first quarter 2008 increased 5.6%
to $9.5 million as compared to the same period last year. Revenues
from on-course golf retailers increased 8.9% or $578,000 over the
prior year, but this increase was partially offset by a decrease of
$76,000 in revenues from off-course golf retailers. The Company
continues to experience significant competitive pressure and market
consolidation within the off-course channel of distribution. As
part of the Company�s effort to restore sales growth, management is
implementing new sales management processes in both the on-course
and off-course channels of distribution. The Company is also
establishing a number of new programs with key off-course accounts.
Corporate Revenues for the corporate distribution channel were $4.1
million in the first quarter 2008, a decrease of 28.8% as compared
to the same period last year. The decrease in the corporate channel
was driven by certain customer event revenues that occurred in the
first quarter of fiscal 2007 that did not reoccur in the first
quarter of fiscal 2008, the Company�s strategic decision to
discontinue sales to certain accounts and a pull-back in corporate
spending as a result of uncertain economic conditions. Management
is developing plans to address these declines through a retooling
of sales programs and account coverage. Retail Revenues for the
retail distribution channel were $3.1 million in the first quarter
2008, a decrease of 24.1% from the first quarter 2007. This
decrease was driven by the consolidation of retail accounts and
their associated location closures and a decision by management to
exit a number of large accounts. The Company is working to open a
number of new retail doors through specially tailored assortments
and sales programs. Collegiate/Racing (The Game�/Kudzu�) First
quarter 2008 revenues for Gekko Brands, LLC were $10.9 million, an
increase of 4.6% over the first quarter 2007. This increase was
primarily driven by improved penetration within the NASCAR channel
combined with an additional increase as a result of having
exclusive vendor rights for the 50th running of the Daytona 500.
These increases were partially offset by a delay in production due
to a labor stoppage at a key vendor and the absence in the first
quarter of 2008 of certain corporate event revenues that occurred
during the first quarter of fiscal 2007. Company-owned Outlet
Stores Revenues from the Company-owned stores were $2.5 million, a
decrease of 7.9% as compared to the first quarter 2007. The
decrease reflects a generally difficult retail environment as well
as increased promotional activity. International Revenues from the
international segment decreased 30.1% to $4.4 million in the first
quarter 2008, a decrease of $1.9 million from the same period last
year. Net revenues for Ashworth U.K., Ltd. decreased 45.1% or $2.2
million to $2.6 million for the first quarter of fiscal 2008 from
$4.8 million for the same period of the prior fiscal year. The
decrease was due to distribution center inefficiencies resulting
from the implementation of a new ERP system at the U.K. facility
together with changes in sales management. Net revenues for the
other international segment increased 19.8% or $287,000 to $1.7
million for the first quarter of fiscal 2008 from $1.4 million for
the same period of the prior fiscal year. The increase was
primarily due to increased purchases from the Company�s
international distributors and the favorable effect of currency
exchange rates, specifically versus the Canadian dollar, when
compared to the prior year quarter. Balance Sheet: Net accounts
receivable decreased 9.1% from the prior year, commensurate with
the 9.8% decrease in revenues for the first quarter. Net inventory
increased 3.2% to $58.2 million as of January 31, 2008 as compared
to $56.4 million as of January 31, 2007 primarily as a result of
earlier deliveries of inventory to the Company�s U.K. and Canadian
operations. Overview Allan H. Fletcher, the Company�s Chief
Executive Officer, commented, �We are continuing to implement plans
to improve our operations and cut operating costs. We are
establishing channel specific product strategies and sales programs
to better serve our customers and improve our profitability. We are
encouraged with the improvement in our domestic core golf
distribution channel, but a complete turnaround will take more
time. I believe the plans we�ve started to implement will, in time,
return the Company to sustainable profitability.� Conference Call
Investors and all others are invited to listen to a conference call
discussing first quarter fiscal year 2008 results, today at 4:30
p.m. Eastern Time (1:30 p.m. Pacific Time). Domestic participants
can access the conference call by dialing 800-765-8779.
International participants should dial 480-248-5081. Callers should
ask to be connected to Ashworth's first quarter earnings
teleconference or provide the conference ID number: 3853161. The
call will also be broadcast live over the Internet and can be
accessed by visiting the Company's investor information page at
www.ashworthinc.com. About Ashworth, Inc. Ashworth, Inc. (NASDAQ:
ASHW) is a leading designer of men�s and women�s golf-inspired
lifestyle sportswear distributed domestically and internationally
in golf pro shops, resorts, upscale department and specialty stores
and to corporate customers. Ashworth�s three market-leading brands
include: Ashworth Collection (TM), a range of upscale sportswear
designed to be worn on and off-course; Ashworth Authentics (TM),
which showcases popular items from the Ashworth line; and Ashworth
Weather Systems�, a technical performance line. Ashworth is also an
Official Apparel Licensee of Callaway Golf Company. Ashworth is
also a leading designer, producer and distributor of headwear and
apparel under The Game� and Kudzu� brands. The Game is a leading
headwear brand in collegiate bookstores and Kudzu products are sold
into the NASCAR/racing markets and through outdoors sports
distribution channels, including fishing and hunting. Ashworth is
also the exclusive on-site event merchandiser for the Kentucky
Derby. For more information, please visit the Company�s Web site at
www.ashworthinc.com. Forward-Looking Statements This press release
contains forward-looking statements related to the Company�s market
position, finances, operating results, marketing and business plans
and strategies within the meaning of Section�27A of the Securities
Act, as amended, and Section�21E of the Securities Exchange Act of
1934, as amended. These forward-looking statements may contain the
words �believes,� �anticipates,� �expects,� �predicts,�
�estimates,� �projects,� �will be,� �will continue,� �will likely
result,� or other similar words and phrases. Readers are cautioned
not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Company undertakes no
obligation to update any forward-looking statements, whether as a
result of new information, changed circumstances or unanticipated
events unless required by law. These statements involve risks and
uncertainties that could cause actual results to differ materially
from those projected. These risks include the uncertainties
associated with implementing a successful transition in executive
leadership, successful resolution of the current dispute with
Callaway Golf, the impact of borrowing base limitations in the
Company�s new credit facility, the evaluation of strategic
alternatives that may be presented, timely development and
acceptance of new products, as well as strategic alliances, the
integration of the Company's acquisition of Gekko Brands, LLC, the
impact of competitive products and pricing, the success of the Sun
Ice� and Callaway Golf apparel product lines, the preliminary
nature of bookings information, the ongoing risk of excess or
obsolete inventory, the potential inadequacy of booked reserves,
the successful operation of the distribution facility in Oceanside,
CA, the successful implementation of the Company's ERP system, and
other risks described in Ashworth, Inc.'s SEC reports, including
the annual report on Form 10-K for the year ended October 31, 2007
quarterly reports on Form 10-Q filed thereafter and amendments to
any of the foregoing reports, including the Form 10-K/A for the
year ended October 31, 2007. ASHWORTH, INC. Consolidated Statements
of Operations First Quarter ended January 31, 2008 and 2007
(Unaudited) � � Summary of Results of Operations 2008 � � 2007
First Quarter Net revenue $ 34,519,000 $ 38,272,000 Cost of goods
sold � 22,021,000 � � 22,655,000 � Gross profit 12,498,000
15,617,000 Selling, general and administrative expenses �
19,362,000 � � 19,117,000 � Loss from operations (6,864,000 )
(3,500,000 ) Other income (expense): Interest income 30,000 37,000
Interest expense (1,007,000 ) (601,000 ) Other income (expense),
net � 610,000 � � (16,000 ) Total other expense, net (367,000 )
(580,000 ) � Loss before income taxes (7,231,000 ) (4,080,000 )
(Provision) benefit for income taxes � (192,000 ) � 1,632,000 � Net
loss $ (7,423,000 ) $ (2,448,000 ) � Loss per share � BASIC ($0.50
) ($0.17 ) Weighted-average common shares outstanding � 14,714,000
� � 14,520,000 � � Loss per share � DILUTED ($0.50 ) ($0.17 )
Adjusted weighted-average shares and assumed conversions �
14,714,000 � � 14,520,000 � ASHWORTH, INC. Consolidated Balance
Sheets As of January 31, 2008 and 2007 (Unaudited) � � � January
31, January 31, ASSETS 2008 2007 � CURRENT ASSETS Cash and cash
equivalents $ 4,207,000 $ 3,966,000 Accounts receivable-trade, net
25,086,000 27,602,000 Inventories, net 58,199,000 56,376,000 Other
current assets � 8,567,000 � 12,898,000 Total current assets
96,059,000 100,842,000 � Property and equipment, net 36,232,000
39,066,000 Other assets, net � 25,424,000 � 25,800,000 Total assets
$ 157,715,000 $ 165,708,000 � LIABILITIES AND STOCKHOLDERS� EQUITY
� CURRENT LIABILITIES Line of credit payable $ 31,205,000 $
17,450,000 Current portion of long-term debt 869,000 5,830,000
Accounts payable � trade 9,224,000 12,230,000 Other current
liabilities � 12,433,000 � 10,048,000 Total current liabilities
53,731,000 45,558,000 � Long-term debt 11,104,000 11,495,000 Other
long-term liabilities 1,624,000 2,023,000 Stockholders� equity �
91,256,000 � 106,632,000 Total liabilities and stockholders� equity
$ 157,715,000 $ 165,708,000
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