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Ashworth reports Q2 and YTD fiscal 2008 financial results
07 Jul '08
6 min read
Corporate
Revenues for the corporate distribution channel were $5.4 million for the second quarter of fiscal 2008, a decrease of 18.1% as compared to the same period last year. The decrease in sales primarily resulted from certain customer events that occurred in the prior year quarter that did not recur in the comparable 2008 quarter and the Company's strategic decision to discontinue sales to certain accounts. In the past the Company has experienced missed sales opportunities in this channel due to out-of-stock positions in selected styles. The Company believes that the narrowing of Corporate assortments will improve its inventory productivity and customer in-stock position.
Retail
Revenues for the retail distribution channel were $3.1 million for the second quarter of fiscal 2008, a decrease of 52.0% from the second quarter of fiscal 2007. The retail channel experienced a decline in the second quarter primarily due to account consolidation in the channel as well as a decision by the management team to strategically exit a number of underperforming doors. The Company will seek to continue to improve its brand positioning by focusing on premium retail accounts and doors within the channel.
Collegiate/Racing (The Game/Kudzu)
Second quarter of fiscal 2008 revenues for Gekko Brands, LLC were $11.8 million, an increase of 20.0% over the second quarter of fiscal 2007. This increase was primarily driven by improved penetration within its 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 the absence in the second quarter of 2008 of certain corporate event revenues that occurred during the second quarter of fiscal 2007 and a decline in the Outdoor Direct catalog sales.
Company-owned Outlet Stores
Revenues from the Company-owned stores were $2.2 million for the second quarter of fiscal 2008, a decrease of 14.2% from the second quarter of fiscal 2007. The decrease was largely due to the difficult retail environment.
International
International revenues (including Ashworth U.K. Ltd.) increased 2.9% to $13.1 million for the second quarter of fiscal 2008, an increase of $0.4 million over the same period last year. The increase is largely due to the timing of the shipment of certain orders which were delayed from the first quarter to the second quarter due to first quarter distribution center inefficiencies resulting from the implementation of a new ERP system at the U.K. facility as well as the favorable effect of currency exchange rates.
Balance Sheet:
Net accounts receivable decreased 3.7% to $44.2 million from $45.9 million in the prior year, commensurate with the 3.4% decrease in revenues for the second quarter. Net inventory decreased 1.4% to $52.4 million as of April 30, 2008 as compared to $53.1 million for the same period last year.
Income Taxes:
The effective tax rate for the income tax provision for the three months ended April 30, 2008 and 2007 was 32% and 518%, respectively. The decrease in the effective rate for the current period as compared to the same period of the prior fiscal year is primarily due to discrete one-time charges in the second quarter of the prior fiscal year of $1.3 million to establish a valuation allowance against non-originating deferred tax assets and a $1.6 million valuation allowance against originating deductible temporary differences.
Revenues for the corporate distribution channel were $5.4 million for the second quarter of fiscal 2008, a decrease of 18.1% as compared to the same period last year. The decrease in sales primarily resulted from certain customer events that occurred in the prior year quarter that did not recur in the comparable 2008 quarter and the Company's strategic decision to discontinue sales to certain accounts. In the past the Company has experienced missed sales opportunities in this channel due to out-of-stock positions in selected styles. The Company believes that the narrowing of Corporate assortments will improve its inventory productivity and customer in-stock position.
Retail
Revenues for the retail distribution channel were $3.1 million for the second quarter of fiscal 2008, a decrease of 52.0% from the second quarter of fiscal 2007. The retail channel experienced a decline in the second quarter primarily due to account consolidation in the channel as well as a decision by the management team to strategically exit a number of underperforming doors. The Company will seek to continue to improve its brand positioning by focusing on premium retail accounts and doors within the channel.
Collegiate/Racing (The Game/Kudzu)
Second quarter of fiscal 2008 revenues for Gekko Brands, LLC were $11.8 million, an increase of 20.0% over the second quarter of fiscal 2007. This increase was primarily driven by improved penetration within its 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 the absence in the second quarter of 2008 of certain corporate event revenues that occurred during the second quarter of fiscal 2007 and a decline in the Outdoor Direct catalog sales.
Company-owned Outlet Stores
Revenues from the Company-owned stores were $2.2 million for the second quarter of fiscal 2008, a decrease of 14.2% from the second quarter of fiscal 2007. The decrease was largely due to the difficult retail environment.
International
International revenues (including Ashworth U.K. Ltd.) increased 2.9% to $13.1 million for the second quarter of fiscal 2008, an increase of $0.4 million over the same period last year. The increase is largely due to the timing of the shipment of certain orders which were delayed from the first quarter to the second quarter due to first quarter distribution center inefficiencies resulting from the implementation of a new ERP system at the U.K. facility as well as the favorable effect of currency exchange rates.
Balance Sheet:
Net accounts receivable decreased 3.7% to $44.2 million from $45.9 million in the prior year, commensurate with the 3.4% decrease in revenues for the second quarter. Net inventory decreased 1.4% to $52.4 million as of April 30, 2008 as compared to $53.1 million for the same period last year.
Income Taxes:
The effective tax rate for the income tax provision for the three months ended April 30, 2008 and 2007 was 32% and 518%, respectively. The decrease in the effective rate for the current period as compared to the same period of the prior fiscal year is primarily due to discrete one-time charges in the second quarter of the prior fiscal year of $1.3 million to establish a valuation allowance against non-originating deferred tax assets and a $1.6 million valuation allowance against originating deductible temporary differences.
Ashworth Inc
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