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Golfsmith announces Q2 2007 results

Aug '07
Golfsmith International Holdings Inc announced its financial results for the second quarter of 2007, ended June 30, 2007.

The company reported net revenues of $125.0 million for the second quarter compared with net revenues of $114.1 million for the second quarter of fiscal 2006.

The increase of 9.5 percent was due to net revenues from 15 non-comparable retail stores that were opened subsequent to July 1, 2006. This increase was partially offset by a 4.8 percent decrease in net revenues from its direct channel and a 4.7 percent decrease in comparable store sales.

Comparable store sales for the quarter were impacted by the continuation of heightened levels of competition in the Dallas and Atlanta markets, and declining sales in the clubmaking business.

Furthermore, golf rounds played in the United States, a leading indicator of golf participation tracked by the National Golf Foundation, declined 1.1 percent year-over-year in the second quarter despite growth in May and June.

The company reported income from operations of $7.7 million in the second quarter compared with $6.5 million for the second quarter of fiscal 2006. Gross margins and operating income continued to be pressured by a higher sales mix of lower margin products and a decline in sales in the higher margin clubmaking business.

The company's operating results were also largely affected by increased selling, general and administrative expenses associated with 15 new stores opened since July 1, 2006, eight of which opened during the second quarter of 2007.

Selling, general and administrative expenses also included increased corporate support costs related to the growth of the business as a public-equity company.

The company also reported net income of $6.8 million in the second quarter, or earnings per diluted share of $0.43, based on 15.8 million fully diluted weighted average shares outstanding.

This compares with a net loss of $7.9 million, or a loss per diluted share of $0.73, based on 10.8 million fully diluted weighted average shares outstanding in the three months ended July 1, 2006.

The second quarter of fiscal year 2006 included certain charges incurred by the company concurrent with its initial public offering (“IPO”) on June 20, 2006. The charges included $12.8 million related to the extinguishment of the company's long-term debt that was retired with proceeds raised in its IPO and $3.0 million of expenses related to the termination of a management consulting agreement with First Atlantic Capital Ltd partially offset by $1.0 million of derivative income associated with the IPO.

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