Golfsmith Announces Third Quarter Fiscal 2009 Results

October 27, 2009 7:30 AM EDT

AUSTIN--(BUSINESS WIRE)-- Golfsmith International Holdings, Inc., (NASDAQ: GOLF) today announced financial results for the third quarter of fiscal 2009 ended October 3, 2009.

Third Quarter Highlights:

    --  Net revenues were $90.6 million for the third quarter of fiscal 2009 as
        compared to net revenues of $101.7 million for the third quarter of
        fiscal 2008. Net revenues reflect an 8.5 percent decrease in comparable
        store sales and a 27.0 percent decrease in net revenues from the
        direct-to-consumer channel, partially offset by revenues from
        non-comparable stores.
    --  Operating income totaled $1.4 million for the third quarter of fiscal
        2009 compared to $3.7 million for the third quarter of fiscal 2008.
        Third quarter 2009 operating income included a $0.4 million one-time,
        non-recurring charge related to litigation settlement costs.
    --  Net income for the third quarter of fiscal 2009 totaled $1.1 million, or
        $0.07 per diluted share. Excluding the non-recurring litigation
        settlement charge, net income for the quarter would have been $1.5
        million or $0.09 per diluted share. This compares to net income of $2.8
        million or $0.17 per diluted share for the third quarter of fiscal 2008.
    --  As of October 3, 2009, the Company had $33.7 million of outstanding
        borrowings under its credit facility, borrowing availability of $19.6
        million, and total inventory of $79.1 million. Average store inventory
        declined 10.4% percent at October 3, 2009 as compared to September 27,
        2008.

Martin Hanaka, chairman and chief executive officer of Golfsmith commented, "Our third quarter results reflect continued sales challenges of discretionary products in the golf industry. While store traffic has begun to stabilize, consumers remain cautious about spending. Despite this, we are pleased with the solid unit market share gains we've earned. We will also continue to closely manage our expenses and maintain leaner inventory levels due to uncertainty of future sales trends. We will also continue to find innovative ways to partner with our vendors to drive traffic and feel we are well positioned to emerge successfully from this challenging period."

Year-to-Date Results

    --  Net revenues were $274.2 million for the nine-month period ended October
        3, 2009 as compared to net revenues of $310.9 million for the nine-month
        period ended September 27, 2008. The decrease in total revenue was due
        to a 9.7 percent decrease in comparable store sales and a 26.8 percent
        decrease in net revenues from the direct-to-consumer channel, partially
        offset by revenues from non-comparable stores.
    --  Operating income totaled $4.3 million for the nine-month period ended
        October 3, 2009 as compared to operating income of $8.9 million for the
        nine-month period ended September 27, 2008. In addition to the $0.4
        million one-time litigation settlement charge in the third quarter of
        fiscal 2009, the Company recorded a $0.5 million non-recurring charge,
        or $0.03 per diluted share, related to severance associated with
        organizational changes in this year's first quarter. Operating results
        for the first nine months of fiscal 2008 included a non-recurring charge
        of $1.8 million, or $0.11 cents per diluted share, also related to
        severance.
    --  Net income totaled $2.8 million, or $0.17 per diluted share compared to
        net income of $6.0 million, or $0.37 per diluted share for the
        nine-month period ended September 27, 2008.

Conference Call Information

The company will host a conference call today at 9:00 a.m. (eastern time) to discuss its third quarter fiscal 2009 financial results. The call will be simulcast over the Internet at https://investors.golfsmith.com. A replay will be available for 30 days after the call at the aforementioned website. Telephone replays can be accessed for one month following the call by dialing 888-203-1112 (U.S.) or 719-457-0820 (international) and entering passcode 7946673.

About Golfsmith

Golfsmith International Holdings, Inc. (NASDAQ: GOLF), is a specialty retailer of golf and tennis equipment, apparel and accessories. The company operates as an integrated multi-channel retailer, offering its guests the convenience of shopping in more than 70 stores across the United States, through its Internet site and from its assortment of catalogs. Golfsmith offers an extensive product selection that features premier branded merchandise, as well as its proprietary products, clubmaking components and pre-owned clubs.

Cautionary Language

This press release contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about the company's beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words "may," "could," "would," "should," "believe," "expect," "anticipate," "plan," "estimate," "target," "project," "intend," or similar expressions. Forward-looking statements are not guarantees of performance. These statements are based on management's beliefs and assumptions, which in turn are based in part on currently available information and in part on management's estimates and projections of future events and conditions. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for the products, the introduction of new product offerings, store opening costs, the ability to lease new sites on a timely basis, expected pricing levels, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve risks and uncertainties, which could cause actual results that differ materially from those contained in any forward-looking statement. Many of these factors are beyond the company's ability to control or predict. Such factors include, but are not limited to the Risk Factors set forth in Item 1A. Risk Factors in the company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 3, 2009.

The company believes its forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update publicly any of them in light of new information or future events.

Golfsmith International Holdings, Inc.

Consolidated Statements of Operations

                       Three Months Ended               Nine Months Ended

                       October 3,      September 27,    October 3,       September 27,

                         2009            2008             2009             2008

                       (unaudited)

Net revenues           $ 90,586,270    $ 101,701,696    $ 274,176,044    $ 310,931,792

Cost of products         59,610,086      66,768,840       180,351,910      204,154,561
sold

Gross profit             30,976,184      34,932,856       93,824,134       106,777,231

Selling, general         29,739,699      31,202,256       89,207,889       97,779,407
and administrative

Store
pre-opening/closing      (179,625   )    42,877           343,655          78,419
expenses

Total operating          29,560,074      31,245,133       89,551,544       97,857,826
expenses

Operating income         1,416,110       3,687,723        4,272,590        8,919,405

Interest expense,        (268,340   )    (507,200    )    (1,060,203  )    (2,201,414  )
net

Other income             3,828           (5,092      )    50,191           (3,620      )
(expense), net

Income before            1,151,598       3,175,431        3,262,578        6,714,371
income taxes

Income tax expense       (51,967    )    (332,348    )    (507,556    )    (742,865    )

Net income             $ 1,099,631     $ 2,843,083      $ 2,755,022      $ 5,971,506

Net income per
common share:

Basic                  $ 0.07          $ 0.18           $ 0.17           $ 0.38

Diluted                $ 0.07          $ 0.17           $ 0.17           $ 0.37

Weighted average
number of common
shares
outstanding:

Basic                    16,092,183      16,031,516       16,062,073       15,943,376

Diluted                  16,224,824      16,390,242       16,077,286       16,075,039

Golfsmith International Holdings, Inc.

Consolidated Balance Sheets

                                                  October 3,      September 27,

                                                    2009            2008

                                                  (unaudited)

ASSETS

Current assets:

Cash                                              $ 3,703,161     $ 2,768,539

Receivables, net of allowances                      1,606,503       1,477,980

Inventories                                         79,062,653      86,645,177

Prepaid expenses and other current assets           7,248,352       9,581,890

Total current assets                                91,620,669      100,473,586

Property and equipment, net                         56,661,763      57,555,046

Intangible assets, net                              25,985,630      26,263,320

Other long-term assets                              1,159,859       1,241,734

Total assets                                      $ 175,427,921   $ 185,533,686

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable                                  $ 38,838,008    $ 40,573,186

Accrued expenses and other current liabilities      14,233,461      16,332,646

Total current liabilities                           53,071,469      56,905,832

Deferred rent liabilities                           15,029,961      12,236,230

Long-term debt                                      33,680,721      39,455,000

Total liabilities                                   101,782,151     108,597,062

Total stockholders' equity                          73,645,770      76,936,624

Total liabilities and stockholders' equity        $ 175,427,921   $ 185,533,686

    Source: Golfsmith International Holdings, Inc.

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