Golfsmith International Holdings, Inc. - Golfsmith Announces Fourth Quarter and Fiscal 2008 Results

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Golfsmith Announces Fourth Quarter and Fiscal 2008 Results

AUSTIN, Texas, Mar 03, 2009 (BUSINESS WIRE) -- Golfsmith International Holdings, Inc., (NASDAQ: GOLF) today announced financial results for the fourth quarter and fiscal 2008 ended January 3, 2009.

Fourth Quarter Highlights:

Net revenues decreased 14.1 percent to $67.8 million for the fourth quarter of fiscal 2008 compared to net revenues of $79.0 million for the same period in the prior year. Net revenues reflect a 17.3 percent decrease in comparable store sales and a 23.1 percent decrease in net revenues from its direct channel. Comparable store sales are calculated on a 13 week basis for both quarters presented.
Operating loss totaled $6.6 million in the fourth quarter of fiscal 2008 compared to a loss of $45.6 million for the same period last year. Fiscal 2007 operating loss included a $43.0 million non-cash impairment charge to write-off goodwill and reduce the net book value of other long-lived assets related to the decline of the Company's stock price and market capitalization. Excluding these non-cash charges, operating loss in fourth quarter of fiscal 2007 would have been $2.6 million. Also, during the fourth quarter of fiscal 2008, the Company performed an analysis of advertising costs related to its co-operative vendor programs resulting in the reclassification of $2.2 million of expense from cost of goods sold to selling, general and administrative. This resulted in a decrease in gross profit of 320 basis points.
Net loss in the fourth quarter of fiscal 2008 totaled $6.5 million, or a net loss per diluted share of $0.40. This compared to a net loss of $46.7 million or, excluding the $43.0 million non-cash impairment charge, a net loss of $3.7 million or $0.23 per diluted share for the fourth quarter of fiscal 2007.

"Martin Hanaka, chairman and chief executive officer commented, "Our fourth quarter results reflect ongoing challenges in the economic environment. Looking ahead to 2009, the retail environment remains difficult and we will continue to carefully control expenses, manage inventory levels and focus on cash preservation. We are also continuing our efforts to institute operational improvements, increase store productivity and enhance profitability, positioning our Company for long-term sales and earnings growth."

Fiscal 2008 Highlights:

Net revenues decreased 2.4 percent to $378.8 million in fiscal 2008 compared to net revenues of $388.2 million in fiscal 2007. Net revenues reflect a 6.3 percent decrease in comparable store sales, and a 13.1 percent decrease in net revenues from the Company's direct channel. Total net revenues represent 53 weeks for 2008 compared to 52 weeks in 2007. Comparable store sales are calculated on a 52 week basis in both fiscal years.
The Company reported operating income of $2.3 million in fiscal 2008. This compares to an operating loss of $36.9 million in fiscal 2007, including the $43.0 million non-cash impairment charge to goodwill and other long-lived assets. Excluding the impairment charge, operating income was $6.1 million in fiscal 2007.
The Company reported a net loss for fiscal 2008 of $0.5 million, or a net loss per diluted share of $0.03. This compares to a net loss of $40.8 million in fiscal 2007. Excluding the impairment charge, net income was $2.2 million or $0.14 per diluted share.

As of January 3, 2009, total inventory was $90.5 million compared to $98.5 million at December 29, 2007, and average store inventory declined approximately 8%.

Outlook:

Until there is greater long-term visibility on the consumer environment, the Company will limit earnings guidance to the upcoming quarter. For the first quarter of fiscal 2009, same-store sales are expected to decline in the mid to high teens and we expect a slight improvement in gross margin. Operating results for the first quarter of fiscal 2008 included a $1.8 million charge, or $0.11 cents per share, related to restructuring costs, severance and search fees associated with organizational changes made during the quarter.

Conference Call Information

The company will host a conference call today at 4:30 p.m. (eastern time) to discuss the fourth quarter and fiscal 2008 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 seven days following the call by dialing 888-286-8010 (U.S.) or 617-801-6888 (international) and entering passcode 6428954.

About Golfsmith

Golfsmith International Holdings, Inc., (NASDAQ: GOLF) is a 40-year-old 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 its 73 stores across the United States, through its Internet site at www.golfsmith.com 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 6, 2008.

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



	Twelve Months Ended						Three Months Ended
	January 3,			December 29,			January 3,			December 29,
	2009			2007			2009			2007
							(unaudited)
Net revenues	$	378,772,097		$	388,157,258		$	67,840,305		$	78,969,155
Cost of products sold		251,134,234			252,254,943			46,979,673			51,413,713
Gross profit		127,637,863			135,902,315			20,860,632			27,555,442

Selling, general and administrative		124,587,302			127,420,598			26,989,259			29,850,870
Store pre-opening/closing expenses		442,181			2,361,324			182,398			311,758
Impairment of goodwill and long-lived assets		284,229			42,993,665			284,229			42,993,665
Total operating expenses		125,313,712			172,775,587			27,455,886			73,156,293

Operating income (loss)		2,324,151			(36,873,272	)		(6,595,254	)		(45,600,851	)

Interest expense		(2,885,301	)		(3,784,517	)		(598,016	)		(1,067,951	)
Interest income		9,553			103,477			(76,318	)		33,811
Other income (expense), net		157,376			395,295			160,996			244,820

Loss before income taxes		(394,221	)		(40,159,017	)		(7,108,592	)		(46,390,171	)

Income tax expense		(121,390	)		(661,033	)		621,475			(305,245	)

Net loss	$	(515,611	)	$	(40,820,050	)	$	(6,487,117	)	$	(46,695,416	)

Net loss per share:
Basic	$	(0.03	)	$	(2.58	)	$	(0.40	)	$	(2.95	)
Diluted	$	(0.03	)	$	(2.58	)	$	(0.40	)	$	(2.95	)

Weighted average number of shares outstanding:
Basic		15,970,581			15,793,697			16,032,153			15,824,367
Diluted		15,970,581			15,793,697			16,032,153			15,824,367

	Golfsmith International Holdings, Inc. Consolidated Balance Sheets


		January 3,			December 29,
			2009			2007

ASSETS
Current assets:
	Cash and cash equivalents	$	2,655,009		$	4,025,299
	Receivables, net		1,597,486			1,600,844
	Inventories		90,499,949			98,509,444
	Prepaid expenses and other current assets		9,288,142			10,531,017
Total current assets			104,040,586			114,666,604

Property and equipment:
	Land and buildings		22,263,200			21,719,245
	Equipment, furniture and fixtures		34,437,845			37,292,454
	Leasehold improvements and construction in progress		39,081,298			35,039,300
			95,782,343			94,050,999
	Less: accumulated depreciation and amortization		(38,899,399	)		(33,309,807	)
Net property and equipment			56,882,944			60,741,192

Tradename			11,158,000			11,158,000
Trademarks			13,972,251			13,972,251
Customer database, net			1,038,646			1,416,336
Debt issuance costs, net			410,396			574,556
Deferred tax assets, net			411,241			460,343
Other long-term assets			330,100			391,097
Total assets		$	188,244,164		$	203,380,379

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	34,920,442		$	49,008,389
Accrued expenses and other current liabilities			19,015,839			21,193,455
Deferred tax liabilities, net			383,538			432,640
Total current liabilities			54,319,819			70,634,484

Deferred rent			12,209,786			11,771,043
Line of credit			51,708,222			50,736,236
Total liabilities			118,237,827			133,141,763

Total stockholders' equity			70,006,337			70,238,616

Total liabilities and stockholders' equity		$	188,244,164		$	203,380,379

SOURCE: Golfsmith International Holdings, Inc.

Investor Relations:
ICR, Inc.
Joseph Teklits / Jean Fontana
203-682-8200
www.icrinc.com

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