Golfsmith International Holdings, Inc. - Golfsmith Announces Second Quarter Fiscal 2009 Results

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Golfsmith Announces Second Quarter Fiscal 2009 Results

AUSTIN, Texas, Jul 30, 2009 (BUSINESS WIRE) -- Golfsmith International Holdings, Inc., (NASDAQ: GOLF) today announced financial results for the second quarter of fiscal 2009 ended July 4, 2009.

Second Quarter Highlights:

Net revenues were $114.8 million for the second quarter of fiscal 2009 as compared to net revenues of $130.0 million for the second quarter of fiscal 2008. Net revenues reflect a 9.5 percent decrease in comparable store sales and a 28.0 percent decrease in net revenues from its direct-to-consumer channel.
Operating income totaled $8.3 million for the second quarter of fiscal 2009 compared to $10.4 million for the second quarter of fiscal 2008.
Net income for the second quarter of fiscal 2009 totaled $6.8 million, or $0.42 per diluted share. This compares to net income of $8.6 million or $0.54 per diluted share for the second quarter of fiscal 2008.
As of July 4, 2009, the Company had $28.0 million of outstanding borrowings under its credit facility, borrowing availability of $38.7 million, and total inventory of $93.1 million. This compares to $34.6 million of outstanding borrowings under its credit facility, $33.0 million of borrowing availability, and $101.1 million of inventory at June 28, 2008. Average store inventory declined 3.5 percent at July 4, 2009 as compared to June 28, 2008.
During the second quarter of fiscal 2009, the Company relocated two of its existing stores and closed one store due to an expiring lease. The Company also signed a lease for a property in Irvine, California for the opening of a retail store in the fourth quarter of fiscal 2009.

Martin Hanaka, chairman and chief executive officer of Golfsmith commented, "Our second quarter results reflect a sequential improvement in comparable store sales and a year-over-year gross margin improvement. We continue to closely manage expenses and inventory without sacrificing product availability and have made significant improvements from a year ago. Looking ahead, we will continue to invest prudently in our customer experience initiatives and be innovative as we work with our vendors to drive traffic in the second half of the year, since we do expect overall trends in the golf industry to remain challenging. As the industry continues to consolidate, we believe our Company is positioned to capture additional market share, and we look forward to resuming our store growth plans in fiscal 2010."

Year-to-Date Results

Net revenues were $183.6 million for the six-month period ended July 4, 2009 as compared to net revenues of $209.2 million for the six-month period ended June 28, 2008. The decrease in total revenue was due to a 10.3 percent decrease in comparable store sales and a 26.7 percent decrease in net revenues from its direct-to-consumer channel.
Operating income totaled $2.9 million for the six-month period ended July 4, 2009 as compared to operating income of $5.2 million for the six-month period ended June 28, 2008. 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 quarter of fiscal 2008 included a $1.8 million non-recurring charge, or $0.11 cents per diluted share, related to the same.
Net income totaled $1.7 million, or $0.10 per diluted share compared to net income of $3.1 million, or $0.20 per diluted share for the six-month period ended June 28, 2008.

Conference Call Information

The company will host a conference call today at 9:00 a.m. (eastern time) to discuss its second 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 7942913.

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 customers 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 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						Six Months Ended
	July 4,			June 28,			July 4,			June 28,
	2009			2008			2009			2008
	(unaudited)

Net revenues	$	114,796,870		$	129,994,600		$	183,589,774		$	209,230,096
Cost of products sold		74,719,386			85,310,115			120,741,824			137,385,721
Gross profit		40,077,484			44,684,485			62,847,950			71,844,375

Selling, general and administrative		31,650,261			34,167,492			59,468,190			66,503,326
Store pre-opening/closing expenses		175,054			81,223			523,280			109,367
Total operating expenses		31,825,315			34,248,715			59,991,470			66,612,693

Operating income		8,252,169			10,435,770			2,856,480			5,231,682

Interest income (expense), net		(314,723	)		(706,515	)		(791,863	)		(1,694,214	)
Other income (expense), net		(10,387	)		(5,089	)		46,363			1,472

Income before income taxes		7,927,059			9,724,166			2,110,980			3,538,940

Income tax expense		(1,145,355	)		(1,152,744	)		(455,589	)		(410,517	)

Net income	$	6,781,704		$	8,571,422		$	1,655,391		$	3,128,423

Net income per common share:
Basic	$	0.42		$	0.54		$	0.10		$	0.20
Diluted	$	0.42		$	0.54		$	0.10		$	0.20

Weighted average number of common shares outstanding:
Basic		16,061,194			15,973,033			16,046,689			15,906,124
Diluted		16,126,393			15,973,033			16,046,890			15,951,852

Golfsmith International Holdings, Inc.
Consolidated Balance Sheets

			July 4,			June 28,
			2009			2008
			(unaudited)
	ASSETS
	Current assets:
		Cash and cash equivalents	$	5,634,633		$	5,664,315
		Receivables, net		2,028,259			2,806,980
		Inventories		93,096,713			101,052,822
		Prepaid expenses and other current assets		13,072,353			11,383,530
	Total current assets			113,831,958			120,907,647

	Property and equipment:
		Land and buildings		22,348,498			22,066,559
		Equipment, furniture and fixtures		42,939,613			33,270,579
		Leasehold improvements and construction in progress		40,870,509			37,400,657
				106,158,620			92,737,795
		Less: accumulated depreciation and amortization		(48,562,444	)		(34,388,792	)
	Net property and equipment			57,596,176			58,349,003

	Tradename			11,158,000			11,158,000
	Trademarks			13,972,251			13,972,251
	Customer database, net			849,802			1,227,491
	Debt issuance costs, net			328,316			492,476
	Deferred tax assets, net			411,241			460,343
	Other long-term assets			437,230			341,101
	Total assets		$	198,584,974		$	206,908,312

	LIABILITIES AND STOCKHOLDERS' EQUITY
	Current liabilities:
	Accounts payable		$	66,595,934		$	67,735,614
	Accrued expenses and other current liabilities			16,197,309			18,039,179
	Deferred tax liabilities, net			383,538			432,640
	Total current liabilities			83,176,781			86,207,433

	Deferred rent			15,020,545			11,879,477
	Line of credit			27,967,000			34,603,152
	Total liabilities			126,164,326			132,690,062

	Total stockholders' equity			72,420,648			74,218,250

	Total liabilities and stockholders' equity		$	198,584,974		$	206,908,312

SOURCE: Golfsmith International Holdings, Inc.

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

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