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Adams Golf Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 10, 2009 10:22PM
Adams Golf Inc. (ADGF) filed Quarterly Report for the period ended 2009-09-30. Adams Golf, Inc. designs, manufactures and markets premium quality, technologically innovative golf clubs. Adams Golf's products include the Tight Lies lines of fairway woods and drivers, SC Series Titanium drivers, Assault-VMI Irons, and the Faldo Series wedges. Adams Golf sells its products primarily to on- and off-course golf shops and selected sporting goods retailers in the U.S. In addition, they market their golf clubs domestically to consumers through direct response advertising campaigns, and internationally through a worldwide network of distributors. Adams Golf Inc. has a market cap of $19.8 million; its shares were traded at around $2.96 with and P/S ratio of 0.2.
Highlight of Business Operations:
Cost of goods sold decreased to $46.0 million, or 71.1% of total net sales, for the nine months ended September 30, 2009 from $46.4 million, or 58.7% of total net sales, for the comparable period of 2008. The increase as a percentage of total net sales is primarily due to the inventory write down to lower of cost or market totaling $3.6 million taken during the second quarter coupled with changes in the product mix and promotional programs during the period.
Selling and marketing expenses decreased to $15.9 million for the nine months ended September 30, 2009 from $21.7 million for the comparable period in 2008. The decrease is primarily the result of a decrease in marketing and tour expense of $3.4 million and commission expense of $1.6 million and other cost saving initiatives in various areas.
General and administrative expenses decreased to $5.2 million for the nine months ended September 30, 2009 from $6.8 million for the comparable period in 2008. The decrease is primarily the result of a decrease in compensation expense of $1.0 million along with other cost saving initiatives in various areas.
Our inventory balances were approximately $20.6 million and $33.6 million at September 30, 2009 and December 31, 2008, respectively. The decrease in inventory levels is primarily due to the seasonality of our business where purchases are stronger in the fourth and first quarters of the year, while sales begin to deplete inventory levels in the first and second quarters of the year, coupled with an inventory write down to lower of cost or market totaling $3.6 million during the second quarter of 2009.
Our accrued liabilities balances were approximately $11.4 million and $7.3 million at September 30, 2009 and December 31, 2008, respectively. The increase in accrued liabilities is primarily due to the accrual for the settlement of the stockholder class action lawsuit pursuant to which we currently estimate that we will contribute $5 million in conjunction with the settlement to cover the layer of exposure on our directors' and officers' corporate liability insurance that our former insurance carrier will not cover at this time. See the Legal Proceedings section of this Form 10-Q for further details.
Cash and cash equivalents increased to $11.4 million at September 30, 2009 compared to $6.0 million at December 31, 2008. During the period, inventory decreased $11.2 million and an increase in the inventory reserve of $1.8 million and a net increase in accrued expense and accounts payable of $1.8 million. These were offset by an increase in accounts receivable of $2.5 million.
Stocks Discussed: ADGF,