x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
DELAWARE
|
75-2320087
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
2801
E. Plano Pkwy, Plano, Texas
|
75074
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(972)
673-9000
|
(Registrant's
telephone number, including area code)
|
Securities
registered pursuant to Section 12(b) of the Act:
|
None
|
Securities
registered pursuant to Section 12(g) of the Act:
|
Common
Stock $.001 Par Value
|
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer x
|
Smaller
reporting company o
|
PART
I
|
|||
Item
1.
|
Business
|
Page
3
|
|
Item
1A.
|
Risk
Factors
|
Page
9
|
|
Item
2.
|
Properties
|
Page
17
|
|
Item
3.
|
Legal
Proceedings
|
Page
17
|
|
PART
II
|
|||
Item
4.
|
Reserved
|
n/a
|
|
Item
5.
|
Market
for Registrant's Common Equity and Related Stockholders Matters and Issuer
Purchases of Equity Securities
|
Page
19
|
|
Item
6.
|
Selected
Financial Data
|
Page
21
|
|
Item
7.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
Page
22
|
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Page
30
|
|
Item
8.
|
Financial
Statements and Supplementary Data
|
Page
30
|
|
Item
9A(T).
|
Controls
and Procedures
|
Page
31
|
|
PART
III
|
|||
Item
10
|
Directors
and Executive Officers of the Registrant
|
Page
32
|
|
Item
11
|
Executive
Compensation
|
Page
32
|
|
Item
12
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
Page
32
|
|
Item
13
|
Certain
Relationships and Related Transactions
|
Page
32
|
|
Item
14
|
Principal
Accounting Fees and Services
|
Page
32
|
|
PART
IV
|
|||
Item
15
|
Exhibits
and Financial Statement Schedules
|
Page
33
|
2009
|
2008
|
2007
|
||||||||||
Irons
|
67.7 | % | 62.5 | % | 66.9 | % | ||||||
Fairway
Woods
|
19.4 | 24.4 | 19.5 | |||||||||
Drivers
|
12.5 | 12.3 | 11.1 | |||||||||
Wedges
and Other
|
0.4 | 0.8 | 2.5 | |||||||||
Total
|
100.0 | % | 100.0 | % | 100.0 | % |
2009
|
2008
|
2007
|
||||||||||||||||||||||
Domestic
|
$ | 60,927,000 | 80.0 | % | $ | 73,375,000 | 80.2 | % | $ | 78,623,000 | 83.1 | % | ||||||||||||
Foreign
|
15,212,000 | 20.0 | 18,076,000 | 19.8 | 15,981,000 | 16.9 | ||||||||||||||||||
Total
|
$ | 76,139,000 | 100.0 | % | $ | 91,451,000 | 100.0 | % | $ | 94,604,000 | 100.0 | % |
High
|
Low
|
|||||||
2009
|
||||||||
First
Quarter
|
$ | 3.50 | $ | 2.22 | ||||
Second
Quarter
|
3.20 | 2.41 | ||||||
Third
Quarter
|
3.25 | 2.30 | ||||||
Fourth
Quarter
|
3.35 | 2.93 | ||||||
2008
|
||||||||
First
Quarter
|
$ | 10.20 | $ | 8.08 | ||||
Second
Quarter
|
8.80 | 5.20 | ||||||
Third
Quarter
|
7.42 | 4.40 | ||||||
Fourth
Quarter
|
5.08 | 2.65 |
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
Number
of securities remaining
available for
future
issuance under equity
compensation plans (excluding
securities reflected
in column (a))
(c)
|
|||||||||
Equity
compensation plans approved by security holders
|
891,044 | $ | 0.52 | 415,655 | ||||||||
Equity
compensation plans not approved by security holders
|
--- | n/a | --- | |||||||||
Total
|
891,044 | $ | 0.52 | 415,655 |
Company
|
December
2004
|
December
2005
|
December
2006
|
December
2007
|
December
2008
|
December
2009
|
||||||||||||||||||
Adams
Golf, Inc.
|
100.00 | 85.72 | 140.72 | 160.74 | 53.58 | 52.68 | ||||||||||||||||||
S&P
Small Cap 600
|
100.00 | 107.68 | 123.96 | 123.59 | 85.19 | 106.98 | ||||||||||||||||||
Peer
Group A (1)
|
100.00 | 110.29 | 111.32 | 136.16 | 71.19 | 59.51 |
(1)
|
Peer
Group consists of Callaway Golf Company and
Aldila.
|
Year
Ended December 31,
|
||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||
(in
thousands, except per share data)
|
||||||||||||||||||||
Consolidated
Statements of Operations Data:
|
||||||||||||||||||||
Net
sales
|
$ | 76,139 | $ | 91,451 | $ | 94,604 | $ | 76,030 | $ | 56,424 | ||||||||||
Operating
income / (loss)
|
(12,075 | ) | (1,422 | ) | 4,106 | 3,440 | 2,045 | |||||||||||||
Net
income / (loss)
|
$ | (12,188 | ) | $ | (1,459 | ) | $ | 9,401 | $ | 9,000 | $ | 3,240 | ||||||||
Income / (loss) per common share (1) : | ||||||||||||||||||||
Basic
|
$ | (1.82 | ) | $ | (0.23 | ) | $ | 1.54 | $ | 1.54 | $ | 0.57 | ||||||||
Diluted
|
$ | (1.82 | ) | $ | (0.23 | ) | $ | 1.32 | $ | 1.24 | $ | 0.47 | ||||||||
Weighted
average common shares (1):
|
||||||||||||||||||||
Basic
|
6,689 | 6,413 | 6,095 | 5,830 | 5,684 | |||||||||||||||
Diluted
|
6,689 | 6,413 | 7,134 | 7,232 | 6,951 | |||||||||||||||
Consolidated
Balance Sheet Data:
|
||||||||||||||||||||
Total
assets
|
$ | 57,219 | $ | 67,056 | $ | 71,186 | $ | 55,603 | $ | 44,102 | ||||||||||
Total
debt (including current maturities)
|
-- | -- | -- | -- | -- | |||||||||||||||
Stockholders'
equity
|
$ | 40,510 | $ | 50,314 | $ | 53,299 | $ | 41,869 | $ | 32,127 |
(1)
|
See
Note 1 (k) of Notes to Consolidated Financial Statements for information
concerning the calculation of income / (loss) per common share and
weighted average common shares
outstanding.
|
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Net
sales
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||
Cost
of goods sold
|
70.5 | 59.0 | 57.7 | |||||||||
Gross
profit
|
29.5 | 41.0 | 42.3 | |||||||||
Operating
expenses:
|
||||||||||||
Research
and development expenses
|
3.7 | 4.1 | 3.9 | |||||||||
Selling
and marketing expenses
|
26.2 | 28.6 | 25.1 | |||||||||
General
and administrative expenses
|
8.9 | 9.8 | 8.9 | |||||||||
Settlement
expense
|
6.6 | -- | -- | |||||||||
Total
operating expenses
|
45.4 | 42.5 | 37.9 | |||||||||
Operating
income / (loss)
|
(15.9 | ) | (1.5 | ) | 4.4 | |||||||
Interest
income, net
|
(0.1 | ) | 0.0 | 0.3 | ||||||||
Other
income / (loss), net
|
0.0 | (0.1 | ) | 0.2 | ||||||||
Income
before income taxes
|
(16.0 | ) | (1.6 | ) | 4.9 | |||||||
Income
tax expense (benefit)
|
0.0 | 0.0 | (5.0 | ) | ||||||||
Net
income / (loss)
|
(16.0 | )% | (1.6 | )% | 9.9 | % |
Contractual
Obligations
|
Total
|
Less than 1 year
|
1-3 years
|
3-5 years
|
More than 5 years
|
|||||||||||||||
Long-term
Debt Obligations
|
$ | -- | $ | -- | $ | -- | $ | -- | $ | -- | ||||||||||
Capital
Lease Obligations
|
16,377 | 13,791 | 2,586 | -- | -- | |||||||||||||||
Operating
Lease Obligations
|
1,970,216 | 651,548 | 1,029,324 | 289,344 | -- | |||||||||||||||
Purchase
Obligations
|
-- | -- | -- | -- | -- | |||||||||||||||
Other
Long-term Liabilities
Reflected
on the Registrant's
Balance
sheet under GAAP
|
5,000,000 | 5,000,000 | -- | -- | -- | |||||||||||||||
Total
|
$ | 6,986,593 | $ | 5,665,339 | $ | 1,031,910 | $ | 289,344 | -- |
(1) Consolidated
Financial Statements
|
||
Item
|
Page
|
|
Index
to Consolidated Financial Statements and Related Financial Statement
Schedule
|
F-1
|
|
Reports
of Independent Registered Public Accounting Firms
|
F-2
– F-3
|
|
Consolidated
Balance Sheets as of December 31, 2009 and 2008
|
F-4
|
|
Consolidated
Statements of Operations for the Years ended December 31, 2009, 2008
and
2007
|
F-5
|
|
Consolidated
Statements of Stockholders' Equity for the Years ended December 31,
2009,
2008 and 2007
|
F-6,
F-7
|
|
Consolidated
Statements of Cash Flows for the Years ended December 31, 2009, 2008
and
2007
|
F-8
|
|
Notes
to Consolidated Financial Statements
|
F-9
- F-25
|
(2) Financial
Statement Schedule
|
||
Our
financial statement schedule for the years ended December 31, 2009, 2008
and 2007 is filed as part of this Annual Report and should be read in
conjunction with our Consolidated Financial
Statements.
|
||
Report
of Independent Registered Public Accounting Firm
|
S-1
|
|
Schedule
II - Valuation and Qualifying Accounts
|
S-2
|
|
All
other schedules are have been omitted because such schedules are not
required under the related instructions, or are not applicable, or because
the information is not present, or is not present in amounts sufficient to
require submission of the schedule, or because the information required is
included in the consolidated financial statements and notes
thereto.
|
(3) Exhibits
|
|
The
exhibits listed below are filed as a part of or incorporated by reference
in this Annual Report. Where such filing is made by
incorporation by reference to a previously filed document, such document
is identified in parenthesis. See the Index of Exhibits
included with the exhibits filed as a part of this Annual
Report.
|
Exhibit
|
Description
|
Location
|
||
Exhibit
3.1
|
Amended
and Restated Certificate of Incorporation
|
Incorporated
by reference to Form S-1 File No. 333-51715 (Exhibit
3.1)
|
||
Exhibit
3.2
|
Certificate
of Amendment to the Restated Certificate of Incorporation filed on
February 14, 2008
|
Incorporated
by reference to 2007 Form 10-K (Exhibit 3.2)
|
||
Exhibit
3.3
|
Amended
and Restated By-laws
|
Incorporated
by reference to Form S-1 File No. 333-51715 (Exhibit
3.2)
|
||
Exhibit
4.1
|
1998
Stock Incentive Plan of the Company dated February 26, 1998, as
amended
|
Incorporated
by reference to Form S-8 File No. 333-68129 (Exhibit
4.1)
|
||
Exhibit
4.2
|
1996
Stock Option Plan dated April 10, 1998
|
Incorporated
by reference to Form S-1 File No.333-51715 (Exhibit
4.2)
|
Exhibit
4.3
|
Adams
Golf, Ltd. 401(k) Retirement Plan
|
Incorporated
by reference to Form S-1 File No.333-51715 (Exhibit
4.3)
|
||
Exhibit
4.4
|
1999
Non-Employee Director Plan of Adams Golf, Inc.
|
Incorporated
by reference to 1999 Form 10-K (Exhibit 4.4)
|
||
Exhibit
4.5
|
1999
Stock Option Plan for Outside Consultants of Adams Golf,
Inc.
|
Incorporated
by reference to Form S-8 File No. 333-37320 (Exhibit
4.5)
|
||
Exhibit
4.6
|
2002
Stock Incentive Plan for Adams Golf, Inc.
|
Incorporated
by reference to Annex A of the 2002 Proxy Statement (Annex
A)
|
||
Exhibit
4.7
|
Form
of Option Agreement under the 2002 Stock Option Plan of Adams Golf,
Inc.
|
Incorporated
by reference to Form S-8 File No. 333-112622 (Exhibit
4.7)
|
||
Exhibit
10.1
|
Amendment
dated September 1, 2003 to the Commercial Lease Agreement dated April 6,
1998, between Jackson-Shaw Technology Center II and the
Company
|
Incorporated
by reference to 2003 Form 10-K (Exhibit 10.12)
|
||
Exhibit
10.2*
|
Golf
Consultant Agreement - Thomas S. Watson
|
Incorporated
by reference to 2004 Form 10-K (Exhibit 10.17)
|
||
Exhibit
10.3*
|
Asset
Purchase Agreement of Women’s Golf Unlimited
|
Incorporated
by reference to 2006 Form 10-K (Exhibit 10.11)
|
||
Exhibit
10.4
|
Revolving
Line of Credit between Adams Golf, Inc and Wachovia Bank, National
Association
|
Incorporated
by reference to the Report on Form 8-K dated November 13, 2007 (Exhibit
10.1)
|
||
Exhibit
10.5
|
Commercial
Lease Agreement dated December 15, 2007, between MDN/JSC -II Limited and
the Company
|
Incorporated
by reference to 2007 Form 10-K (Exhibit 10.9)
|
||
Exhibit
10.6
|
Commercial
Lease Agreement dated April 10, 2008, between CLP Properties Texas, L.P.
and the Company
|
Incorporated
by reference to the Report on Form 8-K dated April 15, 2008 (Exhibit
10.1)
|
||
Exhibit
10.7
|
Employment
Agreement - Byron (Barney) H. Adams
|
Incorporated
by reference to the Report on Form 8-K dated January 12, 2009 (Exhibit
10.1)
|
||
Exhibit
10.8
|
Employment
Agreement - Oliver G. (Chip) Brewer
|
Incorporated
by reference to the Quarterly Report on Form 10-Q for the quarter ended
March 31, 2009 File No. 001-33978 (Exhibit 10.9)
|
||
Exhibit
10.9
|
Amendment
to Revolving line of Credit between Adams Golf, Inc and Wachovia Bank,
National Association
|
Incorporated
by reference to Third quarter 2009 Form 10-Q File No 001-33978 (Exhibit
10.9)
|
||
Exhibit
10.10
|
Stipulation
of Settlement of In Re Adams Golf, Inc. Securities Litigation, dated
December 9, 2009
|
Included
in this filing
|
Exhibit
21.1
|
Subsidiaries
of the Registrant
|
Included
in this filing
|
||
Exhibit
23.1
|
Consent
of BKD LLP
|
Included
in this filing
|
||
Exhibit
23.2
|
Consent
of KBA GROUP LLP
|
Included
in this filing
|
||
Exhibit
31.1
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
Included
in this filing
|
||
Exhibit
31.2
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
Included
in this filing
|
||
Exhibit
32.1
|
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Included
in this filing
|
ADAMS GOLF, INC., a Delaware corporation | ||
Date: March
9, 2010
|
By: |
/S/ B.H. (BARNEY)
ADAMS
|
B.H. (Barney) Adams, Chairman of the Board | ||
Date: March
9, 2010
|
By: |
/S/ B.H. (BARNEY)
ADAMS
|
B.H. (Barney) Adams, Chairman of the Board | ||
Date: March
9, 2010
|
By: |
/S/ OLIVER G.
BREWER III
|
Oliver G. (Chip) Brewer III | ||
Chief Executive Officer, President and Director | ||
Date: March
9, 2010
|
By: |
/S/ PAMELA
HIGH
|
Pamela J. High | ||
Interim Chief Financial Officer | ||
(Principal Financial Officer) | ||
Date: March
9, 2010
|
By: |
/S/ MARK R.
MULVOY
|
Mark R. Mulvoy | ||
Director | ||
Date: March
9, 2010
|
By: |
/S/ ROBERT D.
ROGERS
|
Robert D. Rogers | ||
Director | ||
Date: March
9, 2010
|
By: |
/S/ RUSSELL L.
FLEISCHER
|
Russell L. Fleischer | ||
Director | ||
Date: March
9, 2010
|
By: |
/S/ JOSEPH R.
GREGORY
|
Joseph R. Gregory | ||
Director | ||
Date: March
9, 2010
|
By: |
/S/ JOHN M.
GREGORY
|
John M. Gregory | ||
Director | ||
Page
|
|
Consolidated
Financial Statements
|
|
Reports
of Independent Registered Public Accounting Firms
|
F-2
– F-3
|
Consolidated
Balance Sheets as of December 31, 2009 and 2008
|
F-4
|
Consolidated
Statements of Operations for the Years ended December 31, 2009, 2008 and
2007
|
F-5
|
Consolidated
Statements of Stockholders' Equity for the Years ended December 31,
2009, 2008 and 2007
|
F-6
- F-7
|
Consolidated
Statements of Cash Flows for the Years ended December 31, 2009, 2008
and 2007
|
F-8
|
Notes
to Consolidated Financial Statements
|
F-9
- F-25
|
Report
of Independent Registered Public Accounting Firm
|
|
Schedule
II - Valuation and Qualifying Accounts
|
/S/
BKD LLP
|
Dallas,
Texas
|
March
9, 2010
|
/S/
KBA GROUP LLP
|
Dallas,
Texas
|
March
9, 2010
|
ASSETS
|
||||||||
December 31,
|
||||||||
2009
|
2008
|
|||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 12,562 | $ | 5,960 | ||||
Trade
receivables, net
|
13,136 | 14,743 | ||||||
Inventories,
net
|
19,721 | 33,611 | ||||||
Prepaid
expenses
|
378 | 908 | ||||||
Other
current assets
|
22 | 29 | ||||||
Total
current assets
|
45,819 | 55,251 | ||||||
Property
and equipment, net
|
934 | 1,210 | ||||||
Deferred
tax asset, net – non current
|
10,228 | 10,228 | ||||||
Other
assets
|
238 | 367 | ||||||
$ | 57,219 | $ | 67,056 | |||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 5,479 | $ | 9,471 | ||||
Accrued
expenses and other current liabilities
|
11,228 | 7,253 | ||||||
Total
current liabilities
|
16,707 | 16,724 | ||||||
Other
liabilities
|
2 | 18 | ||||||
Total
liabilities
|
16,709 | 16,742 | ||||||
Stockholders'
equity:
|
||||||||
Preferred
stock, $0.01 par value; authorized 1,250,000 shares; none
issued
|
-- | -- | ||||||
Common
stock, $.001 par value; authorized 12,500,000 shares; 7,387,309 and
6,909,866 shares issued and 6,976,372 and 6,498,929 shares outstanding at
December 31, 2009 and 2008, respectively
|
7 | 7 | ||||||
Additional
paid-in capital
|
93,576 | 92,701 | ||||||
Accumulated
other comprehensive income
|
2,074 | 565 | ||||||
Accumulated
deficit
|
(50,393 | ) | (38,205 | ) | ||||
Treasury
stock, 410,937 common shares at December 31, 2009 and December 31, 2008,
at cost
|
(4,754 | ) | (4,754 | ) | ||||
Total
stockholders' equity
|
40,510 | 50,314 | ||||||
Commitments
and contingencies
|
||||||||
$ | 57,219 | $ | 67,056 |
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Net
sales
|
$ | 76,139 | $ | 91,451 | $ | 94,604 | ||||||
Cost
of goods sold
|
53,714 | 53,981 | 54,608 | |||||||||
Gross
profit
|
22,425 | 37,470 | 39,996 | |||||||||
Operating
expenses:
|
||||||||||||
Research
and development expenses
|
2,816 | 3,758 | 3,698 | |||||||||
Selling
and marketing expenses
|
19,911 | 26,205 | 23,772 | |||||||||
General
and administrative expenses
|
6,773 | 8,929 | 8,420 | |||||||||
Settlement
expense
|
5,000 | -- | -- | |||||||||
Total
operating expenses
|
34,500 | 38,892 | 35,890 | |||||||||
Operating
income/(loss)
|
(12,075 | ) | (1,422 | ) | 4,106 | |||||||
Other
income (expense):
|
||||||||||||
Interest
income
|
8 | 122 | 286 | |||||||||
Interest
expense
|
(87 | ) | (100 | ) | (1 | ) | ||||||
Other
|
34 | (63 | ) | 264 | ||||||||
Income/(loss)
before income taxes
|
(12,120 | ) | (1,463 | ) | 4,655 | |||||||
Net
income tax expense (benefit)
|
68 | (4 | ) | (4,746 | ) | |||||||
Net
income/(loss)
|
$ | (12,188 | ) | $ | (1,459 | ) | $ | 9,401 | ||||
Net income/(loss) per common share: | ||||||||||||
Basic
|
$ | (1.82 | ) | $ | (0.23 | ) | $ | 1.54 | ||||
Diluted
|
$ | (1.82 | ) | $ | (0.23 | ) | $ | 1.32 |
Shares
of
|
Additional
|
Accumulated
Other
|
Cost
of
|
Total
|
||||||||||||||||||||||||||||
Common
|
Common
|
Paid-in
|
Comprehensive
|
Accumulated
|
Comprehensive
|
Treasury
|
Stockholders'
|
|||||||||||||||||||||||||
Stock
|
Stock
|
Capital
|
Income
(Loss)
|
Deficit
|
Income
(Loss)
|
Stock
|
Equity
|
|||||||||||||||||||||||||
Balance,
December 31, 2006
|
6,223,807 | $ | 6 | $ | 90,649 | $ | 887 | $ | (46,147 | ) | $ | (3,526 | ) | $ | 41,869 | |||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||||||
Net
income
|
-- | -- | -- | -- | 9,401 | $ | 9,401 | -- | 9,401 | |||||||||||||||||||||||
Other
comprehensive income, net of tax:
|
||||||||||||||||||||||||||||||||
Unrealized
gain on foreign currency translation
|
-- | -- | -- | 1,668 | -- | 1,668 | -- | 1,668 | ||||||||||||||||||||||||
Comprehensive
income
|
-- | -- | -- | -- | -- | $ | 11,069 | -- | -- | |||||||||||||||||||||||
Stock
options exercised
|
324,040 | 1 | 42 | -- | -- | -- | 43 | |||||||||||||||||||||||||
Treasury
stock purchased
|
-- | -- | -- | -- | -- | (728 | ) | (728 | ) | |||||||||||||||||||||||
Amortization
of deferred compensation
|
-- | -- | 1,046 | -- | -- | -- | 1,046 | |||||||||||||||||||||||||
Balance,
December 31, 2007
|
6,547,847 | 7 | 91,737 | 2,555 | (36,746 | ) | (4,254 | ) | 53,299 | |||||||||||||||||||||||
Comprehensive
loss:
|
||||||||||||||||||||||||||||||||
Net
loss
|
-- | -- | -- | -- | (1,459 | ) | $ | (1,459 | ) | -- | (1,459 | ) | ||||||||||||||||||||
Other
comprehensive loss, net of tax:
|
||||||||||||||||||||||||||||||||
Unrealized
loss on foreign currency translation
|
-- | -- | -- | (1,990 | ) | -- | (1,990 | ) | -- | (1,990 | ) | |||||||||||||||||||||
Comprehensive
loss
|
-- | -- | -- | -- | -- | $ | (3,449 | ) | -- | -- | ||||||||||||||||||||||
Stock
options exercised
|
200,919 | -- | 8 | -- | -- | -- | 8 | |||||||||||||||||||||||||
Issuance
of restricted stock
|
161,365 | -- | -- | -- | -- | -- | -- | |||||||||||||||||||||||||
Stock
retired
|
(265 | ) | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Treasury
stock purchased
|
-- | -- | -- | -- | -- | (500 | ) | (500 | ) | |||||||||||||||||||||||
Amortization
of deferred compensation
|
-- | -- | 956 | -- | -- | -- | 956 | |||||||||||||||||||||||||
Balance,
December 31, 2008
|
6,909,866 | $ | 7 | $ | 92,701 | $ | 565 | $ | (38,205 | ) | $ | (4,754 | ) | $ | 50,314 |
(continued)
|
Shares
of
|
Additional
|
Accumulated
Other
|
Cost
of
|
Total
|
||||||||||||||||||||||||||||
Common
|
Common
|
Paid-in
|
Comprehensive
|
Accumulated
|
Comprehensive
|
Treasury
|
Stockholders'
|
|||||||||||||||||||||||||
Stock
|
Stock
|
Capital
|
Income (Loss)
|
Deficit
|
Income
/(Loss)
|
Stock
|
Equity
|
|||||||||||||||||||||||||
Balance,
December 31, 2008
|
6,909,866 | $ | 7 | $ | 92,701 | $ | 565 | $ | (38,205 | ) | $ | (4,754 | ) | $ | 50,314 | |||||||||||||||||
Comprehensive
loss:
|
||||||||||||||||||||||||||||||||
Net
loss
|
-- | -- | -- | -- | (12,188 | ) | $ | (12,188 | ) | -- | (12,188 | ) | ||||||||||||||||||||
Other
comprehensive income, net of tax:
|
||||||||||||||||||||||||||||||||
Unrealized
gain on foreign currency translation
|
-- | -- | -- | 1,509 | -- | 1,509 | -- | 1,509 | ||||||||||||||||||||||||
Comprehensive
loss
|
-- | -- | -- | -- | -- | $ | (10,679 | ) | -- | -- | ||||||||||||||||||||||
Stock
options exercised
|
101,938 | -- | 4 | -- | -- | -- | 4 | |||||||||||||||||||||||||
Issuance
of restricted stock
|
375,505 | -- | -- | -- | -- | -- | -- | |||||||||||||||||||||||||
Amortization
of deferred compensation
|
-- | -- | 871 | -- | -- | -- | 871 | |||||||||||||||||||||||||
Balance,
December 31, 2009
|
7,387,309 | $ | 7 | $ | 93,576 | $ | 2,074 | $ | (50,393 | ) | $ | (4,754 | ) | $ | 40,510 |
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income/(loss)
|
$ | (12,188 | ) | $ | (1,459 | ) | $ | 9,401 | ||||
Adjustments
to reconcile net income/(loss) to net cash provided by (used in) operating
activities:
|
||||||||||||
Depreciation
and amortization of property and equipment and intangible
assets
|
609 | 578 | 460 | |||||||||
Amortization
of deferred compensation
|
871 | 956 | 1,046 | |||||||||
Provision
for doubtful accounts
|
1,173 | 1,539 | 316 | |||||||||
Provision
for deferred income taxes
|
-- | -- | (4,826 | ) | ||||||||
Provision
for inventory reserve
|
1,848 | 24 | 36 | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Trade
receivables
|
434 | 1,727 | (4,772 | ) | ||||||||
Inventories
|
12,042 | (4,890 | ) | (4,130 | ) | |||||||
Prepaid
expenses
|
530 | (165 | ) | (57 | ) | |||||||
Other
current assets
|
7 | 52 | (61 | ) | ||||||||
Other
assets
|
-- | 557 | 531 | |||||||||
Accounts
payable
|
(3,991 | ) | 266 | 2,934 | ||||||||
Accrued
expenses and other current liabilities
|
3,975 | (1,449 | ) | 1,242 | ||||||||
Net
cash provided by (used in) operating activities
|
5,310 | (2,264 | ) | 2,120 | ||||||||
Cash
flows from investing activities:
|
||||||||||||
Purchase
of property and equipment
|
(184 | ) | (552 | ) | (653 | ) | ||||||
Purchase
of intangible assets
|
-- | -- | (600 | ) | ||||||||
Net
cash used in investing activities
|
(184 | ) | (552 | ) | (1,253 | ) | ||||||
Cash
flows from financing activities:
|
||||||||||||
Principal
payments under capital lease obligation
|
(16 | ) | (11 | ) | (22 | ) | ||||||
Proceeds
from exercise of stock options
|
4 | 8 | 43 | |||||||||
Treasury
stock purchase
|
-- | (500 | ) | (728 | ) | |||||||
Debt
financing costs
|
(21 | ) | 4 | (35 | ) | |||||||
Net
cash used in financing activities
|
(33 | ) | (499 | ) | (742 | ) | ||||||
Effects
of exchange rate changes
|
1,509 | (1,990 | ) | 1,668 | ||||||||
Net
increase (decrease) in cash and cash equivalents
|
6,602 | (5,305 | ) | 1,793 | ||||||||
Cash
and cash equivalents at beginning of the year
|
5,960 | 11,265 | 9,472 | |||||||||
Cash
and cash equivalents at end of the year
|
$ | 12,562 | $ | 5,960 | $ | 11,265 | ||||||
Supplemental
disclosure of cash flow information:
|
||||||||||||
Interest
paid
|
$ | 87 | $ | 101 | $ | 1 | ||||||
Income
taxes paid
|
$ | 68 | $ | 9 | $ | 65 | ||||||
Supplemental
disclosure of non-cash investing and financing activities Equipment
financed with capital lease
|
$ | -- | $ | 44 | $ | -- |
(1)
|
Summary
of Significant Accounting Policies
|
|
(a) General
|
|
We
design, assemble, market and distribute premium quality, technologically
innovative golf clubs for all skill levels. Our recently
launched products include Idea a7 and a7 OS irons and
hybrids, Speedline Fast 10 and Speedline 9032 drivers,
Speedline Fast 10 hybrid fairway woods, Idea Pro Black I-woods and irons,
Idea Tech a4 and a4 OS I-woods and irons, Idea Pro Gold I-woods and irons
and Insight Tech a4 and a4 OS drivers and hybrid-fairway
woods. We also continue to develop new products under the name
of Women's Golf Unlimited, the Lady Fairway and Square 2
brands. We continue to sell certain older product lines,
including the Idea a3 and a3 OS I-woods and irons, the Tight Lies family
of fairway woods, the Puglielli series of wedges, and certain
accessories.
|
|
The
consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
|
|
(b) Inventories
|
|
Inventories
are valued at the lower of cost or market and primarily consist of
finished golf clubs and component parts. Cost is determined
using the first-in, first-out method. The inventory balance,
which includes material, labor and assembly overhead costs, is recorded
net of an estimated allowance for obsolete inventory. The
estimated allowance for obsolete inventory is based upon management's
understanding of market conditions and forecasts of future product
demand. Accounting for inventories could result in material
adjustments if market conditions and future demand estimates are
significantly different than original assumptions, causing the reserve for
obsolescence to be materially adversely
affected.
|
|
(c) Allowance
for Doubtful Accounts
|
|
We
maintain an allowance for doubtful accounts for estimated losses resulting
from the inability of our customers to make required
payments. An estimate of uncollectable amounts is made by
management using an evaluation methodology involving both overall and
specific identification. We evaluate each individual customer
and measure various key aspects of the customer such as, but not limited
to, their overall credit risk (via Experian and Dun and Bradstreet
reports), payment history, track record for meeting payment plans,
industry communications, the portion of the customer's balance that is
past due and other various items. From an overall perspective,
we also look at the aging of the receivables in total and aging relative
to prior periods to determine the appropriate reserve
requirements. Fluctuations in the reserve requirements will
occur from period to period as the change in customer mix or strength of
the customers could affect the reserve disproportionately compared to the
total change in the accounts receivable balance. Based on
management's assessment, we provide for estimated uncollectable amounts
through a charge to earnings and a credit to the valuation
allowance. Balances which remain outstanding after we have used
reasonable collection efforts are written off through a charge to the
valuation allowance and a credit to accounts receivable. We
generally do not require collateral. Accounting for an
allowance for doubtful accounts could be significantly affected as a
result of a deviation in our assessment of any one or more customers'
financial strength.
|
(1)
|
Summary
of Significant Accounting Policies
(continued)
|
|
(d) Revenue
Recognition
|
|
We
recognize revenue when the product is shipped. At that time,
the title and risk of loss transfer to the customer and the ability to
collect is reasonably assured. The ability to collect is
evaluated on an individual customer basis taking into consideration
historical payment trends, current financial position, results of
independent credit evaluations and payment terms. If the
ability to collect decreases significantly, including but not limited to,
due to the current global economic recession, our revenue would be
adversely affected. Additionally, an estimate of product
returns and warranty costs are recorded when revenue is
recognized. Estimates are based on historical trends taking
into consideration current market conditions, customer demands and product
sell through. We also record estimated reductions in revenue
for sales programs such as co-op advertising and spiff
incentives. Estimates in the sales program accruals are based
on program participation and forecast of future product demand. If
actual sales returns and sales programs significantly exceed the recorded
estimated allowances, our sales would be adversely affected. We
recognize deferred revenue for sales that have extended payment terms and
a right of return of the product under a specified
program. Once the product under the deferred revenue program is
paid for and all revenue recognition criteria have been met, we record
revenue.
|
|
(e) Property
and Equipment
|
|
Property
and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are calculated
using the straight-line method over the estimated useful lives of the
respective assets, which range from three to seven
years. Maintenance and repairs are expensed as
incurred. Significant replacements and betterments are
capitalized.
|
|
(f) New
Accounting Pronouncements
|
|
There
were no new accounting pronouncements during the period that had a
material impact on the Company's financial
statements.
|
|
(g) Research
and Development
|
|
Research
and development costs consist of all costs incurred in planning, designing
and testing of golf equipment, including salary costs related to research
and development. These costs are expensed as
incurred. Our research and development expenses were
approximately $2,816,000, $3,758,000 and $3,698,000 for the years ended
December 31, 2009, 2008 and 2007,
respectively.
|
|
(h) Advertising
Costs
|
|
Advertising
costs, included in selling and marketing expenses on the accompanying
consolidated statements of operations, other than direct commercial costs,
are expensed as incurred and totaled approximately $3,922,000, $6,559,000
and $5,732,000 for the years ended December 31, 2009, 2008 and 2007,
respectively.
|
(1)
|
Summary
of Significant Accounting Policies (continued)
|
|
(i) Product
Warranty
|
|
Our
golf equipment is sold under warranty against defects in material and
workmanship for a period of one year. An allowance for
estimated future warranty costs is recorded in the period products are
sold. In estimating our future warranty obligations, we
consider various relevant factors, including our stated warranty policies,
the historical frequency of claims, and the cost to replace or repair the
product. Accounting for product warranty allowances could be
adversely affected if one or more of our products were to fail (i.e.
broken shaft, broken head, etc.) to a significant degree above and beyond
our historical product failure rates, which determine the product warranty
accruals.
|
Beginning
Balance
|
Charges
for Warranty Claims
|
Estimated
Accruals
|
Ending
Balance
|
|||||||||||||
Year
ended December 31, 2009
|
$ | 522 | (474 | ) | 317 | $ | 365 | |||||||||
Year
ended December 31, 2008
|
$ | 337 | (697 | ) | 882 | $ | 522 |
|
(j) Income
Taxes
|
|
We
account for income taxes in accordance with FASB ASC 740, Income
Taxes. FASB ASC 740 prescribes the use of the liability
method whereby deferred tax assets and liabilities are recognized for the
future tax consequences attributable to the differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes
the enactment date. In assessing the realizability of deferred
income tax assets, we consider whether it is more likely than not that
some portion or all of the deferred income tax assets will be
realized. The ultimate realization of deferred income tax
assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become
deductible. Due to our historical operating results, management
is unable to conclude on a more likely than not basis that all deferred
income tax assets generated from net operating losses and other deferred
tax assets will be realized. However, due to our earnings
history over the past years and projected future earnings, we have
concluded that it is more likely than not that a portion of the deferred
tax asset will be realized. We have recognized a valuation
allowance equal to a portion of the deferred income tax asset for which
realization is uncertain. Our estimate of the realizability of the net
deferred tax assets is a significant estimate that is subject to change in
the near term. We file tax returns with the U.S. federal
jurisdictions and are no longer subject to income tax examinations for
years before 2006.
|
(1)
|
Summary
of Significant Accounting Policies
(continued)
|
|
(k) Net
income/(Loss) Per Share
|
|
The
weighted average common stock outstanding used for determining basic and
diluted loss per common share were 6,688,762 for the year ended December
31, 2009. The effect of all options to purchase shares of our
common stock for the year ended December 31, 2009 were excluded from the
calculation of dilutive shares as the effect of inclusion would have been
antidilutive.
|
|
The
weighted average common stock outstanding used for determining basic and
diluted loss per common share were 6,413,054 for the year ended December
31, 2008. The effect of all options to purchase shares of our
common stock for the year ended December 31, 2008 were excluded from the
calculation of dilutive shares as the effect of inclusion would have been
antidilutive.
|
|
The
weighted average common stock outstanding used for determining basic and
diluted income per common share were 6,094,385 and 7,134,363,
respectively, for the year ended December 31, 2007. The effect
of all options to purchase shares of our common stock for the year ended
December 31, 2007 resulted in additional dilutive shares of
1,039,978.
|
|
(l) Financial
Instruments
|
|
The
carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable, and accrued expenses approximate fair value due to the
short maturity of these
instruments.
|
|
(m) Impairment
of Long-Lived Assets
|
|
We
review long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net
cash flows to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair
value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to
sell. During the years ended December 31, 2009, 2008 and 2007,
there was no impairment of long-lived
assets.
|
|
(n) Comprehensive
Income / (Loss)
|
|
Comprehensive
income / (loss) consists of net income / (loss) and unrealized gains and
losses, net of related tax effect, on foreign currency translation
adjustments.
|
|
(o) Cash
and Cash Equivalents
|
|
We
consider all short-term highly liquid instruments, with an original
maturity of three months or less, to be cash
equivalents.
|
(1)
|
Summary
of Significant Accounting Policies
(continued)
|
(2)
|
Trade
Receivables, net
|
2009
|
2008
|
|||||||
Trade
receivables
|
$ | 14,761 | $ | 16,064 | ||||
Allowance
for doubtful accounts
|
(1,625 | ) | (1,321 | ) | ||||
$ | 13,136 | $ | 14,743 |
(3)
|
Inventories,
net
|
2009
|
2008
|
|||||||
Finished
goods
|
$ | 13,057 | $ | 20,423 | ||||
Component
parts
|
8,708 | 13,385 | ||||||
Allowance
for inventory obsolescence
|
(2,044 | ) | (197 | ) | ||||
$ | 19,721 | $ | 33,611 |
(4)
|
Property
and Equipment, net
|
2009
|
2008
|
|||||||
Equipment
|
$ | 2,555 | $ | 2,442 | ||||
Computers
and software
|
7,782 | 7,716 | ||||||
Furniture
and fixtures
|
944 | 940 | ||||||
Leaseholds
improvements
|
183 | 182 | ||||||
Accumulated
depreciation and amortization
|
(10,530 | ) | (10,070 | ) | ||||
$ | 934 | $ | 1,210 |
(5)
|
Other
Current and Non-Current Assets
|
2009
|
2008
|
|||||||
Maintenance
agreements
|
$ | 22 | $ | 29 |
2009
|
2008
|
|||||||
Deposits
|
$ | 6 | $ | 6 | ||||
Other,
including intangible assets purchased
|
232 | 361 | ||||||
$ | 238 | $ | 367 |
(6)
|
Accrued
Expenses and Other Current
Liabilities
|
2009
|
2008
|
|||||||
Payroll
and commissions
|
$ | 284 | $ | 447 | ||||
Product
warranty expense and sales returns
|
2,209 | 1,641 | ||||||
Professional
services
|
25 | 7 | ||||||
Accrued
inventory
|
65 | 1,021 | ||||||
Accrued
settlement expense
|
5,000 | -- | ||||||
Accrued
sales promotions
|
1,060 | 274 | ||||||
Deferred
revenue
|
1,273 | 1,429 | ||||||
Other
|
1,312 | 2,434 | ||||||
$ | 11,228 | $ | 7,253 |
(7)
|
Commitments
and Contingencies
|
Years
ending
|
||||
December
31,
|
||||
2010
|
$ | 652 | ||
2011
|
588 | |||
2012
|
441 | |||
2013
|
289 | |||
2014
|
-- | |||
$ | 1,970 |
(7)
|
Commitments
and Contingencies (continued)
|
|
The
Company maintains directors' and officers' ("D&O") and corporate
liability insurance to cover certain risks associated with these
securities claims filed against us or our directors and
officers. During the period covering the class action lawsuit,
we maintained insurance from multiple carriers, each insuring a different
layer of exposure, up to a total of $50 million. In addition,
we have met the financial deductible of our directors' and officers'
insurance policy for the period covering the time the class action lawsuit
was filed. On March 30, 2006, Zurich American Insurance Company
("Zurich"), which provided insurance coverage totaling $5 million for the
layer of exposure between $15 million and $20 million, notified us that it
was denying coverage due to the fact that it was allegedly not timely
notified of the class action lawsuit. On October 11, 2007, we
filed a suit against our former insurance broker, T&F LLC, asserting
various causes of action arising out of T&F's alleged failure to
notify Zurich of the class action lawsuit. On March 18, 2008,
the suit against T&F was amended to also name as Defendants certain
alleged successor entities to T&F. All of the Defendants
moved to dismiss our lawsuit on the basis that our suit was premature in
that we had not been damaged by the alleged conduct of the Defendants
because we had not paid any sums in satisfaction of a judgment or
settlement of the class action securities litigation. Those
motions were denied pursuant to a Memorandum Opinion and Order dated
September 26, 2008. T&F's successor entities also moved to
dismiss the claims brought against them on the grounds that, as purchasers
of solely T&F's assets, they could not be held liable for the T&F
debts or liabilities. The Court struck our complaint solely
against the successor entity Defendants on the grounds that we had not
alleged sufficient facts triggering an exception to the general rule that
the purchaser of an entity's assets is not liable for the entity's
liabilities and ordered us to replead our claims against the successor
entity Defendants. We and T&F have engaged in preliminary
written discovery efforts, but substantial discovery remains to be
completed. On November 16, 2009, we filed a Second Amended
Complaint reasserting our causes of action against the previously-named
Defendants. The Second Amended
Complaint also added Zurich as a Defendant to the lawsuit,
asserting various causes of action against it arising out of its denial of
coverage for the class action
lawsuit.
|
|
Beginning
April 2008, we received communications from the Estate of Anthony
Antonious alleging that our products infringed a patent of Anthony
Antonious concerning an aerodynamic metal wood golf club
head. On May 28, 2008, we filed a declaratory judgment lawsuit
against the Anthony Antonious Trust in the United States District Court
for the Southern District of the State of Ohio, alleging non-infringement
of the Antonious patent. On June 30, 2008, the Estate of Anthony
Antonious filed a lawsuit against us in the United States District Court
in the State of New Jersey for damage and injunctive relief alleging
infringement of the patent. On September 2, 2008, we filed a
Request for Ex Parte Reexamination with the United States Patent and
Trademark Office ("USPTO") requesting that the USPTO reexamine the
Antonious patent at issue. The USPTO issued an order granting
our Request for Ex Parte Reexamination on November 7, 2008 after finding
that a substantial new question of patentability affecting the claims has
been raised. As a result, both the Ohio lawsuit and the New
Jersey lawsuit were stayed pending the outcome of the USPTO's
reexamination proceeding. On October 9, 2009, the USPTO issued
a Notice of Intent to Issue Ex Parte Reexamination Certificate concerning
claims amended during the reexamination procedure. A
Reexamination Certificate was issued on January 5, 2010 and litigation has
now resumed in the New Jersey action and is expected to resume shortly in
the Ohio action. At this point in the legal proceedings, we cannot
predict the outcome of the matter with any certainty, and thus cannot
reasonably estimate future liability on the conclusion of the events, if
any.
|
|
From
time to time, we are engaged in various other legal proceedings in the
normal course of business. The ultimate liability, if any, for
the aggregate amounts claimed cannot be determined at this
time.
|
(8)
|
Retirement
Plan
|
|
In
February 1998, we adopted the Adams Golf, Ltd. 401(k) Retirement Plan,
which covers substantially all employees of the Company. During
April 2009, we discontinued the employer match. For the years
ended December 31, 2009, 2008 and 2007, we contributed approximately
$65,000, $251,000 and $134,000, respectively, to the 401(k) Retirement
Plan.
|
(9)
|
Liquidity
|
|
In
November 2007, we signed a revolving credit agreement, which expires
November 2012 with Wachovia Bank, NA to provide up to $15.0 million in
short term debt. The agreement is collateralized by all of our
assets and requires us, among other things, to maintain certain financial
performance levels relative to the fixed charge coverage
ratio. This agreement was amended in June 2009 so that the
ratio is only calculated when we have less than $5.0 million in
availability on the facility, and it was further amended in December 2009
to provide that our debt covenant ratio is only calculated if we have less
than $2.0 million in availability on the facility between March and June
of each year. Interest on outstanding balances accrues at a
rate of LIBOR plus 2.50% and is payable monthly. As of December
31, 2009 and March 5, 2010, we had no outstanding borrowings on our credit
facility and we were in compliance with the terms of our
agreement. In 2008, Wells Fargo Bank, NA acquired Wachovia
Bank, NA. As a result, Wells Fargo Bank, NA, as successor to
Wachovia Bank, NA, has become our lender under our existing line of
credit and is subject to all of the terms and
conditions thereof.
|
|
Our
anticipated sources of liquidity over the next twelve months are expected
to be cash reserves, projected cash flows from operations, and available
borrowings under our credit facility. We anticipate that
operating cash flows, current cash reserves, and available borrowings also
will fund capital expenditure programs. These capital
expenditure programs can be suspended or delayed at any time with minimal
disruption to our operations if cash is needed in other areas of our
operations. In addition, cash flows from operations and cash
reserves will be used to support ongoing purchases of component parts for
our current and future product lines. The expected operating
cash flows, current cash reserves and borrowings available under our
credit facility are expected to allow us to meet working capital
requirements during periods of low cash flows resulting from the
seasonality of the industry.
|
|
If
adequate funds are not available or not available on acceptable terms, we
may be unable to continue operations; develop, enhance and market
products; retain qualified personnel; take advantage of future
opportunities; or respond to competitive pressures, any of which could
have a material adverse effect on our business, operating results,
financial condition and/or
liquidity.
|
(10)
|
Income
Taxes
|
2009
|
2008
|
2007
|
||||||||||
Federal-current
|
$ | - | $ | (13 | ) | $ | 79 | |||||
State-current
|
68 | 9 | 1 | |||||||||
Deferred
|
-- | -- | (4,826 | ) | ||||||||
$ | 68 | $ | (4 | ) | $ | (4,746 | ) |
2009
|
2008
|
2007
|
||||||||||
Computed
"expected" tax (benefit) expense
|
$ | (4,242 | ) | $ | (511 | ) | $ | 1,629 | ||||
State
income taxes, net of federal
|
-- | (15 | ) | 47 | ||||||||
Change
in valuation allowance for deferred tax assets
|
4,399 | 680 | (6,809 | ) | ||||||||
Other
|
(89 | ) | (158 | ) | 387 | |||||||
$ | 68 | $ | (4 | ) | $ | (4,746 | ) |
2009
|
2008
|
|||||||
Deferred
tax assets:
|
||||||||
Allowance
for doubtful accounts receivable
|
$ | 569 | $ | 475 | ||||
Product
warranty and sales returns
|
773 | 591 | ||||||
Other
reserves
|
38 | 277 | ||||||
Deferred
compensation
|
621 | 312 | ||||||
263A
adjustment
|
13 | 51 | ||||||
Research
and development tax credit carryforwards
|
306 | 306 | ||||||
Net
operating loss carryforwards
|
17,435 | 13,344 | ||||||
Total
deferred tax assets
|
19,755 | 15,356 | ||||||
Valuation
allowance
|
(9,527 | ) | (5,128 | ) | ||||
Net
deferred tax assets
|
$ | 10,228 | $ | 10,228 |
(10)
|
Income
Taxes (continued)
|
2009
|
2008
|
|||||||
Current
|
$ | -- | $ | -- | ||||
Non-current
|
10,228 | 10,228 | ||||||
$ | 10,228 | $ | 10,228 |
|
In
assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion of the deferred tax
asset will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible.
|
|
At
December 31, 2009, we could not determine based on a weighing of objective
evidence that it is more likely than not that all of our deferred tax
assets will be realized. As a result, as of December 31, 2009
and 2008, we have established a valuation allowance for a portion of our
deferred tax assets resulting in a net deferred tax asset of $10.2
million. This amount represents what we believe to be an
estimate of future usage of our net operating loss
carryfowards. The remaining asset has an existing valuation
allowance applied to it. The net change in the valuation
allowance for the years ended December 31, 2009 and 2008 was $4,399,000
and $680,000, respectively.
|
|
At
December 31, 2009, we had federal net operating loss carryforwards of
approximately $50,119,000 and tax credit carryforwards of $306,000, which
are available to offset future taxable income through
2029.
|
(11)
|
Stockholders'
Equity
|
|
(a) Employee
Stock Option Plans
|
|
In
May 2002, we adopted the 2002 Equity Incentive Plan (the
"Plan") for employees, outside directors and consultants. The
Plan allows for the granting of up to 625,000 shares of our common stock
at the inception of the Plan, plus all shares remaining available for
issuance under all predecessor plans on the effective date of this Plan,
and additional shares as defined in the Plan. On May 1, 2002,
four predecessor plans were terminated and a total of 538,370 shares
available for issuance under these predecessor plans were transferred to
the Equity Incentive Plan. As shares are forfeited or expire
under the four predecessor plans, those shares become available under the
Plan. Since the initial transfer on May 1, 2002, an additional
201,510 shares were transferred to the Plan. At December 31,
2009, options to purchase 891,044 shares were outstanding with exercise
prices ranging from $0.04 to $4.80 per share at the date of
grant. The option vesting periods vary from six months to four
years and the options expire ten years from the date of
grant. At December 31, 2009, 415,655 shares remained available
for grant under the Plan, including
forfeitures.
|
(11)
|
Stockholders'
Equity (continued)
|
|
The
following is a summary of stock options outstanding as of December 31,
2009:
|
Weighted
|
|||||||||||||||||||
Average
|
Weighted
|
Weighted
|
|||||||||||||||||
Range
of
|
Remaining
|
Average
|
Average
Vested
|
||||||||||||||||
Exercise
|
Options
|
Contractual
|
Exercise
Price
|
Options
|
Exercise
Price
|
||||||||||||||
Prices
|
Outstanding
|
Life
|
per share
|
Exercisable
|
per share
|
||||||||||||||
$0.04
- $1.00
|
753,544 |
3.10
years
|
$ | 0.04 | 753,544 | $ | 0.04 | ||||||||||||
$1.01
- $3.00
|
12,500 |
3.12
years
|
1.24 | 12,500 | 1.24 | ||||||||||||||
$3.01
- $4.00
|
100,000 |
9.04
years
|
3.02 | -- | -- | ||||||||||||||
$4.01
- $5.00
|
25,000 |
5.26 years
|
4.76 | 21,875 | 4.76 | ||||||||||||||
|
|||||||||||||||||||
891,044 |
3.83
years
|
$ | 0.52 | 787,919 | $ | 0.19 |
Aggregate
|
||||||||||||
Weighted
|
Intrinsic
|
|||||||||||
Number
of
|
Average
|
Value
of
|
||||||||||
Shares
|
Exercise price
|
options
|
||||||||||
Options
outstanding at December 31, 2006
|
1,424,308 | $ | 0.16 | |||||||||
Options
granted (resulting from the reverse split conversion of
existing options)
|
6 | 0.04 | ||||||||||
Options
forfeited (expired)
|
-- | -- | ||||||||||
Options
exercised
|
(324,040 | ) | 0.04 | $ | 2,557,468 | |||||||
Options
outstanding at December 31, 2007
|
1,100,274 | 0.16 | ||||||||||
Options
granted
|
-- | -- | ||||||||||
Options
forfeited (expired)
|
(6,373 | ) | 0.04 | |||||||||
Options
exercised
|
(200,919 | ) | 0.04 | 1,429,703 | ||||||||
Options
outstanding at December 31, 2008
|
892,982 | 0.19 | ||||||||||
Options
granted
|
100,000 | 3.02 | ||||||||||
Options
forfeited (expired)
|
-- | -- | ||||||||||
Options
exercised
|
(101,938 | ) | 0.04 | 291,133 | ||||||||
Options
outstanding at December 31, 2009
|
891,044 | $ | 0.52 | $ | 2,161,939 | |||||||
Options
exercisable at December 31, 2009
|
787,919 | $ | 0.19 | $ | 2,174,469 |
(11)
|
Stockholders'
Equity (continued)
|
|
During
2009, 100,000 shares of restricted stock was granted at fair market value
of $3.30, 50,000 at $3.20, 175,000 at $3.15 and 50,505 at
$3.02. During 2008, 150,000 shares of restricted stock were
granted at a fair market price of $8.15, and 11,365 were granted at a fair
market price of $8.60 and 50,000 shares vested. The per share
weighted-average fair value of restricted stock granted during 2009 was
$3.18 and $8.51 during 2008. The fair value of the restricted
stock grants were recorded using the fair market value at the date of
grant and expensed over the vesting period. Restricted stock
vesting periods vary from six months to four years from the date of
grant.
|
|
A
summary of restricted stock grant activity
follows:
|
Weighted
|
||||||||
Average
|
||||||||
Number
of
|
Grant date
|
|||||||
Shares
|
price
|
|||||||
Stock
unvested at December 31, 2008
|
111,365 | $ | 8.51 | |||||
Stock
granted
|
375,505 | 3.18 | ||||||
Stock
vested or exercised
|
150,000 | 5.03 | ||||||
Stock
unvested at December 31, 2009
|
336,870 | $ | 4.12 |
|
Operating
expenses included in the consolidated statements of operations for the
years ended December 31, 2009, 2008 and 2007 include total compensation
expense associated with stock options and restricted stock of $871,000,
$956,000 and $1,046,000,
respectively.
|
|
The
weighted average remaining contractual life of the options exercisable at
December 31, 2009 was 3.16 years and at December 31, 2008 was 4.35
years.
|
|
As
of December 31, 2009, compensation costs related to non-vested awards
totaled $1.5 million, which is expected to be recognized over a weighted
average period of 1.9 years.
|
|
(b) Common
Stock Repurchase Program
|
|
In
October 1998, the Board of Directors approved a plan whereby we are
authorized to repurchase from time to time on the open market up to
500,000 shares of its common stock. At December 31, 1998, we
had repurchased 164,375 shares of common stock at an average price per
share of $19.08 for a total cost of approximately
$3,136,000. During the year ended December 31, 2006, we
repurchased 69,782 shares of common stock at prices ranging from $5.40 to
$5.76 price per share for a total cost of approximately
$390,000. During the year ended December 31, 2007, we
repurchased 91,966 shares at prices ranging from $7.60 to $8.00 for a
total cost of approximately $728,000. During the year ended
December 31, 2008, we repurchased 84,814 shares at prices ranging from
$2.90 to $6.73 for a total cost of approximately
$500,000. During 2009, no shares were
repurchased. The repurchased shares are held in
treasury.
|
(11)
|
Stockholders'
Equity (continued)
|
Period of Exercise
|
Total Options to be
Exercised
|
|||
2010
|
15,000 | |||
2011
|
27,500 | |||
2012
|
28,209 | |||
2013
|
13,750 | |||
Beyond
2013
|
15,000 | |||
|
||||
Total
Options
|
99,459 |
(12)
|
Segment
Information
|
2009
|
2008
|
2007
|
||||||||||
United
States
|
$ | 60,927 | $ | 73,375 | $ | 78,623 | ||||||
Rest
of world
|
15,212 | 18,076 | 15,981 | |||||||||
$ | 76,139 | $ | 91,451 | $ | 94,604 |
(12)
|
Segment
Information (continued)
|
|
The
following table sets forth net sales by product class for the years ended
December 31, 2009, 2008 and 2007:
|
2009
|
2008
|
2007
|
||||||||||
Fairway
woods
|
$ | 14,798 | $ | 22,289 | $ | 18,428 | ||||||
Drivers
|
9,509 | 11,276 | 10,472 | |||||||||
Irons
|
51,537 | 57,117 | 63,251 | |||||||||
Wedges
and other
|
295 | 769 | 2,453 | |||||||||
Total
|
$ | 76,139 | $ | 91,451 | $ | 94,604 |
(13)
|
Quarterly
Financial Results (unaudited)
|
|
Quarterly
financial results for the years ended December 31, 2009 and 2008 are as
follows:
|
2009
|
||||||||||||||||
1st Quarter
|
2nd Quarter
|
|
3rd Quarter
|
|
4th Quarter
|
|||||||||||
Net
sales
|
$ | 23,475 | $ | 23,254 | $ | 17,385 | $ | 12,025 | ||||||||
Gross
profit
|
$ | 9,008 | $ | 2,778 | $ | 6,329 | $ | 4,310 | ||||||||
Net
income (loss)
|
$ | 366 | $ | (5,206 | ) | $ | (5,471 | ) | $ | (1,877 | ) | |||||
Income
(loss) per share – basic
|
$ | 0.06 | $ | (0.78 | ) | $ | (0.82 | ) | $ | (0.28 | ) | |||||
–
diluted
|
0.05 | (0.78 | ) | (0.82 | ) | (0.28 | ) |
2008
|
||||||||||||||||
1st Quarter
|
2nd Quarter
|
3rd Quarter
|
|
4th Quarter
|
||||||||||||
Net
sales
|
$ | 28,001 | $ | 33,260 | $ | 17,700 | $ | 12,490 | ||||||||
Gross
profit
|
$ | 12,111 | $ | 13,736 | $ | 6,763 | $ | 4,860 | ||||||||
Net
income (loss)
|
$ | 798 | $ | 1,554 | $ | (1,163 | ) | $ | (2,647 | ) | ||||||
Income
(loss) per share – basic
|
$ | 0.13 | $ | 0.24 | $ | (0.18 | ) | $ | (0.41 | ) | ||||||
–
diluted
|
0.11 | 0.21 | (0.18 | ) | (0.41 | ) |
(14)
|
Business
and Credit Concentrations
|
|
We
are currently dependent on two customers, which collectively comprised
approximately 23.5% of net sales for the year ended December 31,
2009. Of these customers, one customer individually represented
greater than 5% but less than 10% of net sales, and one customer
individually represented greater than 10% but less than 20% of net sales,
while no customer represented greater than 20% of net sales for the year
ended December 31, 2009. For the year ended December 31, 2008,
four customers, which collectively comprised approximately 24.4% of net
sales, of which two customers individually represented greater than 5% but
less than 10% of net sales, while no customer individually represented
greater than 10% of net sales for the year ended December 31,
2008. For the year ended December 31, 2007, four customers,
which collectively comprised approximately 25.5% of net
sales. Of these customers, one customer individually
represented greater than 5% but less than 10% of net sales, while one
customer individually represented greater than 10% but less than 15% of
net sales for the year ended December 31, 2007. Additionally, we have
one customer with an outstanding accounts receivable balance that is
greater than 10% but less than 15% of total accounts receivable and no
customer greater than 15% of total accounts receivable at December 31,
2009. The loss of an individual or a combination of these
customers or a significant impairment or reduction in such customers'
business, including, but not limited to, as a result of the current global
economic recession and credit crisis, would have a material adverse effect
on consolidated revenues, results of operations, financial condition and
competitive market position of the
Company.
|
|
A
significant portion of our inventory purchases are from one supplier in
China; approximately 45% and 48% of our total inventory purchased for the
years ended December 31, 2009 and 2008, respectively, was from this one
Chinese supplier. This supplier and many other industry
suppliers are located in China. We do not anticipate any
changes in the relationships with our suppliers. If such change
were to occur, we have alternative sources available; however, a loss of
our primary supplier or significant impairment to its business, including,
but not limited to, due to the global economic recession and credit
crisis, could adversely affect our business during the period in which we
would have to find an alternative source for such
supplies.
|
|
Schedule
II
|
Charged
to
|
||||||||||||||||
Balance
at
|
Cost
and
|
Balance
at
|
||||||||||||||
Beginning
|
Other
|
End
of
|
||||||||||||||
Description
|
of Period
|
Expenses
|
Deductions(1)
|
Period
|
||||||||||||
Allowance
for doubtful accounts:
|
||||||||||||||||
Year
ended December 31, 2009
|
$ | 1,321 | 1,173 | 869 | $ | 1,625 | ||||||||||
Year
ended December 31, 2008
|
$ | 512 | 1,539 | 730 | $ | 1,321 | ||||||||||
Year
ended December 31, 2007
|
$ | 702 | 316 | 506 | $ | 512 | ||||||||||
Product
warranty and sales returns reserve:
|
||||||||||||||||
Year
ended December 31, 2009
|
$ | 1,641 | 241 | (327 | ) | $ | 2,209 | |||||||||
Year
ended December 31, 2008
|
$ | 1,611 | 885 | 855 | $ | 1,641 | ||||||||||
Year
ended December 31, 2007
|
$ | 2,040 | 545 | 974 | $ | 1,611 | ||||||||||
Inventory
obsolescence reserve:
|
||||||||||||||||
Year
ended December 31, 2009
|
$ | 197 | 3,610 | 1,369 | $ | 2,044 | ||||||||||
Year
ended December 31, 2008
|
$ | 189 | 8 | -- | $ | 197 | ||||||||||
Year
ended December 31, 2007
|
$ | 153 | 36 | -- | $ | 189 | ||||||||||
Deferred
tax asset valuation allowance:
|
||||||||||||||||
Year
ended December 31, 2009
|
$ | 5,128 | 4,399 | -- | $ | 9,527 | ||||||||||
Year
ended December 31, 2008
|
$ | 4,448 | 680 | -- | $ | 5,128 | ||||||||||
Year
ended December 31, 2007
|
$ | 11,257 | (6,809 | ) | -- | $ | 4,448 | |||||||||
(1)
|
Represents
uncollectible accounts charged against the allowance for doubtful
accounts, actual costs incurred for warranty repairs and sales returns,
and inventory items deemed obsolete charged against the inventory
obsolescence reserve.
|