x
|
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
|
For
the quarterly period ended September 30, 2010
|
|
or
|
|
¨
|
Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
|
For
the transition period from to
|
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)
|
Page
|
|||
PART
I
|
FINANCIAL
INFORMATION
|
|
|
Item
1.
|
Financial
Statements
|
||
Condensed
Consolidated Balance Sheets - September 30, 2010 (unaudited) and December
31, 2009
|
3
|
||
Unaudited
Condensed Consolidated Statements of Operations - Three and nine months
ended September 30, 2010 and 2009
|
4
|
||
Unaudited
Condensed Consolidated Statement of Stockholders' Equity - Nine months
ended September 30, 2010
|
5
|
||
Unaudited
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 2010 and 2009
|
6
|
||
Notes
to Unaudited Condensed Consolidated Financial Statements
|
7-14
|
||
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
15-23
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
24
|
|
Item
4T.
|
Controls
and Procedures
|
24
|
|
PART
II
|
OTHER
INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
25-26
|
|
Item
1A.
|
Risk
Factors
|
26
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
N/A
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
N/A
|
|
Item
4.
|
(Removed
and Reserved)
|
N/A
|
|
Item
5.
|
Other
Information
|
N/A
|
|
Item
6.
|
Exhibits
|
26
|
|
Signatures
|
27
|
September 30,
2010
|
December 31,
2009
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 10,268 | $ | 12,562 | ||||
Trade
receivables, net of allowance for doubtful accounts of $1,848 (unaudited)
and $1,625 in 2010 and 2009, respectively
|
18,266 | 13,136 | ||||||
Inventories,
net
|
23,099 | 19,721 | ||||||
Prepaid
expenses
|
695 | 378 | ||||||
Other
current assets
|
114 | 22 | ||||||
Total
current assets
|
52,442 | 45,819 | ||||||
Property
and equipment, net
|
743 | 934 | ||||||
Deferred
tax assets, net
|
10,228 | 10,228 | ||||||
Other
assets, net
|
161 | 238 | ||||||
$ | 63,574 | $ | 57,219 | |||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 4,896 | $ | 5,479 | ||||
Accrued
expenses and other current liabilities
|
10,124 | 11,228 | ||||||
Total
current liabilities
|
15,020 | 16,707 | ||||||
Other
liabilities
|
— | 2 | ||||||
Total
liabilities
|
15,020 | 16,709 | ||||||
Stockholders'
equity:
|
||||||||
Preferred
stock, $0.01 par value; authorized 1,250,000 shares; none
issued
|
— | — | ||||||
Common
stock, $0.001 par value; authorized 12,500,000 shares; 7,759,184 and
7,387,309 shares issued and 7,348,247 and 6,976,372 shares outstanding at
September 30, 2010 (unaudited) and December 31, 2009,
respectively
|
8 | 7 | ||||||
Additional
paid-in capital
|
94,258 | 93,576 | ||||||
Accumulated
other comprehensive income
|
2,326 | 2,074 | ||||||
Accumulated
deficit
|
(43,284 | ) | (50,393 | ) | ||||
Treasury
stock, 410,937 common shares at September 30, 2010 and December 31, 2009,
at cost
|
(4,754 | ) | (4,754 | ) | ||||
Total
stockholders' equity
|
48,554 | 40,510 | ||||||
$ | 63,574 | $ | 57,219 | |||||
Contingencies
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
sales
|
$ | 19,685 | $ | 17,385 | $ | 73,643 | $ | 64,115 | ||||||||
Cost
of goods sold
|
11,432 | 11,056 | 40,653 | 45,999 | ||||||||||||
Gross
profit
|
8,253 | 6,329 | 32,990 | 18,116 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Research
and development expenses
|
663 | 610 | 1,881 | 2,201 | ||||||||||||
Selling
and marketing expenses
|
4,883 | 4,548 | 17,292 | 15,936 | ||||||||||||
General
and administrative expenses
|
2,087 | 1,614 | 6,496 | 5,199 | ||||||||||||
Settlement
expense
|
— | 5,000 | — | 5,000 | ||||||||||||
Total
operating expenses
|
7,633 | 11,772 | 25,669 | 28,336 | ||||||||||||
Operating
income (loss)
|
620 | (5,443 | ) | 7,321 | (10,220 | ) | ||||||||||
Other
income (expense):
|
||||||||||||||||
Interest
expense, net
|
(7 | ) | (19 | ) | (25 | ) | (71 | ) | ||||||||
Other,
net
|
(8 | ) | (5 | ) | (13 | ) | 45 | |||||||||
Income
(loss) before income taxes
|
605 | (5,467 | ) | 7,283 | (10,246 | ) | ||||||||||
Income
tax expense
|
70 | 4 | 174 | 64 | ||||||||||||
Net
income (loss)
|
$ | 535 | $ | (5,471 | ) | $ | 7,109 | $ | (10,310 | ) | ||||||
Net
income (loss) per common share - basic
|
$ | 0.07 | $ | (0.82 | ) | $ | 1.00 | $ | (1.55 | ) | ||||||
-
diluted
|
$ | 0.07 | $ | (0.82 | ) | $ | 0.92 | $ | (1.55 | ) |
Shares of
|
Additional
|
Accumulated Other
|
Cost of
|
Total
|
||||||||||||||||||||||||||||
Common
|
Common
|
Paid-in
|
Comprehensive
|
Accumulated
|
Comprehensive
|
Treasury
|
Stockholders'
|
|||||||||||||||||||||||||
Stock
|
Stock
|
Capital
|
Income
|
Deficit
|
Income (Loss)
|
Stock
|
Equity
|
|||||||||||||||||||||||||
Balance,
December 31, 2009
|
7,387,309 | $ | 7 | $ | 93,576 | $ | 2,074 | $ | (50,393 | ) | $ | (4,754 | ) | $ | 40,510 | |||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||||||
Net
income
|
— | — | — | — | 7,109 | $ | 7,109 | — | 7,109 | |||||||||||||||||||||||
Foreign
currency translation
|
— | — | — | 252 | — | 252 | — | 252 | ||||||||||||||||||||||||
Comprehensive
income
|
— | — | — | — | — | $ | 7,361 | — | — | |||||||||||||||||||||||
Stock
options exercised
|
231,875 | 1 | 9 | — | — | — | 10 | |||||||||||||||||||||||||
Issuance
of restricted stock
|
140,000 | — | — | — | — | — | — | |||||||||||||||||||||||||
Compensatory
stock and stock options
|
— | — | 673 | — | — | — | 673 | |||||||||||||||||||||||||
Balance,
September 30, 2010
|
7,759,184 | $ | 8 | $ | 94,258 | $ | 2,326 | $ | (43,284 | ) | $ | (4,754 | ) | $ | 48,554 |
Nine Months Ended
|
||||||||
September 30,
|
||||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income (loss)
|
$ | 7,109 | $ | (10,310 | ) | |||
Adjustments
to reconcile net income (loss) to net cash used in operating
activities:
|
||||||||
Depreciation
and amortization
|
381 | 463 | ||||||
Amortization
of deferred compensation
|
673 | 647 | ||||||
Provision
for doubtful accounts
|
959 | 968 | ||||||
Provision
for inventory reserve
|
99 | 1,783 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Trade
receivables
|
(6,089 | ) | (2,475 | ) | ||||
Inventories
|
(3,476 | ) | 11,218 | |||||
Prepaid
expenses
|
(317 | ) | 452 | |||||
Other
current assets
|
(92 | ) | (160 | ) | ||||
Other
assets
|
— | (3 | ) | |||||
Accounts
payable
|
(584 | ) | (2,370 | ) | ||||
Accrued
expenses and other current liabilities
|
(1,095 | ) | 4,189 | |||||
Net
cash provided by (used in) operating activities
|
(2,432 | ) | 4,402 | |||||
Cash
flows from investing activities:
|
||||||||
Purchases
of equipment
|
(100 | ) | (169 | ) | ||||
Net
cash used in investing activities
|
(100 | ) | (169 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Principal
payments under capital lease obligation
|
(11 | ) | (11 | ) | ||||
Proceeds
from exercise of stock options
|
10 | 3 | ||||||
Debt
financing costs
|
(14 | ) | — | |||||
Proceeds
from debt
|
— | (21 | ) | |||||
Net
cash used in financing activities
|
(15 | ) | (29 | ) | ||||
Effects
of exchange rate changes
|
253 | 1,243 | ||||||
Net
increase (decrease) in cash and cash equivalents
|
(2,294 | ) | 5,447 | |||||
Cash
and cash equivalents at beginning of period
|
12,562 | 5,960 | ||||||
Cash
and cash equivalents at end of period
|
$ | 10,268 | $ | 11,407 | ||||
Supplemental
disclosure of cash flow information
|
||||||||
Interest
paid
|
$ | 29 | $ | 78 | ||||
Income
taxes paid
|
$ | 174 | $ | 64 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
Finished
goods
|
$ | 15,296 | $ | 13,057 | ||||
Component
parts
|
9,946 | 8,708 | ||||||
Allowance
for inventory obsolescence
|
(2,143 | ) | (2,044 | ) | ||||
Total
inventory
|
$ | 23,099 | $ | 19,721 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
Payroll
and commissions
|
$ | 1,185 | $ | 284 | ||||
Product
warranty and sales returns and promotional allowances
|
3,454 | 2,209 | ||||||
Professional
services
|
88 | 25 | ||||||
Accrued
settlement expense
|
— | 5,000 | ||||||
Accrued
sales promotions
|
2,138 | 1,060 | ||||||
Deferred
revenue
|
1,478 | 1,273 | ||||||
Other
|
1,781 | 1,377 | ||||||
Total
accrued expenses and other current liabilities
|
$ | 10,124 | $ | 11,228 |
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
United States
|
$ | 15,329 | $ | 14,455 | $ | 58,982 | $ | 52,503 | ||||||||
Rest
of World
|
4,356 | 2,930 | 14,661 | 11,612 | ||||||||||||
Total
net sales
|
$ | 19,685 | $ | 17,385 | $ | 73,643 | $ | 64,115 |
Weighted
|
Aggregate
|
|||||||||||
Number of
|
Average
|
Intrinsic
|
||||||||||
Options
|
Exercise Price
|
Value of Options
|
||||||||||
Options
outstanding at December 31, 2009
|
891,044 | $ | 0.52 | — | ||||||||
Options
granted
|
— | — | — | |||||||||
Options
forfeited / expired
|
— | — | — | |||||||||
Options
exercised
|
(231,875 | ) | 0.04 | 863,712 | ||||||||
Options
outstanding at September 30, 2010
|
659,169 | 0.69 | 2,442,977 | |||||||||
Options
exercisable at September 30, 2010
|
584,169 | 0.40 | 2,339,477 |
|
A
summary of restricted stock grant activity
follows:
|
Weighted
|
||||||||
Number of
|
Average
|
|||||||
Shares
|
Grant Date Fair Value
|
|||||||
Stock
unvested at December 31, 2009
|
336,870 | $ | 4.12 | |||||
Stock
granted
|
140,000 | 3.71 | ||||||
Stock
vested
|
(75,378 | ) | 5.03 | |||||
Stock
unvested at September 30, 2010
|
401,492 | $ | 3.83 |
Period of Exercise
|
Total Options to be
Exercised
|
|||
2010
|
3,125 | |||
2011
|
15,000 | |||
2012
|
15,709 | |||
2013
|
1,250 | |||
Beyond
2013
|
2,500 | |||
Total
Options
|
37,584 |
Beginning
Balance
|
Charges for
Warranty Claims
|
Estimated
Accruals
|
Ending
Balance
|
|||||||||||||
Quarter ended December
31, 2009
|
$ | 407 | (97 | ) | 55 | $ | 365 | |||||||||
Quarter
ended March 31, 2010
|
$ | 365 | (72 | ) | 198 | $ | 491 | |||||||||
Quarter
ended June 30, 2010
|
$ | 491 | (97 | ) | 43 | $ | 437 | |||||||||
Quarter
ended September 30, 2010
|
$ | 437 | (134 | ) | 124 | $ | 427 |
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
Net sales
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost
of goods sold
|
58.1 | 63.6 | 55.2 | 71.7 | ||||||||||||
Gross
profit
|
41.9 | 36.4 | 44.8 | 28.3 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Research
and development expenses
|
3.4 | 3.5 | 2.6 | 3.4 | ||||||||||||
Sales
and marketing expenses
|
24.8 | 26.2 | 23.5 | 24.9 | ||||||||||||
General
and administrative expenses
|
10.6 | 9.3 | 8.8 | 8.1 | ||||||||||||
Settlement
expense
|
— | 28.7 | — | 7.8 | ||||||||||||
Total
operating expenses
|
38.8 | 67.7 | 34.9 | 44.2 | ||||||||||||
Interest
income (expense), net
|
— | (0.1 | ) | — | (0.1 | ) | ||||||||||
Other
income, net
|
— | 0.0 | — | 0.0 | ||||||||||||
Income
(loss) before income taxes
|
3.1 | (31.4 | ) | 9.9 | (16.0 | ) | ||||||||||
Income
tax expense
|
0.4 | 0.1 | 0.2 | 0.1 | ||||||||||||
Net
income (loss)
|
2.7 | % | (31.5 | )% | 9.7 | % | (16.1 | )% |
ADAMS
GOLF, INC.
|
|||
Date: November
8, 2010
|
By:
|
/S/ OLIVER G. BREWER III
|
|
Oliver
G. Brewer, III
|
|||
Chief
Executive Officer and President
|
|||
(Principal
Executive Officer)
|
|||
Date: November
8, 2010
|
By:
|
/S/ PAMELA HIGH
|
|
Pamela
J. High
|
|||
Chief
Financial Officer
|
|||
(Principal
Financial Officer and Principal Accounting
Officer)
|
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 the Annual Report on Form 10-K for the year ended December
31, 2007 File No. 001-33978 (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 File No. 000-24583 (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 File No. 000-24583
(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 File No. 000-24583 (Exhibit
10.12)
|
||
Exhibit
10.2*
|
Golf
Consultant Agreement - Thomas S. Watson
|
Incorporated
by reference to 2004 Form 10-K File No. 000-24583 (Exhibit
10.17)
|
||
Exhibit
10.3*
|
Asset
Purchase Agreement of Women's Golf Unlimited
|
Incorporated
by reference to 2006 Form 10-K File No. 000-24583 (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 From 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 File No 001-33978 (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 From 8-K dated April 15, 2008 File No.
001-33978 (Exhibit 10.1)
|
||
Exhibit
10.7
|
Employment
Agreement - Byron (Barney) H. Adams
|
Incorporated
by reference to the Report on From 8-K dated January 12, 2009 File No.
001-33978 (Exhibit 10.1)
|
||
Exhibit
10.8
|
Employment
Agreement - Oliver G. (Chip) Brewer
|
Incorporated
by reference to the Quarterly Report on From 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
|
Incorporated
by reference to 2009 Form 10-K File No 001-33978 (Exhibit
10.10)
|
||
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
|