SOURCE: Sport-Haley, Inc.

May 22, 2006 14:05 ET

Sport-Haley, Inc. Reports Third Quarter Unaudited Results

DENVER, CO -- (MARKET WIRE) -- May 22, 2006 -- Sport-Haley, Inc. (NASDAQ: SPOR) ("Sport-Haley" or the "Company") today reported unaudited earnings for its third fiscal quarter and nine months ended March 31, 2006.

Net sales for the fiscal quarter ended March 31, 2006 were $4,656,000, an increase of $201,000 or 5%, from net sales of $4,455,000 for the same quarter in the prior fiscal year. Net sales for the nine months ended March 31, 2006, were $13,096,000, a decrease of $1,929,000 or 13%, from net sales of $15,025,000 for the comparable nine-month period in the previous fiscal year.

We attribute the differences in net sales for the respective periods to a continuing increase in the sales of our Ben Hogan® men's fashion apparel combined with the previously reported discontinuance of our HALEY RESERVE men's fashion golf apparel, a significant decrease in the sales of our SPORT HALEY™ women's fashion apparel and the initial sales of Top-Flite™ branded apparel. Net sales of Ben Hogan® apparel approximated $2,420,000 and $7,609,000 for the quarter and nine months ended March 31, 2006, increases of approximately $104,000, or 4%, and $584,000, or 8%, from net sales of approximately $2,316,000 and $7,025,000 for the quarter and nine months ended March 31, 2005. We believe the discontinuance of our HALEY RESERVE men's fashion golf apparel contributed $1,200,000 to the decrease for the nine-month period. Net sales of our SPORT HALEY™ women's fashion apparel totaled approximately $1,607,000 and $4,526,000 for the quarter and nine months ended March 31, 2006, decreases of approximately $334,000, or 17%, and $2,764,000, or 35%, when compared with the respective quarterly and nine-month periods in the prior fiscal year. The shrinking market for women's fashion golf apparel appears to have bottomed out, and we anticipate that our sales of women's apparel will begin to increase slightly in future periods. Sport-Haley's operations are consolidated with the operations of Reserve Apparel Group LLC ("Reserve Apparel"), which began shipping Top-Flite™ branded men's golf apparel to Wal-Mart Stores, Inc. in March 2006. Net sales of Top-Flite™ apparel for the quarter ended March 31, 2006, totaled $446,000.

Our gross margins, as a percentage of sales, were 37% and 36% for the quarter and nine months ended March 31, 2006, respectively. Comparatively, our gross margins, as a percentage of sales, were 37% and 26% for the comparable periods in the prior fiscal year. We believe the increase in gross margins is primarily attributable to our successful efforts to minimize the amount of our finished goods inventories remaining on hand at the end of each selling season and to better estimate the recoverable value of our excess finished goods inventories.

Selling, general and administrative expenses for the fiscal quarter ended March 31, 2006, decreased by $176,000, or 8%, to $1,959,000 from $2,134,000 for the same quarter in the prior fiscal year. Selling, general and administrative expenses for the nine months ended March 31, 2006, decreased by $2,236,000, or 30%, to $5,121,000 from $7,357,000 for the comparative nine-month period in the prior fiscal year. Selling, general and administrative expenses were approximately 43% and 39% of net sales for the quarter and nine months ended March 31, 2006, as compared with 48% and 49% for the comparable periods in the prior fiscal year. The decreases between comparative quarterly and nine-month periods were primarily due to the accrual in the prior comparable nine-month period for severance and other compensation payable in the amount of $520,000 to our former Chief Executive Officer plus $650,000 paid to our late Chairman's estate combined the operating expenses of Reserve Apparel and general decreases in other selling, general and administrative expenses. We believe the general decrease in selling, general and administrative expenses is indicative of cost reductions that have been achieved as a result of implementing cost reduction initiatives in fiscal 2005. Operating expenses with respect to distributing Top-Flite™ apparel through Reserve Apparel for the quarter and nine months ended March 31, 2006, totaled $138,000, including $20,000 in legal fees incurred by Sport-Haley relating to the formation of Reserve Apparel. The balance of the Reserve Apparel operating expenses generally related to amounts allocated by Explorer Gear for personnel costs incurred in the business operations of Reserve Apparel during quarter ended March 31, 2006.

Our net loss for the quarter ended March 31, 2006, was ($190,000), a difference of $396,000, or 68%, when compared with our net loss of ($586,000) for the comparable quarter in the prior fiscal year. Our net loss for the nine months ended March 31, 2006, was ($619,000), a difference of $3,249,000, or 84%, when compared with our net loss of ($3,868,000) for the comparable six-month period in the prior fiscal year.

Basic and diluted loss per common share were ($0.07) and ($0.23) for the quarter and nine months ended March 31, 2006, and were ($0.23) and ($1.53) for the quarter and nine months ended March 31, 2005.

Sport-Haley, Inc. designs, purchases, contracts for the manufacture of and markets women's and men's fashion golf apparel and outerwear under the SPORT HALEY™ and Ben Hogan® labels. Our fashion golf apparel collections, known for their innovative designs, quality fabrics, generous fits and classic styles, are primarily marketed in the premium and mid-priced markets, through a network of independent sales representatives and distributors, to golf professional shops, country clubs, resorts and exclusive department stores within the United States and by certain distributors within international markets. Ben Hogan® apparel and Top-Flite™ apparel are distributed pursuant to a licensing agreement between Sport-Haley and Callaway Golf Company ("Callaway"). Sport-Haley previously received approval from Callaway for Reserve Apparel to distribute Top-Flite™ apparel exclusively to Wal-Mart Stores, Inc. in accordance with a joint venture agreement between Sport-Haley, Inc. and Explorer Gear USA.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: When used in this release, the words "may," "will," "expect," "anticipate," "continue," "estimate," "project," "intend," "believe," "appear" and similar expressions, variations or the negative of these words, and any statement regarding possible or assumed future results of operations of Sport-Haley's business, the markets for its products, anticipated expenditures, regulatory developments or competition, or other statements regarding matters that are not historical facts, are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. The reader should be aware that Sport-Haley's actual results could differ materially from those contained in forward-looking statements. Sport-Haley's financial condition and the results of its operations will depend on a number of factors, including, but not limited to, the following: our ability to control costs and expenses; our ability to successfully anticipate fashion trends, design favorably accepted fashion golf apparel, effectively advertise and communicate within the marketplace, and penetrate our chosen distribution channels; our ability to successfully forecast sales and optimize inventory levels; our ability to successfully manage risks associated with the trend of increasing sales with respect to licensed apparel, such as its Ben Hogan® apparel collections; relations with and performance of suppliers; competition within golf apparel markets; business conditions and growth in the fashion golf apparel market and the general economy; political and international trade relations; changes in international trade quota systems for apparel; consumer spending on golf apparel; general global economic and political conditions resulting from threats or acts of war or terrorism and responses thereto; timely performance of third parties, such as freight forwarders, including risks of labor disputes and/or labor strikes; changes in product mix; inventory risks due to shifts in market and/or price erosion of purchased apparel; lost or reduced manufacturing capacity of significant suppliers; loss or delay of shipments from foreign suppliers; access to capital; maintaining satisfactory relationships with commercial banking institutions; and, establishing controls with regard to and maintaining the integrity of technology and information systems. The reader should not place undue reliance on any forward-looking statements. Neither Sport-Haley nor any of its corporate officers or key employees assumes any obligation to update any forward-looking statements as a result of new information, future events or developments, except as required by securities laws.

                           SPORT-HALEY, INC.
              Consolidated Unaudited Financial Information
                  (In thousands, except per share data)


                             Three Months Ended     Nine Months Ended
                                 March 31,              March 31,
                              2006       2005        2006        2005
                            -------     -------     -------     -------
Statements of Income Data:

Net sales                   $ 4,656      $4,455     $13,096     $15,025

Gross profit                  1,737       1,632       4,679       3,860

Other operating costs         2,162       2,287       5,662       7,860

Loss from operations           (425)       (655)       (983)     (4,000)

Other income (expense), net     237          75         367         138

Net loss                       (190)       (586)       (619)     (3,868)

Basic and diluted loss
 per common share           ($ 0.07)    ($ 0.23)    ($ 0.23)    ($ 1.52)

Basic and diluted
 average weighted shares
 outstanding              2,770,000   2,545,000   2,742,000   2,542,000

                                                         March 31,
                                                     2006        2005
                                                    -------     -------
Balance Sheet Data:

Current assets                                     $ 17,457    $ 15,832

Total assets                                         18,134      16,769

Current liabilities                                   2,374       1,904

Long-term liabilities                                   256           -

Shareholders' equity                                 15,504      14,865

Contact Information

  • Contact:
    Donald W. Jewell
    Interim Chief Executive Officer
    (303) 320-8800

    Patrick W. Hurley
    Chief Financial Officer
    (303) 320-8800