Edwin Watts Files For Bankruptcy

[newtogolf]

Quote:

Edwin Watts Golf Shops, the golf-specialty retailer that claims to offer the largest inventory of pro-line golf equipment, apparel and accessories through its 90 domestic retail locations and via its web portal, filed for Chapter 11 bankruptcy protection, Bloomberg reported.

According to papers filed Nov. 4 in U.S. Bankruptcy Court in Wilmington, Del., and cited by Bloomberg, the Fort Walton Beach, Fla.-based retailer listed assets and liabilities between $100 million and $500 million. Callaway Golf is the largest unsecured creditor, with a claim of $4.6 million. The retailer also said it had obtained a loan of as much as $38 million to fund operations in bankruptcy.

Edwin Watts, which was founded in 1968 and is owned by private-equity firm Sun Capital Partners, noted in its filing that it agreed to sell certain assets to GWNE.

The full filing is: Edwin Watts Golf Shops LLC, Case No. 13-12877, U.S. Bankruptcy Court, District of Delaware.

Appears the golf industry is still hurting given one of the largest golf retailers filed Chapter 11 today.  I placed an order yesterday with them, I guess it's 50/50 whether I ever get the products I ordered.

[Ernest Jones]

Crap. I knew I should have got some stuff on lay-away.

[newtogolf]

This could have a major ripple effect since they owe Callaway Golf $4.6M.  Callaway had a profitable year but I'm not sure it was profitable enough to absorb this loss.

[iacas]

This could have a major ripple effect since they owe Callaway Golf $4.6M.  Callaway had a profitable year but I'm not sure it was profitable enough to absorb this loss.

I'm not knowledgeable of corporate accounting but I doubt they counted the money already, right?

[Golfingdad]

Appears the golf industry is still hurting given one of the largest golf retailers filed Chapter 11 today.  I placed an order yesterday with them, I guess it's 50/50 whether I ever get the products I ordered.

So they filed for bankruptcy today, and you placed an order with them yesterday?

I'm no detective but ... I'm going to have to say that is pretty convincing evidence that this is, at least partly, your fault!!!

No way that is a coincidence. ;)

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I haven't bought anything from them in a long time, but my old irons were purchased there.  I loved the fact that, at least at the time, they sold everything with, basically, a flat shipping rate of, like, 8 bucks.  IIRC, Golfsmtih, at the time, had a sliding S&H; scale based solely on price, so it was going to be a lot more expensive to buy from them.

It was the only service I ever got from EW, but I loved it.  Too bad.

[Augustabound]

I'm not knowledgeable of corporate accounting but I doubt they counted the money already, right?

No, it's not counted as earnings until the bill is paid.

The last 3 years they've averaged $4 million in bad debt write offs and they still have $6 million set aside as a provision for bad debts.

[newtogolf]

I'm not knowledgeable of corporate accounting but I doubt they counted the money already, right?

I don't know how Callaway Golf handles their corporate accounting but companies that size typically don't manage their books on a cash basis but instead use an accrual method which means they record sales when the order is made or delivered not when the cash / check is received.  I'd guess all or a major portion of the $4.6M is reflected on their 3rd Quarter P&L; and their internal Accounts Receivable has Edwin Watts down for $4.6M.

[iacas]

The last two posts conflict. Right?

I don't know if a company can count money as received if it's not. I had to count a sizable check in 2010's taxes because I got it on December 31, even though it was for services to be rendered January through June in 2011.

[newtogolf]

No, it's not counted as earnings until the bill is paid.

The last 3 years they've averaged $4 million in bad debt write offs and they still have $6 million set aside as a provision for bad debts.

You're right, at the end of their accounting year they will write off bad debt and make adjustments to their P&L.;

[Augustabound]

The last two posts conflict. Right?

I don't know if a company can count money as received if it's not.

It goes into accounts receivable until the bill is payed. Then it goes into operating cash flow.

[newtogolf]

The last two posts conflict. Right?

I don't know if a company can count money as received if it's not. I had to count a sizable check in 2010's taxes because I got it on December 31, even though it was for services to be rendered January through June in 2011.

You can manage your accounting on a "cash" method or "accrual" method.  If you're on a cash method you pay taxes in the year you receive the monies.  Accrual method you pay taxes based on when you deliver the product or render the services.

In my business (service based) I would not report the income until the year that the services were rendered.  Our balance sheet has Unearned Revenue under our Liabilities and Equity section that we reduce for each month of service we provide against the prepayment we received for the services.

[newtogolf]

It goes into accounts receivable until the bill is payed. Then it goes into operating cash flow.

All revenue (sales) is reported in P&L; when order is made and products / services are delivered in accrual method.  P&L; doesn't reflect Accounts Receivable or cash flow.

[Hotrodjrd]

So does this mean they'll start selling their inventory for pennies-on-the-dollar to try and sale everything in stores?

[Augustabound]

All revenue (sales) is reported in P&L; when order is made and products / services are delivered in accrual method.  P&L; doesn't reflect Accounts Receivable or cash flow.

The net gain or loss from the income statement is the operating cash flow on the statement of cash flows.

On the balance sheet it's not an asset until the bill is paid so it goes into receivables.

I think we're both saying similar things just in a different way.

[nevets88]

So much competition out there. Golfsmith and Golf Galaxy and even Dick's in the brick and mortar space plus online like Rockbottom. I dunno about everyone else, but Edwin Watts was way down on my list when looking to buy things golf. Rockbottom is so competitive on pricing, even with the shipping costs. Not surprised this happened.

[newtogolf]

So does this mean they'll start selling their inventory for pennies-on-the-dollar to try and sale everything in stores?

It depends on what their intent is.  Chapter 11 is debt re-organization which means they are still in business and seeking protection from their creditors.  In order to stay in business they will have to develop a go forward plan that the bankruptcy court views as viable.  If they can't develop an approved plan or don't wish to remain in business they can proceed to Chapter 7 which is liquidation.

Under Chapter 11 they can close some of their poor performing stores and move any inventory of value to the stores they wish to retain.  The inventory that isn't moved will be sold or returned based on the plan approved by the court.

[meenman]

So does this mean they'll start selling their inventory for pennies-on-the-dollar to try and sale everything in stores?

I wouldnt hold my breath waiting on that one.

I've seen several large chains file bankruptcy and most of them come out stronger when it is done.

I would imagine that there will be some store closings. There may be some deals at closing stores, but it will more than likely be the garbage that has no value - I am sure the *good* product will be moved to other locations.

[newtogolf]

The net gain or loss from the income statement is the operating cash flow on the statement of cash flows.

On the balance sheet it's not an asset until the bill is paid so it goes into receivables.

I think we're both saying similar things just in a different way.

Agreed, most people look at the corporate P&L; to determine EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization.).  The 3Q P&L; would reflect all orders that are delivered as revenue and show the profits from the delivered orders minus costs without concern for which invoices are paid or not.

At the end of the fiscal year, adjustments would be made to the financials to reflect bad debt which would impact P&L;, Balance Sheet and Income Statement.