##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended April 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 001-14547
 Ashworth, Inc.
  Delaware
    
    84-1052000(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 2765 LOKER AVENUE WEST
CARLSBAD, CA 92010
 (760) 438-6610
 þ o
  o þ o
 o þ
  Title
    
    Outstanding at May 31, 2007$.001 par value Common Stock
    
    14,520,175




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##### 



PAGEPart I. Financial InformationItem 1. Financial StatementsCondensed Consolidated Balance Sheets
    
    
    1Condensed Consolidated Statements of Operations
    
    
    2Condensed Consolidated Statements of Cash Flows
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    29Part II. Other InformationItem 1. Legal Proceedings
    
    
    30Item1A. Risk Factors
    
    
    31Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3. Defaults Upon Senior Securities
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    31Item 5. Other Information
    
    
    31Item 6. Exhibits
    
    
    31Signature
    
    
    38Exhibit Index
    
    
    38EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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PART I
 FINANCIAL INFORMATION
  
  April 30, 2007
    
    
    October 31, 2006(UNAUDITED)AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,227,000
    
    
    $
    7,508,000Accounts receivable  trade, net
    
    
    45,874,000
    
    
    
    33,984,000Accounts receivable  other, net
    
    
    
    
    
    
    526,000Inventories, net
    
    
    53,125,000
    
    
    
    44,971,000Income tax refund receivable
    
    
    1,118,000
    
    
    
    3,743,000Other current assets
    
    
    6,017,000
    
    
    
    5,247,000Deferred income tax asset
    
    
    1,855,000
    
    
    
    3,116,000Total current assets
    
    
    112,216,000
    
    
    
    99,095,000Property, plant and equipment, at cost
    
    
    66,814,000
    
    
    
    65,958,000Less accumulated depreciation and amortization
    
    
    (28,012,000
    )
    
    
    (26,832,000
    )Total property, plant and equipment, net
    
    
    38,802,000
    
    
    
    39,126,000Goodwill
    
    
    15,250,000
    
    
    
    15,250,000Intangible assets, net
    
    
    10,071,000
    
    
    
    10,245,000Other assets
    
    
    373,000
    
    
    
    327,000Total assets
    
    $
    176,712,000
    
    
    $
    164,043,000Liabilities and Stockholders EquityCurrent liabilities:Line of credit payable
    
    $
    29,470,000
    
    
    $
    14,000,000Current portion of long-term debt
    
    
    6,039,000
    
    
    
    2,117,000Accounts payable
    
    
    11,514,000
    
    
    
    10,724,000Accrued liabilities:Salaries and commissions
    
    
    4,135,000
    
    
    
    4,077,000Other
    
    
    6,947,000
    
    
    
    6,681,000Total current liabilities
    
    
    58,105,000
    
    
    
    37,599,000Long-term debt, net of current portion
    
    
    11,456,000
    
    
    
    15,671,000Deferred income tax liability
    
    
    1,965,000
    
    
    
    1,965,000Other long-term liabilities
    
    
    67,000
    
    
    
    174,000Stockholders equity:Common stock
    
    
    15,000
    
    
    
    15,000Capital in excess of par value
    
    
    48,635,000
    
    
    
    48,256,000Retained earnings
    
    
    51,353,000
    
    
    
    56,333,000Accumulated other comprehensive income
    
    
    5,116,000
    
    
    
    4,030,000Total stockholders equity
    
    
    105,119,000
    
    
    
    108,634,000Total liabilities and stockholders equity
    
    $
    176,712,000
    
    
    $
    164,043,000
  1




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Three months ended April 30,
    
    
    Six months ended April 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net revenues
    
    $
    59,864,000
    
    
    $
    66,020,000
    
    
    $
    98,136,000
    
    
    $
    106,632,000Cost of goods sold
    
    
    36,623,000
    
    
    
    36,137,000
    
    
    
    59,278,000
    
    
    
    58,773,000Gross profit
    
    
    23,241,000
    
    
    
    29,883,000
    
    
    
    38,858,000
    
    
    
    47,859,000Selling, general and administrative
expenses
    
    
    21,841,000
    
    
    
    21,510,000
    
    
    
    40,958,000
    
    
    
    39,208,000Income (loss) from operations
    
    
    1,400,000
    
    
    
    8,373,000
    
    
    
    (2,100,000
    )
    
    
    8,651,000Other income (expense):Interest income
    
    
    21,000
    
    
    
    9,000
    
    
    
    58,000
    
    
    
    19,000Interest expense
    
    
    (771,000
    )
    
    
    (722,000
    )
    
    
    (1,372,000
    )
    
    
    (1,401,000
    )Net foreign currency exchange gain
    
    
    68,000
    
    
    
    166,000
    
    
    
    118,000
    
    
    
    337,000Other income (expense), net
    
    
    (112,000
    )
    
    
    (35,000
    )
    
    
    (178,000
    )
    
    
    102,000Total other expense, net
    
    
    (794,000
    )
    
    
    (582,000
    )
    
    
    (1,374,000
    )
    
    
    (943,000
    )Income (Loss) before income tax
    
    
    606,000
    
    
    
    7,791,000
    
    
    
    (3,474,000
    )
    
    
    7,708,000Provision for Income taxes (benefit)
    
    
    3,139,000
    
    
    
    3,116,000
    
    
    
    1,507,000
    
    
    
    3,083,000Net Income (loss)
    
    $
    (2,533,000
    )
    
    $
    4,675,000
    
    
    $
    (4,981,000
    )
    
    $
    4,625,000Net Income (loss) per share:Basic
    
    $
    (0.17
    )
    
    $
    0.32
    
    
    $
    (0.34
    )
    
    $
    0.32Diluted
    
    $
    (0.17
    )
    
    $
    0.32
    
    
    $
    (0.34
    )
    
    $
    0.32Weighted-average shares outstanding:Basic
    
    
    14,520,000
    
    
    
    14,404,000
    
    
    
    14,520,000
    
    
    
    14,290,000Diluted
    
    
    14,520,000
    
    
    
    14,560,000
    
    
    
    14,520,000
    
    
    
    14,458,000
  2




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Six months ended April 30,2007
    
    
    2006CASH FLOW FROM OPERATING ACTIVITIES:Net cash used in operating activities
    
    $
    (17,096,000
    )
    
    $
    (6,158,000
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment
    
    
    (2,321,000
    )
    
    
    (3,555,000
    )Purchase of intangibles
    
    
    (59,000
    )
    
    
    (69,000
    )Net cash used in investing activities
    
    
    (2,380,000
    )
    
    
    (3,624,000
    )CASH FLOWS FROM FINANCING ACTIVITIESPrincipal payments on capital lease obligations
    
    
    (132,000
    )
    
    
    (33,000
    )Borrowings on line of credit
    
    
    27,500,000
    
    
    
    23,300,000Payments on line of credit
    
    
    (12,030,000
    )
    
    
    (13,750,000
    )Borrowings on notes payable and long-term debt
    
    
    683,000
    
    
    
    Principal payments on notes payable and long-term debt
    
    
    (844,000
    )
    
    
    (675,000
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    2,156,000Excess tax benefit from share-based payment
arrangements
    
    
    
    
    
    
    432,000Net cash provided in financing activities
    
    
    15,177,000
    
    
    
    11,430,000Effect of exchange rate changes
    
    
    1,018,000
    
    
    
    463,000Net increase (decrease) in cash and cash equivalents
    
    
    (3,281,000
    )
    
    
    2,111,000Cash, beginning of period
    
    
    7,508,000
    
    
    
    3,839,000Cash, end of period
    
    $
    4,227,000
    
    
    $
    5,950,000
  3




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NOTE 1  Basis of Presentation.
   Shipping and Handling Revenue
 Accounting of Shipping
and Handling Fees and Costs
 Cost of Goods Sold
  Shipping and Handling Expenses
  Reclassifications
  Stock-Based Compensation
 Share-Based Payment ,
 4




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Accounting for
Stock Issued to Employees, Accounting for
Stock-Based Compensation
  Accounting for Stock-Based Compensation-Transition and
Disclosure,
  Earnings (Loss) Per Share
  5




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Earnings Per Share
 Three months ended April 30,
    
    
    Six months ended April 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Numerator:Net income (loss)
    
    $
    (2,533,000
    )
    
    $
    4,675,000
    
    
    $
    (4,981,000
    )
    
    $
    4,625,000Denominator:Weighted-average shares outstanding
    
    
    14,520,000
    
    
    
    14,404,000
    
    
    
    14,520,000
    
    
    
    14,290,000Effect of dilutive options
    
    
    
    
    
    
    156,000
    
    
    
    
    
    
    
    168,000Denominator for dilutive earnings
per share
    
    
    14,520,000
    
    
    
    14,560,000
    
    
    
    14,520,000
    
    
    
    14,458,000Basic income (loss) per share
    
    $
    (0.17
    )
    
    $
    0.32
    
    
    $
    (0.34
    )
    
    $
    0.32Diluted income (loss) per share
    
    $
    (0.17
    )
    
    $
    0.32
    
    
    $
    (0.34
    )
    
    $
    0.32
  NOTE 2  Inventories.
  April 30,
    
    
    October 31,2007
    
    
    2006Raw materials
    
    $
    10,000
    
    
    $
    93,000Finished goods
    
    
    53,115,000
    
    
    
    44,878,000Total inventories, net
    
    $
    53,125,000
    
    
    $
    44,971,000
 6




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NOTE 3  Goodwill and Other Intangible Assets.
 Goodwill and Other Intangible Assets.
 April 30, 2007
    
    
    October 31, 2006Gross Carrying
    
    
    Accumulated
    
    
    Net Book
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    Net BookAmount
    
    
    Amortization
    
    
    Value
    
    
    Amount
    
    
    Amortization
    
    
    ValueIndefinite life:Tradenames
    
    $
    8,700,000
    
    
    $
    
    
    
    $
    8,700,000
    
    
    $
    8,700,000
    
    
    $
    
    
    
    $
    8,700,000Finite life:Customer lists
    
    
    1,530,000
    
    
    
    (659,000
    )
    
    
    871,000
    
    
    
    1,530,000
    
    
    
    (541,000
    )
    
    
    989,000Non-competes
    
    
    1,372,000
    
    
    
    (1,093,000
    )
    
    
    279,000
    
    
    
    1,372,000
    
    
    
    (1,011,000
    )
    
    
    361,000Customer sales
backlog
    
    
    190,000
    
    
    
    (190,000
    )
    
    
    
    
    
    
    190,000
    
    
    
    (190,000
    )
    
    
    Trademarks
    
    
    1,560,000
    
    
    
    (1,339,000
    )
    
    
    221,000
    
    
    
    1,502,000
    
    
    
    (1,307,000
    )
    
    
    195,000Total intangible assets
    
    $
    13,352,000
    
    
    $
    (3,281,000
    )
    
    $
    10,071,000
    
    
    $
    13,294,000
    
    
    $
    (3,049,000
    )
    
    $
    10,245,000
   Remainder 2007
    
    $
    224,0002008
    
    
    438,0002009
    
    
    296,0002010
    
    
    250,0002011
    
    
    163,0002012
    
    
    Thereafter
    
    
    Total
    
    $
    1,371,000
 NOTE 4  Business Loan Agreement.
   7




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8




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1)
    
    Minimum tangible net worth equal to the sum of $75.0 million; plus the sum
of 90% of net income after income taxes (without subtracting losses) earned in each
quarterly accounting period commencing after January 31, 2006; plus, the net
proceeds from any equity securities issued after the date of the Fourth Amendment,
including net proceeds from stock options exercised;2)
    
    A ratio of quick assets to current liabilities (including the outstanding
amount of loans and letter of credit obligations) of at least 0.90:1:00, except for
the fiscal quarters ending January 31 and April 30, as to which the ratio of quick
assets to current liabilities shall be at least 0.75:1:00;3)
    
    Capital expenditures are not to exceed more than $7.0 million in any fiscal
year;4)
    
    Fixed charge coverage ratio as of the last day of any fiscal quarter is
required to be not less than 1.25 to 1:00; provided that, for the fiscal quarter
ending January 31, 2006, the fixed charge coverage ratio shall be not less than 0.80
to 1:00; and for purposes of determining the fixed charge coverage ratio only, the
Companys inventory write-down of $4.4 million shall be added back to EBITDA for the
Companys fiscal quarter ending April 30, 2006 and the Companys maintenance capital
expenditures shall be $4.0 million through the fiscal year ending October 31, 2006;
and5)
    
    The requirement where, for any period of 30 consecutive days, the total
indebtedness under the revolving credit facility may not be more than $15.0 million
was eliminated.
    9




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NOTE 5  Issuance of Common Stock.
  NOTE 6  Stock-Based Compensation.
   Three months ended April 30,
    
    Six months ended April 30,2007
    
    2006
    
    2007
    
    2006Expected life (years)
    
    
    5.01
    
    
    
    3.71
    
    
    
    4.97
    
    
    
    3.76Risk-free interest rate
    
    
    4.50
    %
    
    
    4.68
    %
    
    
    4.60
    %
    
    
    4.56
    %Volatility
    
    
    37.1
    %
    
    
    38.1
    %
    
    
    37.4
    %
    
    
    38.5
    %Dividend yields
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average fair
value of options during
the period
    
    $
    3.05
    
    
    $
    3.00
    
    
    $
    2.99
    
    
    $
    2.94
 NOTE 7  Comprehensive Income.
  10




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Three months ended April 30,
    
    
    Six months ended April 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income (loss)
    
    $
    (2,533,000
    )
    
    $
    4,675,000
    
    
    $
    (4,981,000
    )
    
    $
    4,625,000Effects of foreign currency transaltion
    
    
    818,000
    
    
    
    630,000
    
    
    
    1,086,000
    
    
    
    493,000Total comprehensive income (loss)
    
    $
    (1,715,000
    )
    
    $
    5,305,000
    
    
    $
    (3,895,000
    )
    
    $
    5,118,000
 NOTE 8  Legal Proceedings.
   NOTE 9  Income Taxes.
 Accounting for Income Taxes
  11




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NOTE 10  Segment Information.
  12




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Three months ended April 30,
    
    
    Six months ended April 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net revenues:Domestic
    
    $
    37,367,000
    
    
    $
    44,705,000
    
    
    $
    58,946,000
    
    
    $
    69,390,000Gekko Brands, LLC
    
    
    9,806,000
    
    
    
    8,146,000
    
    
    
    20,234,000
    
    
    
    18,242,000Ashworth, U.K., Ltd.
    
    
    8,518,000
    
    
    
    8,712,000
    
    
    
    13,330,000
    
    
    
    13,190,000Other International
    
    
    4,173,000
    
    
    
    4,457,000
    
    
    
    5,626,000
    
    
    
    5,810,000Total
    
    $
    59,864,000
    
    
    $
    66,020,000
    
    
    $
    98,136,000
    
    
    $
    106,632,000Income (loss) from operations:Domestic
    
    $
    (852,000
    )
    
    $
    5,236,000
    
    
    $
    (5,320,000
    )
    
    $
    4,808,000Gekko Brands, LLC
    
    
    645,000
    
    
    
    386,000
    
    
    
    1,298,000
    
    
    
    844,000Ashworth, U.K., Ltd.
    
    
    430,000
    
    
    
    1,454,000
    
    
    
    549,000
    
    
    
    1,501,000Other International
    
    
    1,177,000
    
    
    
    1,297,000
    
    
    
    1,373,000
    
    
    
    1,498,000Total
    
    $
    1,400,000
    
    
    $
    8,373,000
    
    
    $
    (2,100,000
    )
    
    $
    8,651,000Capital expenditures:Domestic
    
    $
    690,000
    
    
    $
    2,718,000
    
    
    $
    1,956,000
    
    
    $
    3,284,000Gekko Brands, LLC
    
    
    99,000
    
    
    
    181,000
    
    
    
    201,000
    
    
    
    232,000Ashworth, U.K., Ltd.
    
    
    140,000
    
    
    
    25,000
    
    
    
    164,000
    
    
    
    39,000Total
    
    $
    929,000
    
    
    $
    2,924,000
    
    
    $
    2,321,000
    
    
    $
    3,555,000Depreciation expense:Domestic
    
    $
    1,272,000
    
    
    $
    1,161,000
    
    
    $
    2,539,000
    
    
    $
    2,310,000Gekko Brands, LLC
    
    
    110,000
    
    
    
    107,000
    
    
    
    211,000
    
    
    
    208,000Ashworth, U.K., Ltd.
    
    
    55,000
    
    
    
    77,000
    
    
    
    105,000
    
    
    
    153,000Total
    
    $
    1,437,000
    
    
    $
    1,345,000
    
    
    $
    2,855,000
    
    
    $
    2,671,000
 April 30,
    
    
    October 31,2007
    
    
    2006Total assets:Domestic
    
    $
    101,983,000
    
    
    $
    92,337,000Gekko Brands, LLC
    
    
    43,261,000
    
    
    
    42,597,000Ashworth, U.K., Ltd.
    
    
    23,637,000
    
    
    
    22,517,000Other International
    
    
    7,831,000
    
    
    
    6,592,000Total
    
    $
    176,712,000
    
    
    $
    164,043,000Long-lived assets, at cost:Domestic
    
    $
    64,112,000
    
    
    $
    62,937,000Gekko Brands, LLC
    
    
    29,415,000
    
    
    
    29,209,000Ashworth, U.K., Ltd.
    
    
    2,263,000
    
    
    
    2,683,000Total
    
    $
    95,790,000
    
    
    $
    94,829,000Goodwill:Gekko Brands, LLC
    
    $
    15,250,000
    
    
    $
    15,250,000
 13




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NOTE 11  Subsequent Events.
 Consulting, Employment and Non-Competition Agreements
   
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 General
   14




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Cautionary Statements and Risk Factors
  Critical Accounting Policies
 Cautionary Advice Regarding Disclosure About Critical
Accounting Policies
 Revenue Recognition. Revenue Recognition Accounting of Shipping and Handling Fees and Costs
 Sales Returns and Other Allowances.
 Allowance for Doubtful Accounts.
 15




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Inventory.
 Deferred Taxes. Accounting for Income Taxes Accounting for Contingencies
 Share-Based Compensation. Share-Based Payment
 Off-Balance Sheet Arrangements
  16




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Overview
    Accounting for Income Taxes (SFAS 109
 17




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Innovation
 TM
     18




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Information Technology.
 Results of Operations
 Second quarter 2007 compared to second quarter 2006
     19




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20




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Six months ended April 30, 2007 compared to six months ended April 30, 2006
        21




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Capital Resources and Liquidity
   22




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1)
    
    Minimum tangible net worth equal to the sum of $75.0 million; plus the sum
of 90% of net income after income taxes (without subtracting losses) earned in each
quarterly accounting period commencing after January 31, 2006; plus, the net
proceeds from any equity securities issued after the date of the Fourth Amendment,
including net proceeds from stock option exercises;2)
    
    A ratio of quick assets to current liabilities (including the outstanding
amount of loans and letter of credit obligations) of at least 0.90:1:00, except for
the fiscal quarters ending January 31 and April 30, as to which the ratio of quick
assets to current liabilities shall be at least 0.75:1:00;3)
    
    Capital expenditures are not to exceed more than $7 million in any fiscal
year;4)
    
    Fixed charge coverage ratio as of the last day of any fiscal quarter is
required to be not less than 1.25 to 1:00; provided that, for the fiscal quarter
ended January 31, 2006, the fixed charge coverage ratio shall be not less than 0.80
to 1:00; and for purposes of determining the fixed charge coverage ratio only, the
Companys inventory write-down of $4.4 million shall be added back to EBITDA for the
Companys fiscal quarter ending April 30, 2006 and the Companys maintenance capital
expenditures shall be $4.0 million through the fiscal year ending October 31, 2006;
and
 24




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##### Table of Contents



5)
    
    The requirement where, for any period of 30 consecutive days, the total
indebtedness under the revolving credit facility may not be more than $15 million was
eliminated.
       25




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26




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Recent Accounting Pronouncements
 Fair Value Option for Financial Assets and Financial
Liabilities  Including an Amendment of FASB Statement No. 115 , Fair Value Measurements
 Accounting for Uncertainty in Income
Taxes
 Fair Value Measurements
 27




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Quantifying Financial Statement Misstatements
 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
   Foreign Currency Exchange Rate Risk
  28




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Item 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
    Evaluation of Internal Control over Financial Reporting
  1)
    
    pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the Companys assets;2)
    
    provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that the Companys receipts and expenditures are being made
only in accordance with the authorization of the Companys management and directors;
and
 29




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##### Table of Contents



3)
    
    provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Companys assets that could have a
material effect on
the financial statements.
 Internal ControlIntegrated
Framework
 Changes in Internal Control over Financial Reporting
     
 PART II
 OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
  30




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Item 1A. Risk Factors
  
 Item 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS  None
 
 Item 3.
    
    DEFAULTS UPON SENIOR SECURITIES  Not applicable.
 
 Item 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 
Not applicable
 
 Item 5.
    
    OTHER INFORMATION -None
 
 Item 6.
    
    EXHIBITS
 3(a)
    
    Certificate of Incorporation as filed March 19, 1987 with the Secretary of State of Delaware,
Amendment to Certificate of Incorporation as filed August 3, 1987 and Amendment to Certificate
of Incorporation as filed April 26, 1991 (filed as Exhibit 3(a) to the Companys Registration
Statement dated February 21, 1992 (File No. 33-45078) and incorporated herein by reference)
and Amendment to Certificate of Incorporation as filed April 6, 1995 (filed as Exhibit 3(a) to
the Companys Form 10-K for the fiscal year ended October 31, 1994 (File No. 001-14547) and
incorporated herein by reference).3(b)
    
    Amended and Restated Bylaws of the Company (filed as Exhibit 3.1 to the Companys Current
Report on Form 8-K on February 23, 2000 (File No. 001-14547) and incorporated herein by
reference).4(a)
    
    Specimen certificate for Common Stock, par value $.001 per share, of the Company (filed as
Exhibit 4(a) to the Companys Registration Statement dated November 4, 1987 (File No.
33-16714-D) and incorporated herein by reference).4(b)
    
    Specimen certificate for Options granted under the Amended and Restated Nonqualified Stock
Option Plan dated March 12, 1992 (filed as Exhibit 4(b) to the Companys Form 10-K for the
fiscal year ended October 31, 1993 (File No. 001-14547) and incorporated herein by reference).4(c)
    
    Specimen certificate for Options granted under the Incentive Stock Option Plan dated June 15,
1993 (filed as Exhibit 4(c) to the Companys Form 10-K for the fiscal year ended October 31,
1993 (File No. 001-14547) and incorporated herein by reference).
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4(d)
    
    Rights Agreement dated as of October 6, 1998 and amended on February 22, 2000 by and between
Ashworth, Inc. and American Securities Transfer & Trust, Inc. (filed as Exhibit 4.1 to the
Companys Form 8-K filed on March 14, 2000 (File No. 001-14547) and incorporated
herein by reference).10(a)*
    
    Personal Services Agreement and Acknowledgement of Termination of Executive Employment
effective December 31, 1998 by and between Ashworth, Inc. and Gerald W. Montiel (filed as
Exhibit 10(b) to the Companys Form 10-K for the fiscal year ended October 31, 1998 (File
No.001-14547) and incorporated herein by reference).10(b)*
    
    Amendment to Personal Services Agreement effective January 1, 1999 by and between Ashworth,
Inc. and Gerald W. Montiel (filed as Exhibit 10(c) to the Companys Form 10-K for the fiscal
year ended October 31, 1998 (File No. 001-14547) and incorporated herein by reference).10(c)*
    
    Amended and Restated Nonqualified Stock Option Plan dated November 1, 1996 (filed as Exhibit
10(i) to the Companys Form 10-K for the fiscal year ended October 31, 2000 (File No.
001-14547) and incorporated herein by reference).10(d)*
    
    Amended and Restated Incentive Stock Option Plan dated November 1, 1996 (filed as Exhibit
10(j) to the Companys Form 10-K for the fiscal year ended October 31, 2000 (File No.
001-14547) and incorporated herein by reference).10(e)*
    
    Amended and Restated 2000 Equity Incentive Plan dated December 14, 1999 adopted by the
stockholders on March 24, 2000 (filed as Exhibit 4.1 to the Companys Form S-8 filed on
December 12, 2000 (File No. 333-51730) and incorporated herein by reference).10(e)(1)
    
    Credit Agreement dated July 6, 2004, between Ashworth, Inc. as Borrower, Union Bank of
California, N.A., as Administrative Agent and Lender, Bank of the West and Columbus Bank and
Trust as Lenders, expiring July 6, 2009 (filed as Exhibit 10(z)(1) to the Companys Form 10-Q
for the quarter ended July 31, 2004 (File No. 001-14547) and incorporated herein by
reference).10(e)(2)
    
    Guaranty Agreement dated July 6, 2004 between Ashworth Store I, Inc., Ashworth Store II,
Inc., Ashworth Acquisition Corp, Gekko Brands, LLC, Kudzu, LLC and The Game, LLC as Guarantors
and Union Bank of California, N.A., as Administrative Agent on behalf of Ashworth, Inc. as the
Borrower (filed as Exhibit 10(z)(2) to the Companys Form 10-Q for the quarter ended July 31,
2004 (File No. 001-14547) and incorporated herein by reference).10(e)(3)
    
    Security Agreement effective as of July 6, 2004 to the Credit Agreement dated July 6,
2004, between Ashworth, Inc. as Pledgor, Union Bank of California, N.A., as Administrative
Agent and Lender, Bank of the West and Columbus Bank and Trust as Lenders, expiring July 6,
2009(filed as Exhibit 10(z)(3) to the Companys Form 10-Q for the quarter ended July 31, 2004
(File No. 001-14547) and incorporated herein by reference).10(e)(4)
    
    Security Agreement effective as of July 6, 2004 to the Credit Agreement dated July 6,
2004, between Ashworth Store I, Inc., Ashworth Store II, Inc., Ashworth Acquisition Corp,
Gekko Brands, LLC, Kudzu, LLC and The Game, LLC as Pledgor, Union Bank of California, N.A., as
Administrative Agent and Lender, Bank of the West and Columbus Bank and Trust as Lenders,
expiring July 6, 2009 (filed as Exhibit 10(z)(4) to the Companys Form 10-Q for the quarter
ended July 31, 2004 (File No. 001-14547) and incorporated herein by reference).
 32




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10(e)(5)
    
    Deed of Hypothec of Universality of Moveable Property effective as of July 6, 2004 to the
Credit Agreement dated July 6, 2004, between Ashworth, Inc. as Grantor, Union Bank of
California, N.A., as Administrative Agent and Lender, Bank of the West and Columbus Bank and
Trust as Lenders, expiring July 6, 2009 (filed as Exhibit 10(z)(5) to the Companys Form
10-Q for the quarter ended July 31, 2004 (File No. 001-14547) and incorporated herein by
reference).10(e)(6)
    
    Equitable Mortgage Over Securities effective as of July 6, 2004 to the Credit Agreement
dated July 6, 2004, between Ashworth, Inc. as Mortgagor, Union Bank of California, N.A., as
Security Trustee and Beneficiary, Bank of the West and Columbus Bank and Trust as
Beneficiaries, expiring July 6, 2009 (filed as Exhibit 10(z)(6) to the Companys Form 10-Q for
the quarter ended July 31, 2004 (File No. 001-14547) and incorporated herein by reference).10(e)(7)
    
    First Amendment effective as of September 3, 2004 to the Credit Agreement dated July 6,
2004, between Ashworth, Inc. as Borrower, Union Bank of California, N.A., as Administrative
Agent and Lender, Bank of the West and Columbus Bank and Trust as Lenders, expiring July 6,
2009 (filed as Exhibit 10(z)(7) to the Companys Form 10-Q for the quarter ended July 31, 2004
(File No. 001-14547) and incorporated herein by reference).10(f)
    
    Promotion Agreement effective November 1, 1999 by and between Ashworth, Inc. and Fred
Couples (filed as Exhibit 10(o) to the Companys Form 10-K for the fiscal year ended October
31, 2000 (File No. 001-14547) and incorporated herein by reference).10(g)*
    
    Contract Termination Agreement effective October 31, 2002 by and among Ashworth, Inc., James
Nantz, III and Nantz Communications, Inc. (filed as Exhibit 10(p) to the Companys Form 10-K
for the fiscal year ended October 31, 2002 (File No. 001-14547) and incorporated herein by
reference).10(h)*
    
    Promotion Agreement effective October 31, 2002 by and among Ashworth, Inc., James W. Nantz,
III and Nantz Enterprises, Ltd. (filed as Exhibit 10(q) to the Companys Form 10-Q for the
quarter ended January 31, 2003 (File No. 001-14547) and incorporated herein by reference).10(i)
    
    Purchase and Installation Agreement dated April 10, 2003 between Ashworth, Inc. and Gartner
Storage & Sorter Systems of Pennsylvania (filed as Exhibit 10 (r) to the Companys Form 10-Q
for the quarter ended April 30, 2003 (File No. 001-14547) and incorporated herein by
reference).10(j)
    
    Agreement for Lease dated May 1, 2003 by and among Ashworth, Inc., Ashworth U.K. Limited and
Juniper Developments Limited (filed as Exhibit 10(s) to the Companys Form 10-Q for the
quarter ended April 30, 2003 (File No. 001-14547) and incorporated herein by reference).10(k)
    
    Lease dated September 1, 2003 by and among Ashworth, Inc., Ashworth U.K. Limited and Juniper
Developments Limited (filed as Exhibit 10(t) to the Companys Form 10-Q for the quarter ended
July 31, 2003 (File No. 001-14547) and incorporated herein by reference).10(l)(1)
    
    Master Equipment Lease Agreement dated as of June 23, 2003 by and between Key Equipment
Finance and Ashworth, Inc. including Amendment 01, the Assignment of Purchase Agreement and
the Certificate of Authority (filed as Exhibit 10(u) to the Companys Form 10-Q for the
quarter ended July 31, 2003 (File No. 001-14547) and incorporated herein by reference).
 33




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10(l)(2)
    
    Equipment Schedule No. 01 dated as of August 30, 2004 by and between Ashworth, Inc. and
Key Equipment Finance, a Division of Key Corporate Capital, Inc.(filed as Exhibit 99.1 to the
Companys Form 8-K on September 3, 2004 (File No. 001-14547) and incorporated herein by
reference).10(m)
    
    License Agreement, effective May 14, 2001, by and between Ashworth, Inc. and Callaway Golf
Company (filed as Exhibit 10(v) to the Companys Form 10-K for the fiscal year ended October
31, 2003 (File No. 001-14547) and incorporated herein by reference).10(n)
    
    Amendment to License Agreement, effective December 16, 2003, by and between Ashworth, Inc.
and Callaway Golf Company (filed as Exhibit 10(w) to the Companys Form 10-K for the fiscal
year ended October 31, 2003 (File No. 001-14547) and incorporated herein by reference).10(o)(1)
    
    Loan Agreement, effective April 2, 2004, by and between Ashworth EDC, LLC and Bank of
America, N.A. (filed as Exhibit 10(x)(3) to the Companys Form 10-Q for the quarter ended
April 30, 2004 (File No. 001-14547) and incorporated herein by reference).10(o)(2)
    
    Promissory Note, effective April 2, 2004, by and between Ashworth EDC, LLC and Bank of
America, N.A. (filed as Exhibit 10(x)(4) to the Companys Form 10-Q for the quarter ended
April 30, 2004 (File No. 001-14547) and incorporated herein by reference).10(o)(3)
    
    Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing,
effective April 2, 2004, by and between Ashworth EDC, LLC, PRLAP, Inc. and Bank of America,
N.A. (filed as Exhibit 10(x)(5) to the Companys Form 10-Q for the quarter ended April 30,
2004 (File No. 001-14547) and incorporated herein by reference).10(o)(4)
    
    Environmental Indemnity Agreement, effective April 2, 2004, by and between Ashworth EDC,
LLC, Ashworth, Inc. and Bank of America, N.A. (filed as Exhibit 10(x)(6) to the Companys Form
10-Q for the quarter ended April 30, 2004 (File No. 001-14547) and incorporated herein by
reference).10(p)(1)
    
    Membership Interests Purchase Agreement, dated July 6, 2004, by and among Ashworth
Acquisition Corp. and the selling members, identified therein (filed as Exhibit 99.1 to the
Companys Form 8-K on July 21, 2004 (File No. 001-14547) and incorporated herein by
reference).10(p)(2)
    
    Ashworth Acquisition Corp. Promissory Note in favor of W. C. Bradley Co. (filed as Exhibit
99.2 to the Companys Form 8-K on July 21, 2004 (File No. 001-14547) and incorporated herein
by reference).10(p)(3)
    
    Ashworth, Inc. Guaranty of Ashworth Acquisition Corp. Promissory Note in favor of W. C.
Bradley Co. (filed as Exhibit 99.3 to the Companys Form 8-K on July 21, 2004 (File No.
001-14547) and incorporated herein by reference).10(p)(4)
    
    Amended and Restated Lease Agreement, dated July 6, 2004, by and between 16 Downing, LLC
as Lessor and Gekko Brands, LLC as Lessee (filed as Exhibit 99.4 to the Companys Form 8-K
July 21, 2004 (File No. 001-14547) and incorporated herein by reference).10(p)(5)
    
    Ashworth, Inc. Guaranty of Payments under the Amended and Restated Lease Agreement, dated
July 6, 2004, by and between 16 Downing, LLC as Lessor and Gekko Brands, LLC as Lessee (filed
as Exhibit 99.5 to the Companys Form 8-K on July 21, 2004 (File No. 001-14547) and
incorporated herein by reference).
 34




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10(p)(6)
    
    Form of Executive Employment Agreement by and between Gekko Brands, LLC and certain
selling members (filed as Exhibit 99.6 to the Companys Form 8-K on July 21, 2004 (File No.
001-14547) and incorporated herein by reference).10(q)*
    
    Form of Stock Option Agreement for issuance of stock option grants to each of the Companys
executive officers and non-employee directors on December 21, 2004 (filed as Exhibit 10.1 to
the Companys Form 8-K on December 22, 2004 (File No. 001-14547) and incorporated herein
by reference.10(r)
    
    Stipulation and Agreement of Settlement regarding shareholder class-action lawsuit in which
the U.S. District Court entered a Final Approval of Settlement on November 8, 2004 (filed as
Exhibit 10.1 to the Companys Form 10Q on March 11, 2005 (File No. 001-14547) and incorporated
herein by reference).10(s)*
    
    Second Amended and Restated Executive Employment Agreement with the Companys President and
Chief Executive Officer, Randall L. Herrel, Sr., effective as of February 28, 2006 (filed as
Exhibit 10.1 to the Companys Form 10-K/A on February 28, 2006 (File No. 001-14547) and
incorporated herein by reference).10(s)(1)*
    
    Agreement as to Ashworth, Inc. Executive Employment Agreement with Randall L. Herrel, Sr.
effective September 12, 2006 (filed as Exhibit 10.1 to the Companys Form 8-K on September 13,
2006 (File No. 001-14547) and incorporated herein by reference).10(s)(2)*
    
    Amended and Restated Change In Control Agreement with the Companys President and Chief
Executive Officer, Randall L. Herrel, Sr., effective as of February 28, 2006 (filed as Exhibit
10.2 to the Companys Form 10-K/A on February 28, 2006 (File No. 001-14547) and incorporated
herein by reference).10(t)(1)*
    
    Amended and Restated Employment Agreement with the Companys Executive Vice President of
Sales and Marketing, Mr. Gary I. Sims Schneiderman, effective as of February 28, 2006 (filed
as Exhibit 10.5 to the Companys Form 10-K/A on February 28, 2006 (File No. 001-14547) and
incorporated herein by reference).10(t)(2)*
    
    Amended and Restated Change In Control Agreement with the Companys Executive Vice
President of Sales and Marketing, Mr. Gary I. Sims Schneiderman, effective as of February
28, 2006 (filed as Exhibit 10.6 to the Companys Form 10-K/A on February 28, 2006 (File No.
001-14547) and incorporated herein by reference).10(u)(1)*
    
    Amended and Restated Employment Agreement with the Companys Executive Vice President,
Green Grass Sales and Merchandising, Peter E. Holmberg, effective as of October 25, 2006
(filed as Exhibit 10.1 to the Companys Form 8-K on October 31, 2006 (File No. 001-14547) and
incorporated herein by reference).10(u)(2)*
    
    Amended and Restated Change in Control Agreement with the Companys Executive Vice
President, Merchandising, Design and Production, Peter E. Holmberg, effective as of February
28, 2006 (filed as Exhibit 10.4 to the Companys Form 10-K/A on February 28, 2006 (File No.
001-14547) and incorporated herein by reference).10(v)
    
    Fourth Amendment effective as of January 26, 2006 to the Credit Agreement dated July 6,
2004, between Ashworth, Inc. as Borrower, Union Bank of California, N.A., as Administrative
Agent and Lender, Bank of the West and Columbus Bank and Trust as Lenders, expiring July 6,
2009 (filed as Exhibit 10.5 to the Companys Form 10-K on February 1, 2006 (File No.
001-14547) and incorporated herein by reference).
 35




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##### Table of Contents



10(w)*
    
    Employment Letter with the Companys Executive Vice President and Chief Financial Officer,
Winston E. Hickman, effective as of February 23, 2006 (filed as Exhibit 10.7 to the Companys
Form 10-K/A on February 28, 2006 (File No. 001-14547) and incorporated herein by reference).10(w)(1)*
    
    Change in Control Agreement with the Companys Executive Vice President and Chief
Financial Officer, Winston E. Hickman, effective as of February 23, 2006 (filed as Exhibit
10.8 to the
Companys Form 10-K/A on February 28, 2006 (File No. 001-14547) and incorporated herein
by reference).10(w)(2)*
    
    Release Agreement with the Companys Executive Vice President and Chief financial
Officer, Winston E. Hickman, dated November 16, 2006 (filed as Exhibit 10.1 to the Companys
Form 8-K on November 11, 2006 (File No. 001-14547) and incorporated herein by reference).10(x)
    
    Personal Services Agreement effective September 12, 2005 by and between Ashworth, Inc. and
Peter M. Weil (filed as Exhibit 10.2 to the Companys Form 8-K on September 13, 2006 (File No.
001-14547) and incorporated herein by reference).10(x)(1)*
    
    Employment Agreement with the Companys Chief Executive Officer, Peter M. Weil, dated
November 27, 2006 (filed as Exhibit 10.1 to the Companys Form 8-K on November 28, 2006 (File
No. 001-14547) and incorporated herein by reference).10(y)
    
    Settlement Agreement, dated May 5, 2006, by and among the Company and Knightspoint Partners
II, L.P., Knightspoint Capital Management II LLC, Knightspoint Partners LLC, Michael S.
Koeneke, David M. Meyer, Starboard Value and Opportunity Master Fund Ltd., Parche, LLC,
Admiral Advisors, LLC, Ramius Capital Group, LLC, C4S & Co., LLC, Peter A. Cohen, Jeffrey M.
Solomon, Morgan B. Stark, Thomas W. Strauss, Black Sheep Partners, LLC, Brian Black, and Peter
M. Weil (filed as Exhibit 10.1 to the Companys Form 8-K on May 9, 2006 (File No. 001-14547)
and incorporated herein by reference).10(z)*
    
    Form of Indemnification Agreement by and between the Company and its Directors, Officers and
Other Employees Designated by the Board (filed as Exhibit 10.1 to the Companys Form 8-K on
December 15, 2006 (File No. 001-14547) and incorporated herein by reference).10(aa)*
    
    Offer of Employment Agreement effective October 10, 2005 by and between Ashworth, Inc. and
Greg W. Slack. (filed as Exhibit 10(aa) to the Companys Form 10-K on January 16, 2007 (File
No. 001-14547) and incorporated herein by reference).10(aa)(1)*
    
    Change in Control Agreement effective as of February 9, 2006 by and between Ashworth,
Inc. and Greg W. Slack. (filed as Exhibit 10(aa)(1) to the Companys Form 10-K on January 16,
2007 (File No. 001-14547) and incorporated herein by reference).10(aa)(2)*
    
    Promotion and Retention Bonus Agreement effective February 10, 2006 by and between
Ashworth, Inc. and Greg. W. Slack (filed as Exhibit 10(aa)(2) to the Companys Form 10-K on
January 16, 2007 (File No. 001-14547) and incorporated herein by reference).10(ab)*
    
    Employment Letter between Eric R. Hohl and the Company, dated March 5, 2007 (filed as
Exhibit 10.1 to the Companys Form 8-K on March 7, 2007(File No. 001-14547) and incorporated
herein by reference).
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10(ac)
    
    Employment Letter between Edward J. Fadel and the Company, dated May 23, 2007 (filed as
Exhibit 10.1 to the Companys Form 8-K on May 25, 2007 (File No. 001-14547) and incorporated
herein by reference).10(ad)
    
    Severance and Release Agreement between Gary I. (Sims) Schneiderman and the Company, dated
May 25, 2007 (filed as Exhibit 10.2 to the Companys Form 8-K on May 25, 2007 (File No.
001-14547) and incorporated herein by reference).10(ae)
    
    Severance and Release Agreement between Peter E. Holmberg and the Company, dated May 25,
2007 (filed as Exhibit 10.3 to the Companys Form 8-K on May 25, 2007 (File No. 001-14547) and
incorporated herein by reference).10(af)
    
    Personal services agreement between Ashworth, Inc., a Delaware corporation and its
successors or assignees, and Eric S. Salus (filed as Exhibit 10.1 to the Companys Form 8-K on
June 6, 2007 (File No. 001-14547) and incorporated herein by reference).10(ag)
    
    Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and J. Neil Stillwell. (filed as Exhibit
10.1 to the Companys Form 8-K on June 6, 2007 (File No. 001-14547) and incorporated herein by
reference).10(ah)
    
    Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and Calvin J. Martin, Jr. (filed as
Exhibit 10.2 to the Companys Form 8-K on June 6, 2007 (File No. 001-14547) and incorporated
herein by reference).10(ai)
    
    Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and Phil R. Stillwell. (filed as Exhibit
10.3 to the Companys Form 8-K on June 6, 2007 (File No. 001-14547) and incorporated herein by
reference).10(aj)
    
    Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and Jeffery N. Stillwell. (filed as
Exhibit 10.4 to the Companys Form 8-K on June 6, 2007 (File No. 001-14547) and incorporated
herein by reference)10(ak)
    
    Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and Thomas Patrick Allison, Jr. (filed as
Exhibit 10.5 to the Companys Form 8-K on June 6, 2007 (File No. 001-14547) and incorporated
herein by reference).31.1
    
    Certification Pursuant to Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 by Peter M. Weil.31.2
    
    Certification Pursuant to Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 by Eric R. Hohl.32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 by Peter M. Weil.
 37




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32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 by Eric R. Hohl.
 
 *
    
    Management contract or compensatory plan or arrangement required to be filed as an Exhibit
pursuant to Item 15(b) of Form 10-K and applicable rules of the Securities and Exchange Commission.
    
    Certain portions of this exhibit have been omitted pursuant to a request for confidential
treatment filed
separately with the Securities and Exchange Commission. 38




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SIGNATURES
  ASHWORTH, INCDate:
    
    June 18, 2007
    
    
    
    By:Peter M. WeilChief Executive OfficerDate:
    
    June 18, 2007
    
    
    
    By:Eric R. HohlEVP and Chief Financial Officer
 
 EXHIBIT INDEX
 ExhibitNumber
    
    Description of Exhibit31.1
    
    
    Certification Pursuant to Rules 13a-14 and 15d-14, as
Adopted Pursuant to Section 302 of The Sarbanes-Oxley Act
of 2002 by Peter M. Weil.31.2
    
    
    Certification Pursuant to Rules 13a-14 and 15d-14, as
Adopted Pursuant to Section 302 of The Sarbanes-Oxley Act
of 2002 by Eric R. Hohl.32.1
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act
of 2002 by Peter M. Weil.32.2
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act
of 2002 by Eric R. Hohl.
 39