Lynx Golf Inc., a Carlsbad-based golf club maker backed by a handful of celebrity investors, has filed for voluntary bankruptcy, apparently a victim of the weather and deeper-pocketed, better-known competitors.
But overall, much of the golf industry also has seen a downturn in sales, which analysts and enthusiasts are attributing to the Asian "flu" and El Nino.
Lynx Golf, maker of Black Cat irons, filed over the weekend for protection under Chapter 11 of the U.S. Bankruptcy Code. Lynx officials did not offer comment on Tuesday, but others said the move was not unexpected--the company defaulted on a $3.4-million bank loan earlier this month.
"It's an expensive game to play, and they just didn't have the resources to compete against the majors," said Gar Jackson of Carlsbad's ParValu golf stock newsletter.
Lynx had been struggling for years and hoped to revamp the company with its arrival last year in the heart of golf's big three--Taylor Made Golf Co., Cobra Golf and Callaway Golf Co. have become the epicenter of the club-making universe.
Lynx moved to Carlsbad from Industry, a Los Angeles suburb, after being purchased from Zurn Industries of Pennsylvania and by an investment group led by Fred Couples of the Professional Golf Assn. tour.
Actors Clint Eastwood and Jack Nicholson, tennis star Pete Sampras and NBC sports broadcaster Jim Nantz were among the dozen or so celebrity investors.
"Obviously, the company had deep-seated problems," said Bud Leedom, publisher of Golf Insight & Investing of San Diego. "But I never understood why the company never used its biggest asset--those celebrities--in trying to market its clubs."
Lynx, which once had 120 employees, laid off 35 people this week, leaving it with just 40 employees after an earlier cut. It will try to negotiate with third parties on a recapitalization or possible sale of the company while working with creditors.
The news that Lynx filed for bankruptcy came just days after Callaway announced that economic weakness in Asia, where it does about 25% of its sales, combined with a softening demand for its premium clubs to slash its second-quarter earnings to less than half those of a year ago. The news sent Callaway stock tumbling nearly 33% on Thursday.
Taylor Made laid off 29 of its 328 employees on July 2, citing similar problems with the U.S. and Asian markets.
Smaller companies such as McHenry Metals Golf Corp. of Carlsbad have also seen their stock slip steadily.
"The companies are seeing an impact with the slowdown of golf over in Asia," Jackson said. "And El Nino seemed to affect Callaway more than Taylor Made, because of Callaway's sales base in California and Florida, which was subjected to more problems due to El Nino."
However, Jackson believes part of the downturn may simply be competition coming in and taking business.
"It's really more of a situation of redistribution of market share," he said.
As to speculation that golf's economic boom could be ending, Jackson said he believes just the opposite.
"We saw a big spike in the golf industry with the introduction of Tiger Woods, but Tiger's really just the tip of the iceberg," Jackson said. "Baby boomers are just coming to an age where they can really play. They may have had the money to spend before, but what they didn't have is time. As the baby boomers start to retire, it's going to be one of their main hobbies. . . . I think this is just the beginning."