Callaway Golf Company Announces Increase in 2008 Earnings
CARLSBAD, Calif.--(BUSINESS WIRE)--
- Net sales of
$1.117 billion , which was the second highest sales level in the Company's history and only slightly less than the record sales of$1.125 billion in 2007. - Gross profit was
$486.8 million for 2008 (or 44% of net sales) compared to$493.2 million (or 44% of net sales) in 2007. Excluding the impact of the gross margin improvement charges, pro forma gross profit percentages for both 2008 and 2007 would have been 45%. - Operating expenses for 2008 were
$402.6 million (or 36% of net sales) compared to$403.0 million (or 36% of net sales) in 2007. - Fully diluted pro forma earnings per share of
$.94 (on 63.8 million shares outstanding), an increase of approximately 6% compared to$.89 (on 67.5 million shares outstanding) in 2007. Fully diluted pro forma earnings per share for 2008 exclude a non-cash, non-operational benefit of$.22 per share related to the reversal of an energy derivative valuation account established in 2001 in connection with the Company's termination of a long-term energy supply contract. Pro forma earnings also exclude for 2008 and 2007 charges related to the Company's gross margin initiatives in the amount of$0.12 and$0.08 per share, respectively. Including these benefits and charges, reported earnings per share for 2008 were$1.04 compared to$.81 in 2007.
"We are very pleased that we were able to deliver a 6% increase in pro forma earnings per share in a very difficult economic environment," commented
Business Outlook
"Looking forward," continued Mr. Fellows, "we expect more challenges as a result of continued unfavorable global economic conditions. In addition, given the recent overall strengthening of the US dollar, we anticipate that foreign currency exchange rates will have a significant adverse impact upon the translation of our international results in 2009 and therefore on our consolidated results. Because it is too difficult to predict what consumer spending or foreign currency rates will be in this environment, we are not providing specific financial guidance for 2009 at this time."
"Despite these macroeconomic challenges, our fundamental business operations remain strong and are executing well," added Mr. Fellows. "
The Company will be holding a conference call at
Disclaimer: Statements made in this press release that relate to future plans, events, financial results, performance or prospects, including statements relating to the strength of the 2009 product line-up, the Company's ability to manage in 2009 the Company's costs and inventories, the effect of foreign currency upon the Company's future results, and the ability of the Company's investments in initiatives to drive future growth, are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These estimates and statements are based upon current information and expectations, including current and estimated future foreign currency exchange rates. Accurately estimating the Company's reported future financial performance is based upon various unknowns, including future changes in foreign currency rates and consumer acceptance and demand for the Company's products as well as future consumer discretionary purchasing activity, which can be significantly adversely affected by unfavorable economic or market conditions. Actual results may differ materially from those estimated or anticipated as a result of these unknowns or other risks and uncertainties, including delays, difficulties or increased costs in the supply of components needed to manufacture the Company's products, in manufacturing the Company's products, or in connection with the implementation of the Company's planned gross margin initiatives or the implementation of future initiatives; adverse weather conditions and seasonality; any rule changes or other actions taken by the USGA or other golf association that could have an adverse impact upon demand or supply of the Company's products; a decrease in participation levels in golf; and the effect of terrorist activity, armed conflict, natural disasters or pandemic diseases on the economy generally, on the level of demand for the Company's products or on the Company's ability to manage its supply and delivery logistics in such an environment. For additional information concerning these and other risks and uncertainties that could affect these statements and the Company's business, see Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended
Regulation G: The financial results reported in this press release have been prepared in accordance with accounting principles generally accepted in the
About
Through an unwavering commitment to innovation,
Callaway Golf Company Consolidated Condensed Balance Sheets (In thousands) (Unaudited) December 31, December 31, 2008 2007 ASSETS Current assets: Cash and cash equivalents $ 38,337 $ 49,875 Accounts receivable, net 120,067 112,064 Inventories 257,191 253,001 Deferred taxes 27,046 42,219 Income taxes receivable 15,549 9,232 Other current assets 31,813 30,190 Total current assets 490,003 496,581 Property, plant and equipment, net 142,145 128,036 Intangible assets, net 176,689 173,045 Deferred taxes 30,641 18,885 Other assets 40,202 40,416 $ 879,680 $ 856,963 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 126,167 $ 130,410 Accrued employee compensation and benefits 25,630 44,245 Accrued warranty expense 11,614 12,386 Credit facilities 90,000 36,507 Total current liabilities 253,411 223,548 Long-term liabilities 45,901 63,207 Minority interest 2,213 1,978 Shareholders' equity 578,155 568,230 $ 879,680 $ 856,963
Callaway Golf Company Statements of Operations (In thousands, except per share data) (Unaudited) Quarter Ended December 31, 2008 2007 Net sales $ 171,272 100% $ 174,418 100% Cost of sales 111,184 65% 111,047 64% Gross profit 60,088 35% 63,371 36% Operating expenses: Selling 61,450 36% 59,951 34% General and administrative 19,993 12% 23,921 14% Research and development 7,258 4% 8,169 5% Total operating expenses 88,701 52% 92,041 53% Loss from operations (28,613 ) -17% (28,670 ) -16% Other income, net 771 98 Change in energy derivative valuation 19,922 - account Loss before income taxes (7,920 ) -5% (28,572 ) -16% Income tax benefit (4,766 ) (12,415 ) Net loss $ (3,154 ) -2% $ (16,157 ) -9% Loss per common share: Basic ($0.05 ) ($0.25 ) Diluted ($0.05 ) ($0.25 ) Weighted-average shares outstanding: Basic 62,662 63,765 Diluted 62,662 63,765 Year Ended December 31, 2008 2007 Net sales $ 1,117,204 100% $ 1,124,591 100% Cost of sales 630,371 56% 631,368 56% Gross profit 486,833 44% 493,223 44% Operating expenses: Selling 287,802 26% 281,960 25% General and administrative 85,473 8% 89,060 8% Research and development 29,370 3% 32,020 3% Total operating expenses 402,645 36% 403,040 36% Income from operations 84,188 8% 90,183 8% Other expense, net (2,803 ) (1,908 ) Change in energy derivative valuation 19,922 - account Income before income taxes 101,307 9% 88,275 8% Income tax provision 35,131 33,688 Net income $ 66,176 6% $ 54,587 5% Earnings per common share: Basic $ 1.05 $ 0.82 Diluted $ 1.04 $ 0.81 Weighted-average shares outstanding: Basic 63,055 66,371 Diluted 63,798 67,484
Callaway Golf Company Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited) Year Ended December 31, 2008 2007 Cash flows from operating activities: Net income $ 66,176 $ 54,587 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 37,963 35,326 Non-cash compensation 6,375 10,851 Deferred taxes 14,659 9,047 Gain on disposal of assets 510 (4,731 ) Non-cash change in energy derivative valuation (19,922 ) - account Changes in assets and liabilities (64,137 ) 46,902 Net cash provided by operating activities 41,624 151,982 Cash flows from investing activities: Capital expenditures (51,005 ) (32,930 ) Acquisitions, net of cash acquired (9,797 ) - Proceeds from sale of capital assets 45 11,460 Investment in golf related ventures - (3,698 ) Net cash used in investing activities (60,757 ) (25,168 ) Cash flows from financing activities: Issuance of Common Stock 4,708 48,035 Acquisition of Treasury Stock (23,650 ) (114,795 ) Dividends paid, net (17,794 ) (18,755 ) Proceeds from (payments on) line of credit 53,493 (43,493 ) Tax benefit from exercise of stock options (610 ) 6,031 Other financing activities 235 (9 ) Net cash provided by (used in) financing activities 16,382 (122,986 ) Effect of exchange rate changes on cash and cash (8,787 ) (315 ) equivalents Net (decrease) increase in cash and cash equivalents (11,538 ) 3,513 Cash and cash equivalents at beginning of period 49,875 46,362 Cash and cash equivalents at end of period $ 38,337 $ 49,875 Supplemental disclosures Cash Paid for interest and fees $ (1,346 ) $ (5,633 ) Cash paid for income taxes $ (27,483 ) $ (38,292 )
Callaway Golf Company Consolidated Net Sales and Operating Segment Information (In thousands) (Unaudited) Net Sales by Product Category Quarter Ended Year Ended December 31, Growth/(Decline) December 31, Growth/(Decline) 2008 2007 Dollars Percent 2008 2007 Dollars Percent Net sales: Net sales: Woods $ 31,243 $ 32,291 $ (1,048 ) -3% Woods $ 268,286 $ 305,880 $ (37,594 ) -12% Irons 48,245 45,811 2,434 5% Irons 308,556 309,594 (1,038 ) 0% Putters 12,883 20,542 (7,659 ) -37% Putters 101,676 109,068 (7,392 ) -7% Golf balls 41,994 37,724 4,270 11% Golf balls 223,075 213,064 10,011 5% Accessories 36,907 38,050 (1,143 ) -3% Accessories 215,611 186,985 28,626 15% and other and other $ 171,272 $ 174,418 $ (3,146 ) -2% $ 1,117,204 $ 1,124,591 $ (7,387 ) -1% Net Sales by Region Quarter Ended Year Ended December 31, Growth/(Decline) December 31, Growth/(Decline) 2008 2007 Dollars Percent 2008 2007 Dollars Percent Net sales: Net sales: United $ 88,976 $ 85,053 $ 3,923 5% United $ 554,029 $ 597,569 $ (43,540 ) -7% States States Europe 19,804 26,046 (6,242 ) -24% Europe 191,089 193,336 (2,247 ) -1% Japan 33,753 23,207 10,546 45% Japan 166,476 120,148 46,328 39% Rest of 12,983 17,127 (4,144 ) -24% Rest of 80,011 86,133 (6,122 ) -7% Asia Asia Other Other foreign 15,756 22,985 (7,229 ) -31% foreign 125,599 127,405 (1,806 ) -1% countries countries $ 171,272 $ 174,418 $ (3,146 ) -2% $ 1,117,204 $ 1,124,591 $ (7,387 ) -1% Operating Segment Information Quarter Ended Year Ended December 31, Growth/(Decline) December 31, Growth/(Decline) 2008 2007 Dollars Percent 2008 2007 Dollars Percent Net sales: Net sales: Golf clubs $ 129,278 $ 136,694 $ (7,416 ) -5% Golf clubs $ 894,129 $ 911,527 $ (17,398 ) -2% Golf balls 41,994 37,724 4,270 11% Golf balls 223,075 213,064 10,011 5% $ 171,272 $ 174,418 $ (3,146 ) -2% $ 1,117,204 $ 1,124,591 $ (7,387 ) -1% Income (loss) before provision for income taxes: Golf clubs $ (12,174 ) $ (4,096 ) $ (8,078 ) 197% Golf clubs $ 134,018 $ 151,759 $ (17,741 ) -12% Golf balls (3,145 ) (7,699 ) 4,554 59% Golf balls 6,903 902 6,001 665% Reconciling 7,399 (16,777 ) 24,176 144% Reconciling (39,614 ) (64,386 ) 24,772 38% items (1) items (1) $ (7,920 ) $ (28,572 ) $ 20,652 -72% $ 101,307 $ 88,275 $ 13,032 15% (1) Represents corporate general and administrative expenses and other income (expense) not utilized by management in determining segment profitability.
Callaway Golf Company Supplemental Financial Information (In thousands, except per share data) (Unaudited) Quarter Ended December 31, Quarter Ended December 31, 2008 2007 Gross Energy Gross Pro Forma Margin Derivative Total as Pro Forma Margin Total as Callaway Golf Improvement Valuation Reported Callaway Golf Improvement Reported Initiatives Account Initiatives Net sales $ 171,272 $ - $ - $ 171,272 $ 174,418 $ - $ 174,418 Gross profit 63,201 (3,113 ) - 60,088 64,797 (1,426 ) 63,371 % of sales 37 % n/a - 35 % 37 % n/a 36 % Operating 88,619 82 - 88,701 92,041 - 92,041 expenses Loss from (25,418 ) (3,195 ) - (28,613 ) (27,244 ) (1,426 ) (28,670 ) operations Other income, 771 - 19,922 20,693 98 - 98 net Income (loss) before income (24,647 ) (3,195 ) 19,922 (7,920 ) (27,146 ) (1,426 ) (28,572 ) taxes Income tax provision (9,400 ) (1,230 ) 5,864 (4,766 ) (11,900 ) (515 ) (12,415 ) (benefit) Net income $ (15,247 ) $ (1,965 ) $ 14,058 $ (3,154 ) $ (15,246 ) $ (911 ) $ (16,157 ) (loss) Diluted earnings (loss) per $ (0.24 ) $ (0.03 ) $ 0.22 $ (0.05 ) $ (0.24 ) $ (0.01 ) $ (0.25 ) share: Weighted-average shares 62,662 62,662 62,662 62,662 63,765 63,765 63,765 outstanding: Year Ended December 31, Year Ended December 31, 2008 2007 Gross Energy Gross Pro Forma Margin Derivative Total as Pro Forma Margin Total as Callaway Golf Improvement Valuation Reported Callaway Golf Improvement Reported Initiatives Account Initiatives Net sales $ 1,117,204 $ - $ - $ 1,117,204 $ 1,124,591 $ - $ 1,124,591 Gross profit 499,367 (12,534 ) - 486,833 502,124 (8,901 ) 493,223 % of sales 45 % n/a - 44 % 45 % n/a 44 % Operating 402,469 176 - 402,645 403,040 - 403,040 expenses Income (loss) 96,898 (12,710 ) - 84,188 99,084 (8,901 ) 90,183 from operations Other expense, (2,803 ) - 19,922 17,119 (1,908 ) - (1,908 ) net Income (loss) before income 94,095 (12,710 ) 19,922 101,307 97,176 (8,901 ) 88,275 taxes Income tax provision 34,160 (4,893 ) 5,864 35,131 37,115 (3,427 ) 33,688 (benefit) Net income $ 59,935 $ (7,817 ) $ 14,058 $ 66,176 $ 60,061 $ (5,474 ) $ 54,587 (loss) Diluted earnings (loss) per $ 0.94 $ (0.12 ) $ 0.22 $ 1.04 $ 0.89 $ (0.08 ) $ 0.81 share: Weighted-average shares 63,798 63,798 63,798 63,798 67,484 67,484 67,484 outstanding: Adjusted EBITDA: 2008 Trailing Twelve Months Adjusted EBITDA 2007 Trailing Twelve Months Adjusted EBITDA Quarter Ended Quarter Ended March 31, June 30, September December 31, March 31, June 30, September December 30, 30, 31, 2008 2008 2008 2008 Total 2007 2007 2007 2007 Total Net income $ 39,666 $ 37,107 $ (7,443 ) $ (3,154 ) $ 66,176 $ 32,836 $ 36,639 $ 1,269 $ (16,157 ) $ 54,587 (loss) Interest expense 591 994 497 272 2,354 1,677 1,672 29 (216 ) 3,162 (income), net Income tax provision 25,990 20,583 (6,676 ) (4,766 ) 35,131 21,682 23,591 830 (12,415 ) 33,688 (benefit) Depreciation and amortization 8,794 10,490 9,463 9,216 37,963 9,009 8,591 9,864 7,862 35,326 expense Change in energy derivative - - - (19,922 ) (19,922 ) - - - - - valuation acct. Adjusted EBITDA $ 75,041 $ 69,174 $ (4,159 ) $ (18,354 ) $ 121,702 $ 65,204 $ 70,493 $ 11,992 $ (20,926 ) $ 126,763
CONTACT:
Eric Struik
Michele Szynal
760-931-1771
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