CARLSBAD, Calif.--(BUSINESS WIRE)--Jul. 29, 2009 -- Callaway Golf Company (NYSE:ELY) today announced its financial results for the second quarter and first half of the year ended June 30, 2009. For the second quarter, the Company reported net sales of $302 million, a decrease of 17% compared to $366 million for the second quarter of 2008. On a currency neutral basis, net sales would have been $321 million, a decrease of 12% compared to the second quarter of 2008. The Company also reported gross profit for the second quarter of 2009 of $110 million (36% of net sales), compared to gross profit of $171 million (47% of net sales) in the second quarter of 2008, and reported operating expenses of $100 million (33% of net sales) compared to $111 million (30% of net sales) for the same period in 2008. Fully diluted earnings per share were $0.10 (on 66.8 million shares outstanding), compared to $0.58 (on 63.9 million shares outstanding) in 2008. Fully diluted earnings per share for the second quarter include after-tax charges for gross margin improvement initiatives of $0.02 per share in 2009 and $0.05 per share in 2008.

For the first six months, the Company reported net sales of $574 million, a decrease of 22% compared to last year’s record six month sales of $732 million. On a currency neutral basis, net sales would have been $616 million, a decrease of 16% compared to $732 million in the first half of 2008. Also for the first six months, gross profit was $226 million (39% of net sales) compared to $347 million (47% of net sales) for 2008 and operating expenses were $202 million (35% of net sales) compared to $221 million (30% of net sales) for 2008. Fully diluted earnings per share for 2009 were $0.21 (on 65.1 million shares outstanding) compared to record first half diluted earnings per share of $1.19 (on 64.4 million shares outstanding) for 2008. Fully diluted earnings per share for the period include after-tax charges for gross margin improvement initiatives of $0.03 per share in 2009 and $0.06 per share in 2008.

“Although market conditions remained challenging during the first half of the year, we are pleased we were able to increase our market share, manage our inventories, and reduce our operating costs, while at the same time continuing to invest in our business,” commented George Fellows, President and CEO. “As we have said before, the economy and golf industry will recover and there have been some positive signs of late. We therefore are taking a balanced approach between managing our expenses and liquidity for the current environment and taking action and making investments that are in the best long-term interests of our shareholders. We are the leader in the golf industry and we intend to remain so in the current environment and when the global economy fully recovers. It would be short-sighted to over emphasize the short-term to the detriment of our long-term growth and shareholder value.”

Conference Call and Webcast

The Company will be holding a conference call at 2:00 p.m. PDT today. The call will be broadcast live over the Internet and can be accessed at www.callawaygolf.com. To listen to the call, please go to the website at least 15 minutes before the call to register and for instructions on how to access the broadcast. A replay of the conference call will be available approximately two hours after the call ends, and will remain available through 9:00 p.m. PDT on Wednesday, August 5, 2009. The replay may be accessed through the Internet at www.callawaygolf.com or by telephone by calling 1-800-642-1687 toll free for calls originating within the United States or 706-645-9291 for International calls. The replay pass code is 18992228.

Disclaimer: Statements used in this press release that relate to future plans, events, financial results, performance or prospects, including statements relating to liquidity, economic recovery, and leadership position, 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. 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 continued compliance with the terms of the Company’s credit facility; 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 the Company’s Current Report on Form 8-K filed on June 8, 2009 as well as other risks and uncertainties detailed from time to time in the Company’s reports on Forms 10-Q and 8-K subsequently filed from time to time with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Currency Neutral Basis: This press release includes information regarding certain aspects of the Company’s financial results for the second quarter of 2009 that is presented on a “currency neutral basis.” This information estimates the impact of the effect of foreign currency translation on the Company’s 2009 results as compared to the same period in 2008. This impact is derived by taking the Company’s second quarter 2009 local currency results and translating them into U.S. dollars based upon second quarter 2008 foreign currency exchange rates and does not include any other effect of changes in foreign currency rates on the Company’s results.

Regulation G: The financial results reported in this press release have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). In addition to the GAAP results, the Company has also provided additional information concerning its results, which include certain financial measures not prepared in accordance with GAAP. The non-GAAP financial measures included in this press release present certain of the Company’s financial results on a “currency neutral basis.” These non-GAAP financial measures should not be considered a substitute for any measure derived in accordance with GAAP. These non-GAAP financial measures may also be inconsistent with the manner in which similar measures are derived or used by other companies. Management believes that the presentation of such non-GAAP financial measures, when considered in conjunction with the most directly comparable GAAP financial measures, provides additional useful information for investors as to the underlying performance of the Company’s business without regard to changes in foreign currency exchange rates. The Company has provided reconciling information in the text of this press release.

About Callaway Golf

Through an unwavering commitment to innovation, Callaway Golf Company (NYSE: ELY) creates products and services designed to make every golfer a better golfer. Callaway Golf Company manufactures and sells golf clubs and golf balls, and sells golf accessories, under the Callaway Golf®, Odyssey®, Top-Flite®, Ben Hogan® and uPro™ brands in more than 110 countries worldwide. For more information please visit www.callawaygolf.com or Shop.CallawayGolf.com

Callaway Golf Company
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
			June 30,			December 31,
				2009			2008
ASSETS
Current assets:
	Cash and cash equivalents		$	50,471		$	38,337
	Accounts receivable, net			263,239			120,067
	Inventories			227,878			257,191
	Deferred taxes, net			31,792			27,046
	Income taxes receivable			-			15,549
	Other current assets			25,581			31,813
	Total current assets			598,961			490,003
Property, plant and equipment, net				144,541			142,145
Intangible assets, net				175,485			176,689
Deferred taxes, net				8,441			6,299
Other assets				40,928			40,202
	Total assets		$	968,356		$	855,338
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Accounts payable and accrued expenses		$	170,036		$	126,167
	Accrued employee compensation and benefits			22,080			25,630
	Accrued warranty expense			12,422			11,614
	Income taxes payable			6,773			-
	Credit facilities			-			90,000
	Total current liabilities			211,311			253,411
Long-term liabilities				22,186			21,559
Preferred stock - at redemption value				34,674
Shareholders' equity				700,185			580,368
	Total liabilities and shareholders' equity		$	968,356		$	855,338

 

Callaway Golf Company
Statements of Operations
(In thousands, except per share data)
(Unaudited)
				Quarter Ended
				June 30,
					2009				2008
Net sales				$	302,219			$	366,029
Cost of sales					192,371				194,949
Gross profit					109,848				171,080
Operating expenses:
	Selling				72,394				80,461
	General and administrative				19,358				22,791
	Research and development				7,837				7,538
		Total operating expenses			99,589				110,790
Income from operations					10,259				60,290
Other income (expense), net					512				(2,600	)
Income before income taxes					10,771				57,690
Income tax provision					3,859				20,583
Net income					6,912				37,107
Dividends accrued on convertible Preferred Stock					438				-
Net income available to common shareholders				$	6,474			$	37,107
Earnings per common share:
	Basic			$	0.10			$	0.59
	Diluted			$	0.10			$	0.58
Weighted-average common shares outstanding:
	Basic				63,121				63,180
	Diluted				66,807				63,941
Preferred stock - at redemption value				Six Months Ended
				June 30,
					2009				2008
Net sales				$	574,083			$	732,481
Cost of sales					348,054				385,867
Gross profit					226,029				346,614
Operating expenses:
	Selling				147,044				160,622
	General and administrative				39,345				45,279
	Research and development				15,940				15,462
Total operating expenses					202,329				221,363
Income from operations					23,700				125,251
Other expense, net					(1,869	)			(1,905	)
Income before income taxes					21,831				123,346
Income tax provision					8,107				46,573
Net income					13,724				76,773
Dividends accrued on convertible Preferred Stock					438				-
Net income available to common shareholders				$	13,286			$	76,773
Earnings per common share:
	Basic			$	0.21			$	1.21
	Diluted			$	0.21			$	1.19
Weighted-average common shares outstanding:
	Basic				63,060				63,538
	Diluted				65,105				64,392

 

Callaway Golf Company
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
				Six Months Ended
				June 30,
					2009				2008
Cash flows from operating activities:
	Net income			$	13,724			$	76,773
	Adjustments to reconcile net income to net cash used in operating activities:
		Depreciation and amortization			20,116				19,284
		Deferred taxes, net			(5,509	)			4,130
		Non-cash share-based compensation			3,684				2,960
		Gain on disposal of long-lived assets			(375	)			(438	)
		Changes in assets and liabilities			(40,708	)			(150,755	)
	Net cash used in operating activities				(9,068	)			(48,046	)
Cash flows from investing activities:
	Capital expenditures				(19,448	)			(24,213	)
	Other investing activities				(31	)			15
	Net cash used in investing activities				(19,479	)			(24,198	)
Cash flows from financing activities:
	Issuance of Preferred Stock				140,000				-
	Equity issuance costs				(5,871	)			-
	Issuance of Common Stock				1,498				2,767
	Dividends paid, net				(4,430	)			(4,526	)
	Acquisition of treasury stock				-				(20,076	)
	Proceeds from (payments on) credit facilities, net				(90,000	)			98,441
	Other financing activities				54				(34	)
	Net cash provided by financing activities				41,251				76,572
Effect of exchange rate changes on cash and cash equivalents					(570	)			771
Net increase in cash and cash equivalents					12,134				5,099
Cash and cash equivalents at beginning of period					38,337				49,875
Cash and cash equivalents at end of period				$	50,471			$	54,974

 

Callaway Golf Company
Consolidated Net Sales and Operating Segment Information
(In thousands)
(Unaudited)
Net Sales by Product Category
			Quarter Ended																		Six Months Ended
			June 30,								Growth/(Decline)										June 30,								Growth/(Decline)
				2009				2008			Dollars				Percent							2009				2008			Dollars				Percent
Net sales:																		Net sales:
	Woods		$	75,956			$	85,992			$	(10,036	)		-12	%			Woods		$	155,838			$	202,544			$	(46,706	)		-23	%
	Irons			72,222				100,047				(27,825	)		-28	%			Irons			137,409				196,543				(59,134	)		-30	%
	Putters			26,421				32,934				(6,513	)		-20	%			Putters			54,112				67,488				(13,376	)		-20	%
	Golf balls			58,245				74,235				(15,990	)		-22	%			Golf balls			105,593				132,668				(27,075	)		-20	%
	Accessories and other			69,375				72,821				(3,446	)		-5	%			Accessories and other			121,131				133,238				(12,107	)		-9	%
			$	302,219			$	366,029			$	(63,810	)		-17	%					$	574,083			$	732,481			$	(158,398	)		-22	%
Net Sales by Region
			Quarter Ended																		Six Months Ended
			June 30,								Growth/(Decline)										June 30,								Growth/(Decline)
				2009				2008			Dollars				Percent							2009				2008			Dollars				Percent
Net sales:																		Net sales:
	United States		$	163,739			$	176,077			$	(12,338	)		-7	%			United States		$	305,020			$	360,456			$	(55,436	)		-15	%
	Europe			42,477				71,824				(29,347	)		-41	%			Europe			85,480				137,914				(52,434	)		-38	%
	Japan			37,061				46,559				(9,498	)		-20	%			Japan			84,456				99,899				(15,443	)		-15	%
	Rest of Asia			21,300				22,072				(772	)		-3	%			Rest of Asia			37,852				48,533				(10,681	)		-22	%
	Other foreign countries			37,642				49,497				(11,855	)		-24	%			Other foreign countries			61,275				85,679				(24,404	)		-28	%
			$	302,219			$	366,029			$	(63,810	)		-17	%					$	574,083			$	732,481			$	(158,398	)		-22	%
Operating Segment Information
			Quarter Ended																		Six Months Ended
			June 30,								Growth/(Decline)										June 30,								Growth/(Decline)
				2009				2008			Dollars				Percent							2009				2008			Dollars				Percent
Net sales:																		Net sales:
	Golf clubs		$	243,974			$	291,794			$	(47,820	)		-16	%			Golf clubs		$	468,490			$	599,813			$	(131,323	)		-22	%
	Golf balls			58,245				74,235				(15,990	)		-22	%			Golf balls			105,593				132,668				(27,075	)		-20	%
			$	302,219			$	366,029			$	(63,810	)		-17	%					$	574,083			$	732,481			$	(158,398	)		-22	%
Income (loss) before provision for income taxes:
	Golf clubs		$	25,367			$	67,167			$	(41,800	)		-62	%			Golf clubs		$	53,648			$	143,366			$	(89,718	)		-63	%
	Golf balls			(965	)			8,257				(9,222	)		-112	%			Golf balls			(2,663	)			12,702				(15,365	)		-121	%
	Reconciling items (1)			(13,631	)			(17,734	)			4,103			23	%			Reconciling items (1)			(29,154	)			(32,722	)			3,568			11	%
			$	10,771			$	57,690			$	(46,919	)		-81	%					$	21,831			$	123,346			$	(101,515	)		-82	%
(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 June 30,												Quarter Ended June 30,
		2009												2008
		Pro Forma Callaway Golf				Gross Margin Improvement Initiatives				Total as Reported				Pro Forma Callaway Golf				Gross Margin Improvement Initiatives				Total as Reported
Net sales		$	302,219			$	-			$	302,219			$	366,029			$	-			$	366,029
Gross profit			111,662				(1,814	)			109,848				175,773				(4,693	)			171,080
% of sales			37	%			n/a				36	%			48	%			n/a				47	%
Operating expenses			99,589				-				99,589				110,670				120				110,790
Income (loss) from operations			12,073				(1,814	)			10,259				65,103				(4,813	)			60,290
Other income (loss), net			512				-				512				(2,600	)			-				(2,600	)
Income (loss) before income taxes			12,585				(1,814	)			10,771				62,503				(4,813	)			57,690
Income tax provision (benefit)			4,557				(698	)			3,859				22,436				(1,853	)			20,583
Net income (loss)			8,028				(1,116	)			6,912				40,067				(2,960	)			37,107
Dividends accrued on convertible preferred stock			438				-				438				-				-				-
Net income available to common shareholders		$	7,590			$	(1,116	)		$	6,474			$	40,067			$	(2,960	)		$	37,107
Diluted earnings (loss) per share:		$	0.12			$	(0.02	)		$	0.10			$	0.63			$	(0.05	)		$	0.58
Weighted-average shares
outstanding:			66,807				66,807				66,807				63,941				63,941				63,941
		Six Months Ended June 30,												Six Months Ended June 30,
		2009												2008
		Pro Forma Callaway Golf				Gross Margin Improvement Initiatives				Total as Reported				Pro Forma Callaway Golf				Gross Margin Improvement Initiatives				Total as Reported
Net sales		$	574,083			$	-			$	574,083			$	732,481			$	-			$	732,481
Gross profit			229,399				(3,370	)			226,029				352,402				(5,788	)			346,614
% of sales			40	%			n/a				39	%			48	%			n/a				47	%
Operating expenses			202,329				-				202,329				221,243				120				221,363
Income (loss) from operations			27,070				(3,370	)			23,700				131,159				(5,908	)			125,251
Other expense, net			(1,869	)			-				(1,869	)			(1,905	)			-				(1,905	)
Income (expense) before income taxes			25,201				(3,370	)			21,831				129,254				(5,908	)			123,346
Income tax provision (benefit)			9,404				(1,297	)			8,107				48,848				(2,275	)			46,573
Net income (loss)			15,797				(2,073	)			13,724				80,406				(3,633	)			76,773
Dividends accrued on convertible preferred stock			438				-				438				-				-				-
Net income available to common shareholders		$	15,359			$	(2,073	)		$	13,286			$	80,406			$	(3,633	)		$	76,773
Diluted earnings (loss) per share:		$	0.24			$	(0.03	)		$	0.21			$	1.25			$	(0.06	)		$	1.19
Weighted-average shares
outstanding:			65,105				65,105				65,105				64,392				64,392				64,392

Adjusted EBITDA:
		2009 Trailing Twelve Months Adjusted EBITDA																					2008 Trailing Twelve Months Adjusted EBITDA
		Quarter Ended																					Quarter Ended
		September 30,				December 31,				March 31,				June 30,									September 30,			December 31,				March 31,			June 30,
			2008				2008				2009				2009		Total							2007			2007				2008			2008		Total
Net income (loss)		$	(7,443	)		$	(3,154	)		$	6,812			$	6,912		$	3,127					$	1,269		$	(16,157	)		$	39,666		$	37,107		$	61,885
Interest expense (income), net			497				272				(123	)			551			1,197						29			(216	)			591			994			1,398
Income tax provision (benefit)			(6,676	)			(4,766	)			4,248				3,859			(3,335	)					830			(12,415	)			25,990			20,583			34,988
Depreciation and amortization expense			9,463				9,216				9,944				10,172			38,795						9,864			7,862				8,794			10,490			37,010
Change in energy derivative valuation acct.			-				(19,922	)			-				-			(19,922	)					-			-				-			-			-
Adjusted EBITDA		$	(4,159	)		$	(18,354	)		$	20,881			$	21,494		$	19,862					$	11,992		$	(20,926	)		$	75,041		$	69,174		$	135,281

 

 

Source: Callaway Golf Company

Callaway Golf Company
Brad Holiday
Eric Struik
Michele Szynal
760-931-1771