Callaway Golf Company Releases First Quarter 2010 Results
CARLSBAD, Calif., April 29, 2010 /PRNewswire via COMTEX/ --Callaway Golf Company (NYSE: ELY) today announced its financial results for the first quarter of 2010.
- Net sales of $303 million, an increase of 11% as compared to net sales of $272 million for the first quarter of 2009. Changes in foreign currency exchange rates favorably affected net sales by $15 million. On a currency neutral basis (i.e. translating the Company's first quarter 2010 results at first quarter 2009 exchange rates), net sales would be $288 million, an increase of 6% compared to the first quarter of 2009.
- U.S. net sales of $151 million, an increase of 7% compared to $141 million for the same period last year.
- International net sales of $152 million, an increase of 16% compared to $131 million last year. On a currency neutral basis, 2010 international net sales were $137 million, an increase of 5% compared to the same period last year.
- Gross profit of $137 million (45% of net sales), compared to gross profit of $116 million (43% of net sales) for the first quarter of 2009.
- Operating expenses for the quarter of $109 million (36% of sales), compared to $103 million (38% of sales) for the first quarter of 2009.
- Earnings per diluted share of $0.24 (on 83.9 million shares). For the first quarter of 2009, the Company reported fully diluted earnings per share of $0.11 (on 63.3 million shares). Both periods include after-tax charges of approximately $0.01 per share related to the Company's global operations strategy.
"It will take more than 2010 for the golf industry and our business to recover fully, but the first quarter was a good step for us toward that recovery," commented George Fellows, President and Chief Executive Officer. "Our sales increased despite the poor weather conditions which delayed the opening of the golf season in many of our key regions, and our gross margins increased. Our operating expenses as a percentage of net sales improved to 36% compared to 38% in 2009 despite the restoration in 2010 of employee incentive compensation and benefits that had been reversed or temporarily suspended in 2009 and despite continued investment in growth initiatives such as our entry into India and our uPlay business. Furthermore, we continued to invest in our global operations strategy and international expansion as well as carefully manage our working capital, which resulted in a 12% reduction in inventories on 11% higher sales compared to the same period last year. Although the second quarter will be a better indicator of how much the golf industry and our business will recover this year, at this point we remain cautiously optimistic that 2010 will be a significant improvement over 2009."
Business Outlook
Based on Callaway Golf's first quarter results and management's current view regarding the remainder of the year, the Company expects its 2010 financial results will be consistent with guidance provided on its last conference call in January. Annual sales for 2010 are estimated to be in the range of $990 million to $1.05 billion. Annual pro forma gross margins are estimated to be in the range of 42% to 44%, and operating expenses are estimated to be in the range of $375 to $405 million. The Company also estimates full year pro forma earnings per share of $0.25 - $0.35, which excludes after tax charges of approximately $0.10 per share for the charges associated with the Company's global operations strategy.
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 Thursday, May 6, 2010. 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 69435314.
Disclaimer: Statements used in this press release that relate to future plans, events, financial results, performance or prospects, including statements relating to an economic or golf industry recovery, and estimated sales, gross margins, operating expenses, earnings, and charges for the Company's global operations strategy in 2010 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 exchange rates, consumer acceptance and demand for the Company's products, the level of promotional activity in the marketplace, 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 Annual Report on Form 10-K for the year ended December 31, 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 first quarter of 2010 that is presented on a "currency neutral basis." This information estimates the impact of the effect of foreign currency translation on the Company's 2010 results as compared to the same period in 2009. This impact is derived by taking the Company's 2010 local currency results and translating them into U.S. dollars based upon 2009 foreign currency exchange rates for the periods presented 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 these items. 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(R), Odyssey(R), Top-Flite(R), Ben Hogan(R) and uPro(TM) brands in more than 110 countries worldwide. For more information please visit www.callawaygolf.com or Shop.CallawayGolf.com
Contacts: Brad Holiday
Eric Struik
Tim Buckman
(760) 931-1771
Callaway Golf Company
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
March 31, December 31,
2010 2009
---- ----
ASSETS
Current assets:
Cash and cash equivalents $41,852 $78,314
------- -------
Accounts receivable, net 277,423 139,776
------- -------
Inventories 230,769 219,178
------- -------
Deferred taxes, net 22,578 21,276
------ ------
Income taxes receivable 1,176 19,730
----- ------
Other current assets 38,972 34,713
------ ------
Total current assets 612,770 512,987
------- -------
Property, plant and equipment, net 137,948 143,436
Intangible assets, net 172,351 174,017
------- -------
Other assets 47,148 45,490
------ ------
Total assets $970,217 $875,930
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $145,352 $118,294
======== ========
Accrued employee compensation and
benefits 31,291 22,219
====== ======
Accrued warranty expense 9,361 9,449
===== =====
Income tax liability 11,382 1,492
====== =====
Credit facilities 31,000 -
------ ---
Total current liabilities 228,386 151,454
------- -------
Long-term liabilities 14,420 14,594
Shareholders' equity 727,411 709,882
------- -------
Total liabilities and shareholders'
equity $970,217 $875,930
======== ========
Callaway Golf Company
Statements of Operations
(In thousands, except per share data)
(Unaudited)
Quarter Ended
March 31,
---------
2010 2009
---- ----
Net sales $302,875 $271,864
--------
Cost of sales 165,580 155,683
------- -------
Gross profit 137,295 116,181
Operating expenses:
Selling 74,628 74,650
------
General and administrative 24,976 19,987
------
Research and development 9,318 8,103
----- -----
Total operating expenses 108,922 102,740
Income from operations 28,373 13,441
Other income (expense), net 1,571 (2,381)
----- ------
Other income before income taxes 29,944 11,060
------
Income tax provision 9,641 4,248
----- -----
Net income 20,303 6,812
Dividends on convertible preferred
stock 2,625 -
----- ---
Net income allocable to common
shareholders $17,678 $6,812
======= ======
Earnings per common share:
Basic $0.28 $0.11
=====
Diluted $0.24 $0.11
Weighted-average common shares
outstanding:
Basic 63,653 62,914
Diluted 83,926 63,320
======
Callaway Golf Company
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Quarter Ended
March 31,
---------
2010 2009
---- ----
Cash flows from operating activities:
Net income $20,303 $6,812
------- ------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,949 9,944
Deferred taxes, net (1,746) (1,604)
------ ------
Non-cash share-based compensation 2,519 1,667
----- -----
Gain on disposal of long-lived assets (14) (150)
------------------------------------- --- ----
Changes in assets and liabilities (90,098) (82,356)
------- -------
Net cash used in operating activities (59,087) (65,687)
------- -------
Cash flows from investing activities:
Capital expenditures (4,149) (10,046)
Proceeds from sales of property and equipment 14 -
--- ---
Other investing activities (1,950) (89)
------ ---
Net cash used in investing activities (6,085) (10,135)
------ -------
Cash flows from financing activities:
Issuance of common stock 1,301 1,500
Dividends paid, net (3,266) -
------
Proceeds from credit facilities, net 31,000 57,081
------ ------
Other financing activities (167) (491)
---- ----
Net cash provided by financing activities 28,868 58,090
------ ------
Effect of exchange rate changes on cash and cash
equivalents (158) (1,060)
---- ------
Net decrease in cash and cash equivalents (36,462) (18,792)
------- -------
Cash and cash equivalents at beginning of period 78,314 38,337
------ ------
Cash and cash equivalents at end of period $41,852 $19,545
======= =======
Callaway Golf Company
Consolidated Net Sales and Operating Segment Information
(In thousands)
(Unaudited)
Net Sales by Product Category
-----------------------------
Quarter Ended
March 31, Growth/(Decline)
--------- ----------------
2010 2009 Dollars Percent
---- ---- ------- -------
Net sales:
Woods $94,490 $79,882 $14,608 18%
Irons 57,435 65,187 (7,752) -12%
Putters 38,147 27,691 10,456 38%
Golf balls 51,135 47,348 3,787 8%
Accessories and other 61,668 51,756 9,912 19%
$302,875 $271,864 $31,011 11%
======== ======== =======
Net Sales by Region
-------------------
Quarter Ended
March 31, Growth/(Decline)
--------- ----------------
2010 2009 Dollars Percent
---- ---- ------- -------
Net sales:
United States $151,058 $141,280 $9,778 7%
Europe 42,259 43,003 (744) -2%
Japan 53,383 47,396 5,987 13%
Rest of Asia 24,587 16,552 8,035 49%
Other foreign
countries 31,588 23,633 7,955 34%
------ ------ -----
$302,875 $271,864 $31,011 11%
======== ======== =======
Operating Segment Information
Quarter Ended
March 31, Growth/(Decline)
--------- ----------------
2010 2009 Dollars Percent
---- ---- ------- -------
Net sales:
Golf clubs $251,740 $224,516 $27,224 12%
Golf balls 51,135 47,348 3,787 8%
$302,875 $271,864 $31,011 11%
======== ======== =======
Income (loss) before income taxes:
Golf clubs $43,614 $28,281 $15,333 54%
------- -------
Golf balls 1,896 (1,698) 3,594 212%
----- ------
Reconciling
items (1) (15,566) (15,523) (43) 0%
------- -------
$29,944 $11,060 $18,884 171%
======= ======= =======
(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 March 31,
-----------------------
2010
----
Pro Forma Global
Callaway Operations Total as
Golf Strategy Reported
--------- ----------- ---------
Net sales $302,875 $- $302,875
Gross profit 138,295 (1,000) 137,295
% of sales 46% n/a 45%
Operating expenses 108,869 53 108,922
------- -- -------
Income (loss) from operations 29,426 (1,053) 28,373
Other income (loss), net 1,571 - 1,571
----- - -----
Income (loss) before
income taxes 30,997 (1,053) 29,944
Income tax provision (benefit) 10,065 (424) 9,641
------ ---- -----
Net income (loss) 20,932 (629) 20,303
Dividends on convertible
preferred stock 2,625 - 2,625
----- - -----
Net income (loss) allocable to
common shareholders $18,307 $(629) $17,678
======= ===== =======
------------------ ----- ------ -----
Diluted earnings
(loss) per share: $0.25 $(0.01) $0.24
Weighted-
average shares
outstanding: 83,926 83,926 83,926
Quarter Ended March 31,
-----------------------
2009
----
Pro Forma Global
Callaway Operations Total as
Golf Strategy Reported
--------- ----------- ---------
Net sales $271,864 $- $271,864
Gross profit 117,737 (1,556) 116,181
% of sales 43% n/a 43%
Operating expenses 102,740 - 102,740
------- - -------
Income (loss) from operations 14,997 (1,556) 13,441
Other income (loss), net (2,381) - (2,381)
------ - ------
Income (loss) before
income taxes 12,616 (1,556) 11,060
Income tax provision (benefit) 4,847 (599) 4,248
----- ---- -----
Net income (loss) 7,769 (957) 6,812
Dividends on convertible
preferred stock - - -
- - -
Net income (loss) allocable to
common shareholders $7,769 $(957) $6,812
====== ===== ======
------------------
Diluted earnings
(loss) per share: $0.12 $(0.01) $0.11
Weighted-
average shares
outstanding: 63,320 63,320 63,320
2010 Trailing Twelve Months Adjusted EBITDA
-------------------------------------------
Quarter Ended
-------------
Adjusted
EBITDA: June 30, September 30, December 31, March 31,
2009 2009 2009 2010 Total
---- ---- ---- ---- -----
Net
income
(loss) $6,912 $(13,429) $(15,555) $20,303 $(1,769)
------ -------- -------- -------
Interest
expense
(income),
net 551 (46) (435) (118) (48)
--- --- ---- ----
Income tax
provision
(benefit) 3,859 (11,308) (11,142) 9,641 (8,950)
----- ------- ------- -----
Depreciation
and
amortization
expense 10,172 10,128 10,504 9,949 40,753
------ ------ ------ -----
Change in
energy
derivative
valuation
acct. - - - - -
- - - - -
Adjusted
EBITDA $21,494 $(14,655) $(16,628) $39,775 $29,986
======= ======== ======== ======= =======
2009 Trailing Twelve Months Adjusted EBITDA
-------------------------------------------
Quarter Ended
-------------
Adjusted
EBITDA: June 30, September 30, December 31, March 31,
--------
2008 2008 2008 2009 Total
---- ---- ---- ---- -----
Net
income
(loss) $37,107 $(7,443) $(3,154) $6,812 $33,322
------- ------- ------- ------
Interest
expense
(income),
net 994 497 272 (123) 1,640
--- --- --- ----
Income tax
provision
(benefit) 20,583 (6,676) (4,766) 4,248 13,389
------ ------ ------ -----
Depreciation
and
amortization
expense 10,490 9,463 9,216 9,944 39,113
------ ----- ----- -----
Change in
energy
derivative
valuation
acct. - - (19,922) - (19,922)
- - ------- - -------
Adjusted
EBITDA $69,174 $(4,159) $(18,354) $20,881 $67,542
======= ======= ======== ======= =======
SOURCE Callaway Golf Company
