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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
April 22, 2004
Date of Report (Date of Earliest Event Reported)
CALLAWAY GOLF COMPANY
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-10962 95-3797580
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
2180 Rutherford Road
Carlsbad, CA 92008-7328
(Address of Principal Executive Offices)
(760) 931-1771
(Registrant's Telephone Number, Including Area Code)
Item 9. Regulation FD Disclosure.*
On April 22, 2004, Callaway Golf Company issued a press release
captioned "Callaway Golf Announces Record First Quarter Sales; Core Business
Strengthens During Top-Flite Integration; Company Reiterates 2004 Guidance for
Sales and Earnings." A copy of the press release is attached hereto as Exhibit
99.1 and incorporated herein by this reference.
Item 12. Results of Operations and Financial Condition.*
On April 22, 2004, Callaway Golf Company issued a press release
captioned "Callaway Golf Announces Record First Quarter Sales; Core Business
Strengthens During Top-Flite Integration; Company Reiterates 2004 Guidance for
Sales and Earnings." A copy of the press release is attached hereto as Exhibit
99.1 and incorporated herein by this reference.
* The information furnished under Item 9 and Item 12 of this Current Report on
Form 8-K, including Exhibit 99.1, shall not be deemed to be "filed" for the
purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or
otherwise subject to the liabilities of that section, nor shall it be deemed
incorporated by reference in any filing under the Securities Act of 1933, as
amended, except as shall be expressly set forth by specific reference in such
filing.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April 22, 2004
CALLAWAY GOLF COMPANY
By: /s/ Bradley J. Holiday
----------------------------------------
Name: Bradley J. Holiday
Title: Senior Executive Vice President
and Chief Financial Officer
3
Exhibit Index
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Exhibit Number Description of Exhibit
- -------------- ----------------------
99.1 Press release dated April 22, 2004, captioned "Callaway
Golf Announces Record First Quarter Sales; Core Business
Strengthens During Top-Flite Integration; Company
Reiterates 2004 Guidance for Sales and Earnings."
Exhibit 99.1
Callaway Golf Announces Record
First Quarter Sales; Core Business Strengthens During Top-Flite
Integration; Company Reiterates 2004 Guidance for Sales and Earnings
CARLSBAD, Calif.--(BUSINESS WIRE)--April 22, 2004--Callaway Golf
Company (NYSE:ELY) today released its consolidated financial results
for the quarter ended March 31, 2004, announcing consolidated net
sales for the quarter of $364 million, net income of $41 million, and
fully diluted earnings per share of $0.59. Reported net income and
earnings per share were affected by $3 million and $0.05,
respectively, due to charges associated with the integration of the
Top-Flite operations. Excluding these charges, the Company's pro forma
net income was $44 million, an increase of 3% compared to the first
quarter in 2003 and a record first quarter for the Company, and pro
forma fully diluted earnings per share were $0.64, the same as the
prior year.
Reported net sales of $364 million included $297 million from core
Callaway Golf and Odyssey branded products, an increase of 9% for
these products over the first quarter of 2003 and a record for any
quarter in the Company's history. Reported net sales also included $67
million from newly acquired Top-Flite and Ben Hogan branded products.
Reported net income of $41 million included $43 million from
Callaway Golf and Odyssey branded products, an increase of 2% over the
prior year. Reported net income also included $551,000 from Top-Flite
and Ben Hogan branded products and $3 million in integration charges.
Reported fully diluted earnings per share of $0.59 included $0.63 from
Callaway Golf and Odyssey branded products as compared to $0.64 for
the comparable period in the prior year. Reported fully diluted
earnings per share also included $0.01 from Top-Flite and Ben Hogan
branded products and $0.05 in integration charges. Please refer to the
attachment, "Supplemental Financial Information," for more details
regarding this information.
"I am very pleased with our results for the first quarter, with
record net sales and net income in our core Callaway Golf business,"
said Ron Drapeau, Chairman and CEO. "In turn, we increased our
investment in programs directed at achieving our operational
objectives of eliminating the losses from the Callaway Golf ball
business, growing our woods business and restructuring the Top-Flite
Golf operations. We made progress on all fronts. In our consolidated
results you would find that Callaway Golf branded golf ball sales
increased $14 million, or 100%, over the prior year and delivered a
profit for the quarter; sales of Callaway Golf branded woods increased
$30 million dollars, or 32%, over the prior year; and Top-Flite,
excluding integration charges, was profitable. We are very pleased to
be hitting our major goals so early in the year; and remain on track
to hit our overall growth targets for 2004."
Sales by Product
First Quarter - 2004
---------------------
$'s in millions Net Sales % Change
vs. 2003
---------- ---------
Woods $124 33%
Irons 96 (4%)
Putters 37 (18%)
Golf balls 72 427%
Accessories, other 35 77%
-----------
Total $364 34%
Commenting on the results, Brad Holiday, Senior Executive Vice
President and Chief Financial Officer stated, "We predicted for 2004
that we could both invest in our business and also achieve improved
top line and bottom line results for the year. The benefits of our
investments in Top-Flite and pro tour spending will continue to be
seen over the remainder of the year, keeping us on track to hit our
guidance."
In accordance with the Company's dividend practice, the next
dividend will be determined by the Board of Directors at its May
meeting.
BUSINESS OUTLOOK
In light of SEC Regulations, the Company elects to provide certain
forward-looking information in this press release. These statements
are based on current information and expectations, and actual results
may differ materially. The Company undertakes no obligation to update
this information. See further disclaimer below.
"We are encouraged by early sell in of our new products at retail,
improvements in rounds of golf played in the United States, and what
appears to be a recovering economy here at home," continued Mr.
Drapeau. "Based on those external factors and the results we have
achieved in the first quarter, we reiterate our previous guidance of
net sales for 2004 of approximately $1.03 billion, plus or minus 3%,
with fully diluted earnings per share between $0.82 and $0.97,
including charges associated with the integration of the Top-Flite
operations (about $35 million pre-tax, or $0.33 in earnings per
share)."
The Company will be holding a conference call at 2:00 p.m. PDT
today, which will be hosted by Ron Drapeau, Chairman and CEO, and Brad
Holiday, Senior Executive Vice President and Chief Financial Officer.
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 web
site 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
conclusion of the conference call, and available through 5:00 p.m. PDT
on Thursday, April 29th. The replay may be accessed through the
Internet at www.callawaygolf.com or by telephone by calling 800-
642-1687 for calls originating within the United States or 706-
645-9291 for International calls. The replay pass code is 6862890.
Disclaimer: Statements used in this press release that relate to
future plans, events, financial results or performance, including
statements under the Business Outlook section relating to estimated
future sales, earnings and estimated charges in connection with the
integration of the Callaway Golf and Top-Flite Golf operations, are
forward-looking statements as defined under the Private Securities
Litigation Reform Act of 1995. These statements are based upon current
information and expectations. Actual results may differ materially
from those anticipated as a result of certain risks and uncertainties,
including but not limited to delays, difficulties or unanticipated
costs in integrating the Top-Flite Golf and Callaway Golf assets,
brands and businesses, the maintenance of good vendor relationships,
adverse market and economic conditions, market acceptance of current
and future products, adverse weather conditions and seasonality,
competitive pressures, fluctuations in foreign currency exchange
rates, delays, difficulties or increased costs in the manufacturing of
the Company's golf club or ball products, or in the procurement of
materials or resources needed to manufacture the Company's golf club
or ball products, any rule changes or other actions taken by the USGA
or other golf association that could have an adverse impact upon
demand for the Company's products, a decrease in participation levels
in golf and the effect of terrorist activity or armed conflict 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, see Part II, Item
7 of the Company's Annual Report on Form 10-K for the year ended
December 31, 2003, as well as other risks and uncertainties detailed
from time to time in the Company's reports on Forms 10-K, 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.
Regulation G: The Company's results 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 the Company's results, which includes certain financial
measures not prepared in accordance with GAAP. The non-GAAP financial
measures included in this press release exclude the 2004 after -tax
charges of $3 million associated with the integration of the Top-Flite
Golf business. They also report the results of the Callaway Golf and
Top-Flite operations each on a stand-alone basis, although such
operations are not reportable business segments. 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 useful information to investors by
permitting additional relevant period-to-period comparisons of the
historical operations of the Callaway Golf business excluding the
operations of the recently acquired Top-Flite Golf business, as well
as information concerning operations notwithstanding the Top-Flite
integration charges. For certain non-GAAP financial measures, the
Company has provided supplemental information as an attachment to this
press release which reconciles those non-GAAP financial measures to
the most directly comparable financial measures prepared in accordance
with GAAP. In other circumstances, the reconciling information is
presented in the text of this press release.
Callaway Golf Company makes and sells Big Bertha(R) Metal Woods
and Irons, including ERC(R) Fusion(R) Drivers and Fairway Woods, Great
Big Bertha(R) II Titanium Drivers and Fairway Woods, Great Big Bertha
II 415 Titanium Drivers, Big Bertha Titanium Drivers and Big Bertha
Stainless Steel Fairway Woods, Hawk Eye(R) VFT(R) Tungsten
Injected(TM) Titanium Irons, Big Bertha Stainless Steel Irons,
Steelhead X-16(R) and Steelhead X-16 Pro Series Stainless Steel Irons,
Game Enjoyment System(TM) (GES(TM)), Callaway Golf Forged+ Wedges and
Callaway Golf Forged Wedges, and Callaway Golf Tour Blue(TM) Putters.
Callaway Golf Company also makes and sells Odyssey(R) Putters,
including White Hot(R), TriHot(R), DFX(R) and Dual Force(R) Putters.
Callaway Golf Company makes and sells the Callaway Golf(R) HX(R) Tour
balls, HX Blue and HX Red balls, Big Bertha(TM) Blue and Big Bertha
Red balls, and the Warbird(TM) balls. Callaway Golf also owns and
operates The Top-Flite Golf Company, a wholly owned subsidiary that
includes the Top-Flite(R), Strata(R) and Ben Hogan(R) brands. For more
information about Callaway Golf Company, please visit our websites at
www.callawaygolf.com, www.topflite.com and www.odysseygolf.com.
Callaway Golf Company
Supplemental Financial Information
(In thousands)
(Unaudited)
Quarter Ended
March 31,
-------------------------------------------------
2004 2003(a)
-------------------------------------- ---------
Callaway Top- Integration Total Total
Golf Flite Charges
Golf
-------------------------------------- ---------
Net sales $297,284 $66,502 $- $363,786 $271,719
Gross profit 146,061 23,600 (3,470) 166,191 137,837
% of sales 49% 35% n/a 46% 51%
Operating expenses 77,703 22,824 1,638 102,165 69,414
-------------------------------------- ---------
Income from
operations 68,358 776 (5,108) 64,026 68,423
Other income
(expense), net 173 98 - 271 (1,184)
-------------------------------------- ---------
Income before income
taxes 68,531 874 (5,108) 64,297 67,239
Income tax provision 25,316 323 (1,887) 23,752 24,762
-------------------------------------- ---------
Net income $43,215 $551 $(3,221) $40,545 $42,477
======================================= =========
Diluted earnings per
share $0.63 $0.01 $(0.05) $0.59 $0.64
Weighted-average
shares outstanding 68,365 68,365 68,365 68,365 65,926
(a) During the latter part of 2003, the Callaway Golf Company
completed the acquisition of substantially all of the golf-related
assets of the Top-Flite Golf Company. Therefore, the results reported
for the quarter ended March 31, 2003 are representative of the
Callaway Golf and Odyssey brand operations and do not include
Top-Flite Golf operating results and the related integration charges.
Callaway Golf Company
Consolidated Condensed Statement of Operations
(In thousands, except per share data)
(Unaudited)
Quarter Ended
March 31,
-----------------------------
2004 2003
-----------------------------
Net sales $363,786 100% $271,719 100%
Cost of goods sold 197,595 54% 133,882 49%
--------- ---------
Gross profit 166,191 46% 137,837 51%
Operating expenses:
Selling 71,195 20% 48,901 18%
General and administrative 22,861 6% 13,841 5%
Research and development 8,109 2% 6,672 2%
--------- ---------
Total operating expenses 102,165 28% 69,414 26%
Income from operations 64,026 18% 68,423 25%
Other income (expense), net 271 (1,184)
--------- ---------
Income before income taxes 64,297 18% 67,239 25%
Income tax provision 23,752 24,762
--------- ---------
Net income $40,545 11% $42,477 16%
========= =========
Earnings per common share:
Basic $0.60 $0.65
Diluted $0.59 $0.64
Weighted-average shares outstanding:
Basic 67,285 65,736
Diluted 68,365 65,926
Callaway Golf Company
Consolidated Condensed Balance Sheet
(In thousands)
(Unaudited)
March 31, December 31,
2004 2003
---------- ------------
ASSETS
Current assets:
Cash and cash equivalents $20,933 $47,340
Accounts receivable, net 297,709 100,664
Inventories, net 169,685 185,389
Deferred taxes 36,602 36,707
Other current assets 12,222 13,362
--------- ---------
Total current assets 537,151 383,462
Property, plant and equipment, net 154,261 164,763
Intangible assets, net 168,601 169,851
Deferred taxes 12,871 12,289
Other assets 18,030 18,201
--------- ---------
890,914 $748,566
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $101,152 $79,787
Accrued employee compensation and
benefits 27,012 25,544
Accrued warranty expense 13,891 12,627
Income taxes payable 29,117 11,962
Line of credit 52,587 -
Other current liabilities 44 240
--------- --------
Total current liabilities 223,803 130,160
Long-term liabilities 28,594 29,023
Shareholders' equity 638,517 589,383
--------- ---------
$890,914 $748,566
========= ========
CONTACT: Callaway Golf Company
Ron Drapeau, Brad Holiday or Larry Dorman
760-931-1771