UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
July 27,
2010
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
|
(IRS
Employer
|
|
of
incorporation)
|
File
Number)
|
Identification
No.)
|
|
2180
RUTHERFORD ROAD, CARLSBAD, CALIFORNIA
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92008-7328
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(760)
931-1771
Registrant’s
telephone number, including area code
|
NOT
APPLICABLE
|
|
(Former
name or former address, if changed since last
report.)
|
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
¨ Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
2.02 Results of Operations and Financial
Condition.*
On July
28, 2010, Callaway Golf Company (the “Company”) issued a press release captioned
“Callaway Golf Company Announces Second Quarter and First Half 2010
Results.” A copy of the press release is attached hereto as Exhibit
99.1 and incorporated herein by this reference.
Item
2.05 Costs Associated with Exit or Disposal
Activities.
The Company previously announced that
it had adopted a global operations strategy targeted at improving the Company’s
gross margins (the “Global Operations Strategy”). On July 27, 2010,
the Company announced the next phase of its Global Operations
Strategy. More specifically, the Company announced that it will be
restructuring its global manufacturing and distribution operations over the next
18 months to add speed and flexibility to customer service demands, optimize
efficiencies and facilitate long-term gross margin improvements (the “M&D
Restructuring”). This initiative will include the reorganization of
the Company’s manufacturing and distribution centers located in Carlsbad,
California and Toronto, Canada, the creation of third party logistics sites in
Dallas, Texas and Toronto, Canada, as well as the establishment of a new
production facility in Monterrey, Mexico. A copy of the July 27, 2010 press
release is attached hereto as Exhibit 99.2 and incorporated herein by this
reference.
Set forth below are the current
estimated charges that are expected to be incurred over the next 18 months in
connection with the M&D Restructuring (in
thousands):
|
Cash
|
Non-cash
|
Total
|
||||||||||
|
Termination
benefits
|
$ | 5,447 | $ | - | $ | 5,447 | ||||||
|
Asset
write-offs
|
- | 100 | 100 | |||||||||
|
Transition
costs1
|
18,753 | - | 18,753 | |||||||||
|
Total
|
$ | 24,200 | $ | 100 | $ | 24,300 | ||||||
1Transition
costs consist primarily of consulting expenses, costs associated with
redundancies during the start-up and training phase of the new production
facility in Monterrey, Mexico, start-up costs associated with the establishment
of third party logistics sites, travel expenses, and costs associated with the
transfer of inventory and equipment.
The above
enumerated charges reflect the Company’s best estimate as of the filing of this
report based upon the Company’s current plans. Any change in the
Company’s plans during implementation, or any delays, difficulties, or increased
costs associated with the implementation of these initiatives, could affect the
estimated amounts or timing of the charges.
Item
9.01 Financial Statements and Exhibits.*
|
|
(c)
|
Exhibits.
|
The following exhibits are being
furnished herewith:
|
|
Exhibit
99.1
|
Press
Release, dated July 28, 2010, captioned “Callaway Golf Company Announces
Second Quarter and First Half 2010
Results.”
|
|
|
Exhibit
99.2
|
Press
Release, dated July 27, 2010, captioned “Callaway Golf Announces Redesign
of Global Operations System.”
|
* The
information furnished under Item 2.02 and 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 registration statement or
other filing under the Securities Act of 1933, as amended, except as shall be
expressly set forth by specific reference in such filing.
SIGNATURES
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.
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CALLAWAY
GOLF COMPANY
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||
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Date: July 28,
2010
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By:
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/s/ Brian P. Lynch
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Name:
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Brian
P. Lynch
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|
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Title:
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Vice
President and
|
|
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Corporate
Secretary
|
||
Exhibit
Index
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Exhibit Number
|
Description
|
|
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99.1
|
Press
Release, dated July 28, 2010, captioned “Callaway Golf Company Announces
Second Quarter and First Half 2010 Results.”
|
|
|
99.2
|
Press
Release, dated July 27, 2010, captioned “Callaway Golf Announces Redesign
of Global Operations System.”
|
Exhibit 99.1
Contacts: Brad
Holiday
Eric
Struik
Tim
Buckman
(760)
931-1771
CALLAWAY
GOLF COMPANY ANNOUNCES
SECOND
QUARTER AND FIRST HALF 2010 RESULTS
CARLSBAD,
CA /July 28, 2010/ Callaway Golf Company (NYSE:ELY) today announced its
financial results for the second quarter and first half of the year ended June
30, 2010, which were consistent with the Company’s June 14th
guidance.
For the
second quarter, the Company reported:
|
|
·
|
Net
sales of $304 million, an increase of 1% compared to $302 million for the
second quarter of 2009. Changes in foreign currency rates
favorably affected net sales by $6 million in the second quarter of 2010
compared to the same period in
2009.
|
|
|
·
|
Gross
profit of $124 million (41% of net sales), compared to gross profit of
$110 million (36% of net sales) for the second quarter of
2009.
|
|
|
·
|
Operating
expenses for the quarter of $99 million (32% of net sales) compared to
$100 million (33% of net sales) for the same period in
2009.
|
|
|
·
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Operating
profit of $25 million (8% of net sales) compared to $10 million (3% of net
sales) for the same period in 2009.
|
|
|
·
|
Earnings
per diluted share of $0.14 (on 84.3 million weighted average shares
outstanding), compared to $0.10 (on 66.8 million weighted average shares
outstanding) in 2009. Fully diluted earnings per share for the
second quarter include after-tax charges for the Company’s Global
Operations Strategy initiatives of $0.01 per share in 2010 and $0.02 per
share in 2009.
|
For the
first six months, the Company reported:
|
|
·
|
Net
sales of $606 million, an increase of 6% compared to last year’s net sales
of $574 million. Changes in foreign currency rates favorably affected net
sales by $21 million for the first six months of 2010 compared to the same
period in 2009.
|
|
|
·
|
Gross
profit of $261 million (43% of net sales) compared to $226 million (39% of
net sales) for 2009.
|
|
|
·
|
Operating
expenses of $207 million (34% of net sales) compared to $202 million (35%
of net sales) for 2009.
|
|
|
·
|
Operating
profit of $53 million (9% of net sales) compared to $24 million (4% of net
sales) for 2009.
|
|
|
·
|
Earnings
per diluted share of $0.38 (on 84.1 million weighted average shares
outstanding) compared to earnings per diluted share of $0.21 (on 65.1
million weighted average shares outstanding) for 2009. Fully
diluted earnings per share for the period include after-tax charges for
the Company’s Global Operations Strategy initiatives of $0.02 per share in
2010 and $0.03 per share in 2009.
|
“Global
economic conditions and the golf industry have recovered more slowly than our
original expectations coming into 2010,” commented George Fellows, President and
CEO. “Consumer spending remains constrained by high
unemployment, modest income growth, lower housing wealth and tight credit. These
constraints, together with unfavorable weather conditions in many key markets
for a significant portion of 2010, have resulted in an overall decline in sales
in the golf industry for the year. Despite this industry decline, our first half
results have improved over last year, driven in large part by our improved gross
margins, more favorable foreign currency rates, and significant growth in our
putters and accessories businesses.”
“While
the golf industry will recover, given recent increased uncertainty regarding
retailer and consumer spending in the back half of the year, it does not appear
that the industry will fully recover during 2010,” continued Mr. Fellows. “We
are therefore focused on the controllable portions of our business, including
tight management of discretionary spending, investment in emerging markets and
other key growth initiatives to drive long-term shareholder value, and
improvements in our operations such as the restructuring of our global
operations announced yesterday. These actions, together with the strength of our
brands, will allow us to maximize results in the current environment and prepare
us to take advantage of a better market once global conditions
improve.”
Restructuring of Global
Operations
The
Company announced yesterday that it will be restructuring its global
operations over the next 18 months as a part of its overall Global
Operations Strategy to add speed and flexibility to customer service demands,
optimize efficiencies and facilitate long-term gross margin
improvements. This initiative will include the reorganization of the
Company’s manufacturing and distribution centers located in Carlsbad, California
and Toronto Canada and the creation of third party logistics sites in Dallas,
Texas and Toronto, Canada as well as the establishment of a new production
facility in Monterrey, Mexico.
Business
Outlook
“While we
expect that our overall financial results will be better than last year, the
unusual uncertainty caused by the current macroeconomic and market conditions
make it impossible to forecast retailer and consumer demand for golf products
with any reliability,” commented Brad Holiday, Chief Financial Officer of the
Company. “We do expect that our full year gross margins will be
improved compared to last year and that our full year operating expenses will be
approximately flat compared to last year, even after taking into account the
restoration of employee compensation and benefits that were temporarily
suspended in 2009. Because of the lack of visibility into sales,
however, we are not providing specific financial guidance for the balance of the
year.”
The
Company previously estimated that charges for 2010 for its overall Global
Operations Strategy initiatives would be approximately $.10 per
share. The scope of the initiatives has been expanded and the Company
now estimates that charges for such initiatives in 2010 will be approximately
$0.16 per share. Given the expanded scope of the initiatives, the Company now
estimates that the savings from its overall Global Operations Strategy
initiatives will be approximately $45-$55 million from 2010-2013 as compared to
its prior estimate of $25-$45 million through 2012.
Conference Call and
Webcast
The
Company will be holding a conference call at 2:00 p.m. PDT today to discuss the
Company’s financial results and the recently announced restructuring of its
global operations. 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 three hours after the call ends,
and will remain available through 9:00 p.m. PDT on Wednesday, August 4,
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 85601986.
* * * *
*
Disclaimer: Statements
used in this press release that relate to future plans, events, financial
results, performance or prospects, including statements relating to a golf
industry recovery, the Company’s future performance, estimated 2010 gross
margins and operating expenses, and the estimated amount and timing of the
charges and savings related to the Company’s global operations strategy
initiatives, 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 forward-looking statements 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 global operations
strategy 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
golf industry 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.
Regulation
G: The financial statement schedules attached to this press
release have been prepared in accordance with accounting principles generally
accepted in the United States (“GAAP”). In addition to these
schedules, the Company has also provided certain supplemental financial
information concerning its results, which include certain financial measures not
prepared in accordance with GAAP. The non-GAAP financial measures
included in the supplemental financial information present certain of the
Company’s financial results (i) excluding charges for the Company’s global
operations strategy and (ii) excluding interest, taxes, depreciation and
amortization expenses, and changes in the Company’s prior derivative valuation
account (“Adjusted EBITDA”). 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 within the supplemental financial information attached to 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,
|
|||||||
|
2010
|
2009
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 53,594 | $ | 78,314 | ||||
|
Accounts
receivable, net
|
254,549 | 139,776 | ||||||
|
Inventories
|
214,490 | 219,178 | ||||||
|
Deferred
taxes, net
|
21,251 | 21,276 | ||||||
|
Income
taxes receivable
|
584 | 19,730 | ||||||
|
Other
current assets
|
35,246 | 34,713 | ||||||
|
Total
current assets
|
579,714 | 512,987 | ||||||
|
Property,
plant and equipment, net
|
132,700 | 143,436 | ||||||
|
Intangible
assets, net
|
170,455 | 174,017 | ||||||
|
Other
assets
|
46,167 | 45,490 | ||||||
|
Total
assets
|
$ | 929,036 | $ | 875,930 | ||||
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable and accrued expenses
|
$ | 134,558 | $ | 118,294 | ||||
|
Accrued
employee compensation and benefits
|
22,574 | 22,219 | ||||||
|
Accrued
warranty expense
|
9,390 | 9,449 | ||||||
|
Income
tax liability
|
14,730 | 1,492 | ||||||
|
Total
current liabilities
|
181,252 | 151,454 | ||||||
|
Long-term
liabilities
|
13,011 | 14,594 | ||||||
|
Shareholders'
equity
|
734,773 | 709,882 | ||||||
|
Total
liabilities and shareholders' equity
|
$ | 929,036 | $ | 875,930 | ||||
Statements
of Operations
(In
thousands, except per share data)
(Unaudited)
|
Quarter
Ended
|
||||||||
|
June 30,
|
||||||||
|
2010
|
2009
|
|||||||
|
Net
sales
|
$ | 303,609 | $ | 302,219 | ||||
|
Cost
of sales
|
179,983 | 192,371 | ||||||
|
Gross
profit
|
123,626 | 109,848 | ||||||
|
Operating
expenses:
|
||||||||
|
Selling
|
70,730 | 72,394 | ||||||
|
General
and administrative
|
19,147 | 19,358 | ||||||
|
Research
and development
|
8,648 | 7,837 | ||||||
|
Total
operating expenses
|
98,525 | 99,589 | ||||||
|
Income
from operations
|
25,101 | 10,259 | ||||||
|
Other
(expense) income, net
|
(4,704 | ) | 512 | |||||
|
Other
income before income taxes
|
20,397 | 10,771 | ||||||
|
Income
tax provision
|
8,932 | 3,859 | ||||||
|
Net
income
|
11,465 | 6,912 | ||||||
|
Dividends
on convertible preferred stock
|
2,625 | 438 | ||||||
|
Net
income allocable to common shareholders
|
$ | 8,840 | $ | 6,474 | ||||
|
Earnings
per common share:
|
||||||||
|
Basic
|
$ | 0.14 | $ | 0.10 | ||||
|
Diluted
|
$ | 0.14 | $ | 0.10 | ||||
|
Weighted-average
common shares outstanding:
|
||||||||
|
Basic
|
63,844 | 63,121 | ||||||
|
Diluted
|
84,259 | 66,807 | ||||||
|
Six
Months Ended
|
||||||||
|
June 30,
|
||||||||
|
2010
|
2009
|
|||||||
|
Net
sales
|
$ | 606,484 | $ | 574,083 | ||||
|
Cost
of sales
|
345,563 | 348,054 | ||||||
|
Gross
profit
|
260,921 | 226,029 | ||||||
|
Operating
expenses:
|
||||||||
|
Selling
|
145,358 | 147,044 | ||||||
|
General
and administrative
|
44,123 | 39,345 | ||||||
|
Research
and development
|
17,966 | 15,940 | ||||||
|
Total
operating expenses
|
207,447 | 202,329 | ||||||
|
Income
from operations
|
53,474 | 23,700 | ||||||
|
Other
expense, net
|
(3,133 | ) | (1,869 | ) | ||||
|
Income
before income taxes
|
50,341 | 21,831 | ||||||
|
Income
tax provision
|
18,573 | 8,107 | ||||||
|
Net
income
|
31,768 | 13,724 | ||||||
|
Dividends
on convertible preferred stock
|
5,250 | 438 | ||||||
|
Net
income allocable to common shareholders
|
$ | 26,518 | $ | 13,286 | ||||
|
Earnings
per common share:
|
||||||||
|
Basic
|
$ | 0.42 | $ | 0.21 | ||||
|
Diluted
|
$ | 0.38 | $ | 0.21 | ||||
|
Weighted-average
common shares outstanding:
|
||||||||
|
Basic
|
63,749 | 63,060 | ||||||
|
Diluted
|
84,093 | 65,105 | ||||||
Callaway
Golf Company
Consolidated
Condensed Statements of Cash Flows
(In
thousands)
(Unaudited)
|
Six
Months Ended
|
||||||||
|
June 30,
|
||||||||
|
2010
|
2009
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
income
|
$ | 31,768 | $ | 13,724 | ||||
|
Adjustments
to reconcile net income to net cash used in operating
activities:
|
||||||||
|
Depreciation
and amortization
|
19,555 | 20,116 | ||||||
|
Deferred
taxes, net
|
(1,914 | ) | (5,509 | ) | ||||
|
Non-cash
share-based compensation
|
5,002 | 3,684 | ||||||
|
Gain
(loss) on disposal of long-lived assets
|
73 | (375 | ) | |||||
|
Changes
in assets and liabilities
|
(64,216 | ) | (40,708 | ) | ||||
|
Net
cash used in operating activities
|
(9,732 | ) | (9,068 | ) | ||||
|
Cash
flows from investing activities:
|
||||||||
|
Capital
expenditures
|
(7,549 | ) | (19,448 | ) | ||||
|
Other
investing activities
|
(1,870 | ) | (31 | ) | ||||
|
Net
cash used in investing activities
|
(9,419 | ) | (19,479 | ) | ||||
|
Cash
flows from financing activities:
|
||||||||
|
Issuance
of common stock
|
1,683 | 1,498 | ||||||
|
Issuance
of preferred stock
|
- | 140,000 | ||||||
|
Equity
issuance cost
|
(60 | ) | (5,871 | ) | ||||
|
Dividends
paid, net
|
(6,530 | ) | (4,430 | ) | ||||
|
Payments
on credit facilities, net
|
- | (90,000 | ) | |||||
|
Other
financing activities
|
(249 | ) | 54 | |||||
|
Net
cash (used in) provided by financing activities
|
(5,156 | ) | 41,251 | |||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
(413 | ) | (570 | ) | ||||
|
Net
(decrease) increase in cash and cash equivalents
|
(24,720 | ) | 12,134 | |||||
|
Cash
and cash equivalents at beginning of period
|
78,314 | 38,337 | ||||||
|
Cash
and cash equivalents at end of period
|
$ | 53,594 | $ | 50,471 | ||||
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)
|
|||||||||||||||||||||||||||||
|
2010
|
2009
|
Dollars
|
Percent
|
2010
|
2009
|
Dollars
|
Percent
|
|||||||||||||||||||||||||
|
Net
sales:
|
||||||||||||||||||||||||||||||||
|
Woods
|
$ | 63,263 | $ | 75,956 | $ | (12,693 | ) | -17 | % | $ | 157,752 | $ | 155,838 | $ | 1,914 | 1 | % | |||||||||||||||
|
Irons
|
71,489 | 72,222 | (733 | ) | -1 | % | 128,924 | 137,409 | (8,485 | ) | -6 | % | ||||||||||||||||||||
|
Putters
|
33,520 | 26,421 | 7,099 | 27 | % | 71,667 | 54,112 | 17,555 | 32 | % | ||||||||||||||||||||||
|
Golf
balls
|
58,003 | 58,245 | (242 | ) | 0 | % | 109,138 | 105,593 | 3,545 | 3 | % | |||||||||||||||||||||
|
Accessories
and other
|
77,334 | 69,375 | 7,959 | 11 | % | 139,003 | 121,131 | 17,872 | 15 | % | ||||||||||||||||||||||
| $ | 303,609 | $ | 302,219 | $ | 1,390 | 0 | % | $ | 606,484 | $ | 574,083 | $ | 32,401 | 6 | % | |||||||||||||||||
|
Net Sales by Region
|
||||||||||||||||||||||||||||||||
|
Quarter
Ended
|
Six
Months Ended
|
|||||||||||||||||||||||||||||||
|
June 30,
|
Growth/(Decline)
|
June 30,
|
Growth/(Decline)
|
|||||||||||||||||||||||||||||
|
2010
|
2009
|
Dollars
|
Percent
|
2010
|
2009
|
Dollars
|
Percent
|
|||||||||||||||||||||||||
|
Net
sales:
|
||||||||||||||||||||||||||||||||
|
United
States
|
$ | 162,363 | $ | 163,739 | $ | (1,376 | ) | -1 | % | $ | 313,419 | $ | 305,020 | $ | 8,399 | 3 | % | |||||||||||||||
|
Europe
|
41,475 | 42,477 | (1,002 | ) | -2 | % | 83,734 | 85,480 | (1,746 | ) | -2 | % | ||||||||||||||||||||
|
Japan
|
30,179 | 37,061 | (6,882 | ) | -19 | % | 83,562 | 84,456 | (894 | ) | -1 | % | ||||||||||||||||||||
|
Rest
of Asia
|
24,726 | 21,300 | 3,426 | 16 | % | 49,315 | 37,852 | 11,463 | 30 | % | ||||||||||||||||||||||
|
Other
foreign countries
|
44,866 | 37,642 | 7,224 | 19 | % | 76,454 | 61,275 | 15,179 | 25 | % | ||||||||||||||||||||||
| $ | 303,609 | $ | 302,219 | $ | 1,390 | 0 | % | $ | 606,484 | $ | 574,083 | $ | 32,401 | 6 | % | |||||||||||||||||
|
Operating Segment
Information
|
||||||||||||||||||||||||||||||||
|
Quarter
Ended
|
Six
Months Ended
|
|||||||||||||||||||||||||||||||
|
June 30,
|
Growth/(Decline)
|
June 30,
|
Growth/(Decline)
|
|||||||||||||||||||||||||||||
|
2010
|
2009
|
Dollars
|
Percent
|
2010
|
2008
|
Dollars
|
Percent
|
|||||||||||||||||||||||||
|
Net
sales:
|
||||||||||||||||||||||||||||||||
|
Golf
clubs
|
$ | 245,606 | $ | 243,974 | $ | 1,632 | 1 | % | $ | 497,346 | $ | 468,490 | $ | 28,856 | 6 | % | ||||||||||||||||
|
Golf
balls
|
58,003 | 58,245 | (242 | ) | 0 | % | 109,138 | 105,593 | 3,545 | 3 | % | |||||||||||||||||||||
| $ | 303,609 | $ | 302,219 | $ | 1,390 | 0 | % | $ | 606,484 | $ | 574,083 | $ | 32,401 | 6 | % | |||||||||||||||||
|
Income
(loss) before income taxes:
|
||||||||||||||||||||||||||||||||
|
Golf
clubs
|
$ | 30,838 | $ | 25,367 | $ | 5,471 | 22 | % | $ | 74,453 | $ | 53,648 | $ | 20,805 | 39 | % | ||||||||||||||||
|
Golf
balls
|
5,751 | (965 | ) | 6,716 |
NM
|
7,646 | (2,663 | ) | 10,309 |
NM
|
||||||||||||||||||||||
|
Reconciling
items (1)
|
(16,192 | ) | (13,631 | ) | (2,561 | ) | -19 | % | (31,758 | ) | (29,154 | ) | (2,604 | ) | -9 | % | ||||||||||||||||
| $ | 20,397 | $ | 10,771 | $ | 9,626 | 89 | % | $ | 50,341 | $ | 21,831 | $ | 28,510 | 131 | % | |||||||||||||||||
(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,
|
|||||||||||||||||||||||
|
2010
|
2009
|
|||||||||||||||||||||||
|
Pro Forma
Callaway Golf
|
Global
Operations
Strategy
Initiatives
|
Total as
Reported
|
Pro Forma
Callaway Golf
|
Global
Operations
Strategy
Initiatives
|
Total as
Reported
|
|||||||||||||||||||
|
Net
sales
|
$ | 303,609 | $ | - | $ | 303,609 | $ | 302,219 | $ | - | $ | 302,219 | ||||||||||||
|
Gross
profit
|
124,823 | (1,197 | ) | 123,626 | 111,662 | (1,814 | ) | 109,848 | ||||||||||||||||
|
%
of sales
|
41 | % | n/a | 41 | % | 37 | % | n/a | 36 | % | ||||||||||||||
|
Operating
expenses
|
98,417 | 108 | 98,525 | 99,589 | - | 99,589 | ||||||||||||||||||
|
Income
(loss) from operations
|
26,406 | (1,305 | ) | 25,101 | 12,073 | (1,814 | ) | 10,259 | ||||||||||||||||
|
Other
income (loss), net
|
(4,704 | ) | - | (4,704 | ) | 512 | - | 512 | ||||||||||||||||
|
Income
(loss) before income taxes
|
21,702 | (1,305 | ) | 20,397 | 12,585 | (1,814 | ) | 10,771 | ||||||||||||||||
|
Income
tax provision (benefit)
|
9,428 | (496 | ) | 8,932 | 4,557 | (698 | ) | 3,859 | ||||||||||||||||
|
Net
income (loss)
|
12,274 | (809 | ) | 11,465 | 8,028 | (1,116 | ) | 6,912 | ||||||||||||||||
|
Dividends
on convertible preferred stock
|
2,625 | - | 2,625 | 438 | - | 438 | ||||||||||||||||||
|
Net
income (loss) allocable to common shareholders
|
$ | 9,649 | $ | (809 | ) | $ | 8,840 | $ | 7,590 | $ | (1,116 | ) | $ | 6,474 | ||||||||||
|
Diluted
earnings (loss) per share:
|
$ | 0.15 | $ | (0.01 | ) | $ | 0.14 | $ | 0.12 | $ | (0.02 | ) | $ | 0.10 | ||||||||||
|
Weighted-average
shares outstanding:
|
84,259 | 84,259 | 84,259 | 66,807 | 66,807 | 66,807 | ||||||||||||||||||
|
Six Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||
|
2010
|
2009
|
|||||||||||||||||||||||
|
Pro Forma
Callaway Golf
|
Global
Operations
Strategy
Initiatives
|
Total as
Reported
|
Pro Forma
Callaway Golf
|
Global
Operations
Strategy
Initiatives
|
Total as
Reported
|
|||||||||||||||||||
|
Net
sales
|
$ | 606,484 | $ | - | $ | 606,484 | $ | 574,083 | $ | - | $ | 574,083 | ||||||||||||
|
Gross
profit
|
263,118 | (2,197 | ) | 260,921 | 229,399 | (3,370 | ) | 226,029 | ||||||||||||||||
|
%
of sales
|
43 | % | n/a | 43 | % | 40 | % | n/a | 39 | % | ||||||||||||||
|
Operating
expenses
|
207,286 | 161 | 207,447 | 202,329 | - | 202,329 | ||||||||||||||||||
|
Income
(loss) from operations
|
55,832 | (2,358 | ) | 53,474 | 27,070 | (3,370 | ) | 23,700 | ||||||||||||||||
|
Other
expense, net
|
(3,133 | ) | - | (3,133 | ) | (1,869 | ) | - | (1,869 | ) | ||||||||||||||
|
Income
(expense) before income taxes
|
52,699 | (2,358 | ) | 50,341 | 25,201 | (3,370 | ) | 21,831 | ||||||||||||||||
|
Income
tax provision (benefit)
|
19,493 | (920 | ) | 18,573 | 9,404 | (1,297 | ) | 8,107 | ||||||||||||||||
|
Net
income (loss)
|
33,206 | (1,438 | ) | 31,768 | 15,797 | (2,073 | ) | 13,724 | ||||||||||||||||
|
Dividends
due to preferred shareholders
|
5,250 | - | 5,250 | 438 | - | 438 | ||||||||||||||||||
|
Net
income (loss) available to common shareholders
|
$ | 27,956 | $ | (1,438 | ) | $ | 26,518 | $ | 15,359 | $ | (2,073 | ) | $ | 13,286 | ||||||||||
|
Diluted
earnings (loss) per share:
|
$ | 0.40 | $ | (0.02 | ) | $ | 0.38 | $ | 0.24 | $ | (0.03 | ) | $ | 0.21 | ||||||||||
|
Weighted-average
shares outstanding:
|
84,093 | 84,093 | 84,093 | 65,105 | 65,105 | 65,105 | ||||||||||||||||||
|
2010 Trailing Twelve Months Adjusted
EBITDA
|
||||||||||||||||||||
|
Adjusted
EBITDA:
|
Quarter Ended
|
|||||||||||||||||||
|
September
30,
|
December
31,
|
March
31,
|
June
30,
|
|||||||||||||||||
|
2009
|
2009
|
2010
|
2010
|
Total
|
||||||||||||||||
|
Net
income (loss)
|
$ | (13,429 | ) | $ | (15,555 | ) | $ | 20,303 | $ | 11,465 | $ | 2,784 | ||||||||
|
Interest
expense (income), net
|
(46 | ) | (435 | ) | (118 | ) | (242 | ) | (841 | ) | ||||||||||
|
Income
tax provision (benefit)
|
(11,308 | ) | (11,142 | ) | 9,641 | 8,932 | (3,877 | ) | ||||||||||||
|
Depreciation
and amortization expense
|
10,128 | 10,504 | 9,949 | 9,606 | 40,187 | |||||||||||||||
|
Change
in energy derivative valuation acct.
|
- | - | - | - | - | |||||||||||||||
|
Adjusted
EBITDA
|
$ | (14,655 | ) | $ | (16,628 | ) - | $ | 39,775 | $ | 29,761 | $ | 38,253 | ||||||||
|
2009 Trailing Twelve Months Adjusted
EBITDA
|
||||||||||||||||||||
|
Adjusted
EBITDA:
|
Quarter Ended
|
|||||||||||||||||||
|
September
30,
|
December
31,
|
March
31,
|
June
30,
|
|||||||||||||||||
|
2008
|
2008
|
2009
|
2009
|
Total
|
||||||||||||||||
|
Net
income (loss)
|
$ | (7,443 | ) | $ | (3,154 | ) | $ | 6,812 | $ | 6,912 | $ | 3,127 | ||||||||
|
Interest
expense (income), net
|
497 | 272 | (123 | ) | 551 | 1,197 | ||||||||||||||
|
Income
tax provision (benefit)
|
(6,676 | ) | (4,766 | ) | 4,248 | 3,859 | (3,335 | ) | ||||||||||||
|
Depreciation
and amortization expense
|
9,463 | 9,216 | 9,944 | 10,172 | 38,795 | |||||||||||||||
|
Change
in energy derivative valuation acct.
|
- | (19,922 | ) | - | - | (19,922 | ) | |||||||||||||
|
Adjusted
EBITDA
|
$ | (4,159 | ) | $ | (18,354 | ) | $ | 20,881 | $ | 21,494 | $ | 19,862 | ||||||||
Exhibit
99.2
CONTACT:
Tim
Buckman
Callaway
Golf
(760)
804-4133
Tim.Buckman@CallawayGolf.com
CALLAWAY
GOLF ANNOUNCES REDESIGN OF GLOBAL OPERATIONS SYSTEM
New
Manufacturing and Distribution Model Optimizes Efficiencies, Supports Global
Operations Strategy
CARLSBAD,
Calif., July 27, 2010 – Callaway Golf Company (NYSE: ELY) today announced a
restructuring of its global operations to occur over the next 18
months. The initiative encompasses the reorganization of
manufacturing and distribution centers located in Carlsbad, Calif. and Toronto,
Canada; the creation of third-party logistics sites in Dallas, Texas, and
Toronto; and the establishment of a new production facility in Monterrey,
Mexico. The redesign, which is part of the Company’s previously
announced Global Operations Strategy, increases speed and flexibility to the
support of customer service demands, optimizes efficiencies and furthers
long-term gross margin improvements.
Callaway’s
global operations restructure is the result of a comprehensive analysis to
identify improved manufacturing and supply chain processes. This
undertaking will provide greater flexibility to shift global production and
distribution in response to specific needs and changing global economic factors,
and is consistent with the Company’s recent distribution network renovations in
Europe, Japan and Southeast Asia. Callaway’s International business
is expected to represent more than half of the Company’s future annual revenue,
and this redesign of its global operations allows the Company to better serve
this expanding International footprint.
Manufacturing
and distribution capabilities will remain in Carlsbad and Toronto, however a
gradual reduction in workforce will impact each location over the next 18
months. Consistent with the Company’s core values, Callaway Golf will
provide transition support to impacted employees.
“The
redesign of Callaway’s global operations creates a stronger, more flexible model
that better positions our business for the future,” said George Fellows,
President and CEO, Callaway Golf. “This decision was based on an
extensive review of our operations structure and supports the gross margin
improvements necessary to secure our leadership position in a competitive
market.”
Callaway
Golf announced previously that it will release its second quarter 2010 financial
results on Wednesday afternoon, July 28, 2010. The Company will
subsequently hold a conference call to review 2nd quarter
financial results and discuss specifics of its global operations redesign at
2:00 p.m. PDT that same day. The call will be broadcast live over the Internet
and can be accessed at www.callawaygolf.com.
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®, and Ben Hogan®
brands in more than 110 countries worldwide. For more information please visit
www.callawaygolf.com
or shop.callawaygolf.com.
# # #