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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
July 17, 2003
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)
TABLE OF CONTENTS
ITEM 9. REGULATION FD DISCLOSURE AND ITEM 12. RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.*
SIGNATURE
Exhibit Index
EXHIBIT 99.1
2
ITEM 9. REGULATION FD DISCLOSURE AND ITEM 12. RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.*
The following information and the exhibit relating thereto are
furnished pursuant to Item 9 and Item 12 of this Current Report on Form 8-K.
On July 17, 2003, Callaway Golf Company issued a press release
announcing its financial results for the second quarter ended June 30, 2003. A
copy of the press release is attached hereto as Exhibit 99.1.
*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.
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: July 17, 2003 CALLAWAY GOLF COMPANY
By: /s/ Bradley J. Holiday
------------------------
Bradley J. Holiday
Executive Vice President
and Chief Financial Officer
3
Exhibit Index
99.1 Press release, dated July 17, 2003, captioned "Callaway Golf Announces
Record Six Months' Net Income and EPS; Increases EPS
Guidance for 2003."
Exhibit 99.1
Callaway Golf Announces Record Six Months' Net Income and EPS;
Increases EPS Guidance for 2003
CARLSBAD, Calif.--(BUSINESS WIRE)--July 17, 2003--Callaway Golf
Company (NYSE:ELY) today announced its financial results for the six
months ended June 30, 2003, announcing net income of $76.6 million and
diluted earnings per share of $1.16, both records for the Company. The
Company estimates diluted earnings per share for the year of
approximately $0.95 on a lower revenue estimate of $780 million.
For the quarter ended June 30, 2003, the Company reported net
sales of $242.1 million, compared to $252.5 million during the same
quarter in 2002. Foreign currency exchange rates favorably impacted
net sales for the second quarter of 2003 by approximately $7.5
million. Net income during the second quarter was $34.1 million,
versus $37.1 million for the same quarter last year. Earnings per
diluted share were $0.52, compared to $0.55 for the same quarter last
year. The year-over-year decline in net sales and earnings for the
quarter was consistent with the Company's previous guidance.
For the six months ended June 30, 2003, the Company reported net
sales of $513.8 million, an increase of 1% compared to $509.2 million
during the same period in 2002. Foreign currency exchange rates
favorably impacted net sales for the period by approximately $19.4
million. Net income during the first six months was $76.6 million, an
increase of 13% compared to $67.8 million for the same period last
year. Earnings per diluted share were $1.16, an increase of 17%
compared to $0.99 for the same period last year.
"We are pleased with our results in the first half of 2003," said
Ron Drapeau, Chairman, President and CEO. "As we expected, there was
some shifting of business from the second quarter, resulting in a
slight decline on a quarter-to-quarter basis. But we achieved record
six-month earnings, growing net sales by 1% while reducing operating
expenses by 9%. In the process of achieving these results, we
maintained our #1 market share position in the U.S. in woods, irons
and putters."
SALES BY PRODUCT AND REGION
-------------------------------------------------
Second Quarter - 2003 First Half - 2003
-------------------------------------------------
$'s - millions Net Sales % Change Net Sales % Change
vs. vs.
2002 2002
-------------------------------------------------
Woods $77.0 (20%) $169.9 (16%)
Irons 83.0 6% 179.2 11%
Golf Balls 15.6 (34%) 29.3 (37%)
Putters 46.2 27% 91.1 47%
Accessories, Other 20.3 16% 44.3 19%
--------------------- -------------
TOTAL $242.1 (4%) $513.8 1%
===================== =============
United States $143.2 0% $292.5 (1%)
International 98.9 (9%) 221.3 3%
--------------------- -------------
TOTAL $242.1 (4%) $513.8 1%
===================== =============
Brad Holiday, Executive Vice-President and Chief Financial
Officer, stated, "We are pleased to report gross margins in the first
six months of 51%, essentially flat compared with 52% for the first
six months last year. In addition, operating expenses for the same
period were reduced to 28% of net sales, versus 31% for the same
period last year. Our balance sheet remains strong with a 49% increase
in cash and an 18% reduction in inventories versus the same time last
year."
In accordance with the Company's dividend practice, the Board of
Directors will determine the next dividend in August.
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. The Company's earnings estimates exclude any special
charges or gains. See further disclaimer below.
"With the performance achieved in the first half of the year, and
with modest incremental contributions from some limited product
launches planned for the last part of 2003, we now expect that annual
fully diluted earnings per share will exceed our previous guidance,"
reported Mr. Drapeau. "We are now targeting annual net sales at
approximately $780 million with our earnings forecast increasing to
approximately $0.95 per share. However, achieving these targets will
not be easy. The golf equipment marketplace, particularly in the U.S.,
remains depressed and our competitors are taking many aggressive
actions to gain business. It is also important that the overall
economy, particularly in the U.S., continue to show some signs of
improvement. We continue to think that quarterly guidance is not
appropriate or productive, and decline to provide guidance beyond the
annual targets," stated Mr. Drapeau. "However, those familiar with the
seasonality in our industry know to expect a significant drop in sales
and earnings in the back half of the year, including a loss in the
fourth quarter."
"This guidance does not include any adjustments associated with
the expected acquisition of the Top-Flite Golf assets," continued Mr.
Drapeau. "At this time it is premature for us to publish such
information. In today's conference call I plan to cover some
additional information in connection with that transaction, but I will
not be providing financial guidance for the rest of this year or for
next year until we have more clarity around the certainty and timing
of the transaction."
The Company will be holding a conference call at 2:00 p.m. PDT
today, which will be hosted by Ronald A. Drapeau, Chairman, CEO and
President, and Bradley J. Holiday, 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 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 conclusion of the conference call. The replay may be accessed
through the Internet at www.callawaygolf.com or by telephone by
calling (800) 642-1687 toll free for calls originating within the
United States or (706) 645-9291 for International calls. The replay
pass code is 1656205 and the replay will be available through 5:00
p.m. PDT, on Thursday, July 24, 2003.
Disclaimer: Statements used in this press release that relate to
future plans, events, financial results or performance, including
statements relating to estimated sales and earnings and other
statements in the Business Outlook section of the press release, 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 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 actions
taken by the USGA or other golf association that could have an adverse
impact upon demand for the Company's products, 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 I, Item 2 of the Company's Quarterly Report on
Form 10-Q for the quarter ended March 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.
Callaway Golf Company makes and sells Big Bertha(R) Metal Woods
and Irons, including Great Big Bertha(R) II Titanium Drivers and
Fairway Woods, Big Bertha Steelhead(TM) III Stainless Steel Drivers
and Fairway Woods, Hawk Eye VFT Tungsten Injected(TM) Titanium Irons,
Big Bertha Stainless Steel Irons, Steelhead X-16(TM) and Steelhead
X-16 Pro Series Stainless Steel Irons, and Callaway Golf Forged
Wedges. Callaway Golf Company also makes and sells Odyssey(R) Putters,
including White Hot(R), TriHot(R), DFX(TM) and Dual Force(R) Putters.
Callaway Golf Company makes and sells the Callaway Golf(R) HX(R) Blue
and HX Red balls, the CTU 30(R) Blue and CTU 30 Red balls, the HX
2-Piece Blue and HX 2-Piece Red balls, the CB1(R) Blue and CB1 Red
balls, and the Warbird(TM) golf balls. For more information about
Callaway Golf Company, please visit our Web sites at
www.callawaygolf.com and www.odysseygolf.com.
Callaway Golf Company
Consolidated Condensed Statement of Operations
(In thousands, except per share data)
(unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
----------------------- -----------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Net sales $242,077 100% $252,473 100% $513,796 100% $509,182 100%
Cost of goods
sold 115,583 48% 114,684 45% 249,465 49% 242,641 48%
--------- --------- --------- ---------
Gross profit 126,494 52% 137,789 55% 264,331 51% 266,541 52%
Operating
expenses:
Selling 53,164 22% 54,978 22% 102,064 20% 112,277 22%
General and
administrative 14,629 6% 14,988 6% 28,470 6% 28,408 6%
Research and
development 6,242 3% 8,444 3% 12,914 3% 16,327 3%
--------- --------- --------- ---------
Total operating
expenses 74,035 31% 78,410 31% 143,448 28% 157,012 31%
Income from
operations 52,459 22% 59,379 24% 120,883 24% 109,529 22%
Other income,
net 1,472 1,404 288 1,022
--------- --------- --------- ---------
Income before
income taxes 53,931 22% 60,783 24% 121,171 24% 110,551 22%
Income tax
provision 19,788 23,641 44,550 42,715
--------- --------- --------- ---------
Net income $34,143 14% $37,142 15% $76,621 15% $67,836 13%
========= ========= ========= =========
Earnings per
common share:
Basic $0.52 $0.56 $1.16 $1.01
Diluted $0.52 $0.55 $1.16 $0.99
Weighted-average
shares
outstanding:
Basic 65,804 66,922 65,770 67,132
Diluted 66,146 67,910 66,036 68,264
Callaway Golf Company
Consolidated Condensed Balance Sheet
(In thousands)
June December
30, 31,
2003 2002
----------- ---------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $137,459 $108,452
Accounts receivable, net 196,563 63,867
Inventories, net 119,631 151,760
Deferred taxes 34,169 34,519
Other current assets 8,208 10,429
----------- ---------
Total current assets 496,030 369,027
Property, plant and equipment, net 151,560 167,340
Intangible assets, net 121,595 121,317
Other assets 22,583 22,161
----------- ---------
$791,768 $679,845
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $71,233 $61,720
Accrued employee compensation and
benefits 24,972 23,168
Accrued warranty expense 14,580 13,464
Note payable, current portion 1,608 3,160
Income taxes payable 35,762 7,649
----------- ---------
Total current liabilities 148,155 109,161
Long-term liabilities 27,777 27,297
Shareholders' equity 615,836 543,387
----------- ---------
$791,768 $679,845
=========== =========
CONTACT: Callaway Golf Company, Carlsbad
Ron Drapeau, Brad Holiday or Larry Dorman, 760-931-1771