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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 29, 2009
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

of incorporation)

 

(Commission

File Number)

(IRS Employer

Identification No.)

2180 RUTHERFORD ROAD, CARLSBAD, CALIFORNIA

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 29, 2009, Callaway Golf Company issued a press release captioned “Callaway Golf Company Announces Second Quarter and First Half 2009 Results.”  A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by this reference.

Item 9.01     Financial Statements and Exhibits.*

  (c)

Exhibits.

 
The following exhibit is being furnished herewith:
 
Exhibit 99.1 Press Release, dated July 29, 2009, captioned “Callaway Golf Company Announces Second Quarter and First Half 2009 Results.”

*  The information furnished under Item 2.02 and Item 9.01 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 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.

CALLAWAY GOLF COMPANY

 

 

 

 

 

Date:

July 29, 2009

By:

/s/ Bradley J. Holiday

Name:

Bradley J. Holiday

Title:

Senior Executive Vice President

and Chief Financial Officer

Exhibit Index

 

Exhibit Number

 

Description

 
99.1 Press Release, dated July 29, 2009, captioned “Callaway Golf Company Announces Second Quarter and First Half 2009 Results.”

Exhibit 99.1

Callaway Golf Company Announces Second Quarter and First Half 2009 Results

CARLSBAD, Calif.--(BUSINESS WIRE)--July 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
 

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