Callaway Golf Company (NYSE:ELY) today announced its preliminary
financial results for the first quarter of 2009.
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Net sales are estimated to be $272 million, a decrease of 26% as
compared to net sales of $366 million for the first quarter of 2008.
Changes in foreign currency exchange rates adversely affected net
sales by approximately $22 million. On a currency neutral basis (i.e.
translating the Company’s first quarter 2009 results at first quarter
2008 exchange rates), estimated net sales would be $294 million, a
decrease of 20% compared to the first quarter of 2008.
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U.S. net sales are estimated to be $141 million, a decrease of 23%
compared to $184 million for the same period last year.
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International net sales are estimated to be $131 million, a
decrease of 28% compared to $182 million last year. On a currency
neutral basis, 2009 international net sales are estimated to be
$153 million, a decrease of 16% compared to the same period last
year.
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Gross profit is estimated to be $116 million, or 43% of net sales,
compared to gross profit of $176 million or 48% of net sales for the
first quarter of 2008. On a currency neutral basis, gross profit for
the first quarter of 2009 is estimated to be $136 million, or 46% of
net sales.
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Operating expenses for the quarter are estimated to be $103 million,
compared to $111 million for the first quarter of 2008. On a currency
neutral basis, operating expenses are estimated to be $107 million for
the first quarter of 2009.
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Earnings per diluted share are estimated to range from $0.10 to $0.12
(on 63.3 million shares). For the first quarter of 2008, the Company
reported fully diluted earnings per share of $0.61 (on 64.8 million
shares). Both periods include after-tax charges of approximately $0.01
per share related to the Company’s gross margin improvement
initiatives.
"Global economic conditions have proven to be more severe than initially
anticipated,” commented George Fellows, President and CEO of Callaway
Golf. "In addition to causing consumers to defer golf equipment
purchasing decisions, these conditions have also caused retailers to be
very conservative on the levels of inventory they are willing to carry,
both of which have adversely affected the Company’s sales during the
first quarter. These conditions have resulted in a more aggressive
pricing environment in the United States and some international markets
and a continued shift by consumers to lower price point products, which
have also adversely affected the Company’s gross margins. Further
strengthening of the Dollar has also had a larger than anticipated
negative impact on the Company’s financial results for the first
quarter.”
"Despite these economic headwinds,” continued Mr. Fellows, "the strength
of our 2009 products, together with several retail initiatives we put in
place early in the year, has enabled us to gain market share around the
world in almost all product categories. In addition, the successful
implementation of our gross margin initiatives over the past two years
has allowed us to mitigate the adverse effect these macroeconomic
conditions are having upon our gross margins. Fortunately, there has
been more positive economic news of late, which could stimulate
increased consumer activity as the golf season begins to open up and
continue as the year progresses.”
Business Update
Based on Callaway Golf’s preliminary first quarter results and
management’s current view regarding the remainder of the year, the
Company no longer expects that its 2009 currency neutral earnings will
be roughly the same as in 2008. In the current environment it is
extremely difficult to forecast the remainder of the year, but based
upon recent trends, industry-wide sales for 2009 are estimated to
decrease approximately 15% to 20% compared with 2008, and that Callaway
Golf’s annual sales for 2009 are estimated to decrease less than that as
the Company continues to outperform the industry and gain market share
in most product categories. It is further estimated that annual gross
profit as a percentage of net sales will be in the range of 40% to 42%,
and operating expenses will range from $375 to $390 million. Further
discussion about expectations for the year will be provided at the
Company’s upcoming conference call.
"We believe these unprecedented macroeconomic conditions will continue
to adversely affect consumers and our business in the short-term, but we
remain optimistic about the golf industry for the long-term and believe
it will recover as the global economy recovers,” commented Mr. Fellows.
"During this time, however, we will continue to proactively grow our
market share, aggressively manage our costs, and position ourselves to
take advantage of opportunities as the economy and golf industry begin
to recover. We are continuing to invest in additional gross margin
initiatives, and have just completed a reduction of our global workforce
by approximately 10%. These actions, combined with the cost reductions
taken at the beginning of the year, will allow the Company to weather
these short-term challenges and still be able to invest in initiatives
that will drive sustained and meaningful long-term growth.”
Conference Call
The Company will release actual first quarter financial results on April
30, 2009. A conference call and webcast will also take place at that
time.
Disclaimer: Investors should be
aware that the Company has not yet finalized its results for the first
quarter of 2009 and that the Company’s "preliminary” estimates of net
sales, gross profit, operating expenses, and earnings contained in this
press release reflect management’s estimates based upon the information
available at the time made. These estimates could differ materially from
the Company’s actual results if the information on which the estimates
were based ultimately proves to be incorrect or incomplete. In addition,
statements used in this press release that relate to future plans,
events, financial results, performance or prospects, including
statements relating to future growth or market share gains, the ability
to manage costs or invest in future initiatives, the estimated industry
or Company sales for 2009, or the estimated gross profit or operating
expenses for 2009, 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,
including current and estimated future foreign currency exchange rates.
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 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 Part I,
Item 1A of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008, 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 Presentation:
This press release includes information regarding certain aspects of the
Company’s financial results for the first quarter of 2009 that are
presented on a "currency neutral basis.” For purposes of this press
release, "currency neutral basis” means those results are derived by
taking the Company’s first quarter 2009 local currency results and
translating them into U.S. dollars based upon first quarter 2008 foreign
currency exchange rates. "Currency neutral basis” does not include the
effect of changes in foreign currency exchange rates on intercompany
inventory transactions or any other effect that changes in foreign
currency exchange rates may have had upon the Company’s business or
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
