Callaway Golf Company (NYSE:ELY) today announced its preliminary
financial results for the second quarter of 2009 as follows:
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Net sales are estimated to be $302 million, a decrease of 17% as
compared to net sales of $366 million for the second quarter of 2008.
Changes in foreign currency exchange rates adversely affected net
sales by approximately $19 million. On a currency neutral basis (i.e.
translating the Company’s second quarter 2009 net sales at second
quarter 2008 exchange rates), estimated net sales would have been $321
million, a decrease of 12% compared to the second quarter of 2008.
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Gross profit is estimated to be $110 million, or 36% of net sales,
compared to gross profit of $171 million or 47% of net sales for the
second quarter of 2008.
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Operating expenses for the quarter are estimated to be $100 million,
compared to $111 million for the second quarter of 2008.
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Earnings per diluted share are estimated to be approximately $0.10 (on
66.8 million shares) as compared to $0.58 (on 63.9 million shares) for
the second quarter of 2008. The second quarter of 2009 includes
after-tax charges of approximately $0.02 per share related to the
Company’s gross margin improvement initiatives while the second
quarter of 2008 included charges of $0.05 per share for such
initiatives. Dilution related to the preferred stock offering
adversely affected earnings for the second quarter of 2009 by
approximately $0.01 per share.
"Consumer spending is recovering more slowly than we had anticipated and
market conditions remained soft in the second quarter of 2009 in both
the United States and internationally,” commented George Fellows,
President and CEO of Callaway Golf. "Despite this challenging
environment, we were able to outperform the market and gain market share
in almost all categories, which is a testament to the strength of our
brands and our products. We also reduced our operating expenses in the
second quarter by approximately 10% and we raised $140 million through a
preferred stock offering,” added Mr. Fellows. "The additional capital
allowed us to remain in compliance with our credit facility and will
provide us with the operational and financial flexibility to manage our
business through 2010.”
Business Update
The Company also reported that macroeconomic factors and an aggressive
promotional environment in many of the Company’s key markets will
continue to have a negative impact on the Company’s sales and gross
margins for the remainder of 2009 and the Company therefore no longer
expects that earnings for the second half of the year will be higher
than last year. The Company currently estimates that sales will be down
approximately 15% to 17% for the year due to these conditions, as well
as an anticipated further contraction in retail inventory levels as the
year progresses. It is also estimated that full year gross margins will
be in the range of 38% to 40%, as compared to the previous estimate of
40% to 42%, and that this decline will be partially offset by
improvements in operating expenses. The Company currently estimates that
full year operating expenses will be approximately $370 to $380 million,
as compared to its prior estimate of $375 to $390 million, and as
compared to $403 million in 2008. This estimate includes increased
expenses in 2009 resulting from additional investments in the Company’s
business, including the Company’s uPro acquisition, costs related to the
previously announced reduction in force, and international expansion.
Dilution from the preferred equity offering is estimated to be $0.09 for
the year.
"While we are disappointed with the pace of the economic recovery, we
believe that the current conditions are temporary and we remain
optimistic about the Company’s prospects and the golf industry over the
long-term,” emphasized Mr. Fellows. "Underlying our optimism is the fact
that rounds played in the United States are up for the year reflecting
consumer interest in the golf category. We also continue to gain market
share, reduce operating expenses, and realize savings from our gross
margin initiatives, and we have a strong balance sheet and ample
liquidity. These factors, together with the strength of our brand and
expansive global presence will allow us to take advantage of
opportunities as the economy and golf industry continue to recover.”
Conference Call
The Company will release actual second quarter financial results on July
29, 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 second
quarter of 2009 and that the Company’s "preliminary” estimates of second
quarter 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 are 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 operational and
financial flexibility, liquidity, market share gains, and retail
inventory levels, as well as estimated future sales, gross margins,
operating expenses, and earnings, 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.
Foreign Currency Translation: This
press release includes information regarding certain aspects of the
Company’s financial results for the second quarter of 2009 that estimate
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
