(Source: Business Wire)
Callaway Golf Company (NYSE:ELY) today announced its financial results
for the third quarter and first nine months ended September 30, 2009,
consistent with the preliminary results released on October 15th,
2009.
For the third quarter, the Company reported:
Net sales of $191 million, a decrease of 11% compared to $213 million
for the third quarter of 2008. On a currency neutral basis, net sales
would have been $194 million, a decrease of 9% compared to the third
quarter of 2008.
Gross profit of $60 million (31% of net sales) compared to gross
profit of $80 million (38% of net sales) in the third quarter of 2008.
Operating expenses of $85 million (45% of net sales) compared to $93
million (43% of net sales) for the same period in 2008.
A loss of $0.25 per share (on 63.2 million shares outstanding),
compared to a loss of $0.12 per share (on 62.5 million shares
outstanding) in 2008. The loss per share for the third quarter of 2009
was adversely affected by $0.01 per share associated with the
Company's gross margin initiatives and $0.04 per share dilution
related to the Company's preferred stock issuance. The loss per share
for the third quarter of 2008 included after-tax charges of $0.04 per
share for the gross margin initiatives.
For the first nine months, the Company reported:
Net sales of $765 million, a decrease of 19% compared to $946 million
for the same period last year. On a currency neutral basis, net sales
would have been $810 million, a decrease of 14% compared to the first
nine months of 2008.
Gross profit of $286 million (37% of net sales) compared to $427
million (45% of net sales) for 2008.
Operating expenses of $287 million (38% of net sales) compared to $314
million (33% of net sales) for 2008.
A loss per share of $0.04 (on 63.1 million shares outstanding)
compared to fully diluted earnings per share of $1.08 (on 64.0 million
shares outstanding) for 2008. The loss per share for the first nine
months of 2009 was adversely affected by $0.04 per share associated
with the Company's gross margin initiatives and $0.05 per share
dilution related to the Company's preferred stock issuance. Fully
diluted earnings per share for the first nine months of 2008 included
after-tax charges of $0.09 per share for the gross margin initiatives.
"While market conditions have been challenging this year, we have
managed our business in such a way that we have gained market share in
all club categories, managed our expenses responsibly and invested in a
few important growth initiatives that should position Callaway Golf to
grow when the economy begins to rebound," commented George Fellows,
President and CEO. "We are already seeing some improvement in global
economic conditions and a lessening of the negative impact of foreign
currency exchange rates. Furthermore, initial feedback on our 2010 new
products has been positive, our supply chain continues to improve, and
the many actions we've taken this year, together with our increased
market share base, should position us to generate a meaningful
turnaround and return to profitability next year."
Business Outlook
The Company estimates sales for the year will be down approximately 16%
due to the challenging economic and market environment in addition to
unfavorable foreign currency exchange rates. Gross margins for the year
are now estimated to be approximately 37% compared to the Company's
prior estimate of 38% - 40%, due to higher than expected participation
rates on second and third quarter sales promotions. Operating expenses
for the year are still anticipated to be approximately $370 - $380
million as compared to $403 million in 2008. This estimate includes
increased expenses in 2009 resulting from investments in the Company's
business including the uPro acquisition, costs related to reductions in
workforce, and international expansion. The Company estimates a full
year loss per share of $0.30 to $0.35 which includes after tax charges
of $0.05 per share for gross margin initiatives and approximately $0.09
per share of dilution associated with the Company's preferred equity.
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. PST on Thursday, November 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 36067055.
* * * * *
Disclaimer: Statements used in
this press release that relate to future plans, events, financial
results, performance or prospects, including statements relating to an
economic recovery, future growth, improvement in foreign currency
exchange rates, acceptance of 2010 products, a turnaround and return to
profitability in 2010, and estimated 2009 sales, gross margins,
operating expenses, and loss per share, 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 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 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 Quarterly Report on Form 10-Q for the quarter ended June 30,
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 third quarter and first nine months 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 2009 local currency results
and translating them into U.S. dollars based upon 2008 foreign currency
exchange rates for the periods presented 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)
September 30, December 31,
2009 2008
ASSETS
Current assets:
Cash and cash equivalents $ 104,677 $ 38,337
Accounts receivable, net 154,998 120,067
Inventories 198,734 257,191
Deferred taxes, net 37,376 27,046
Income taxes receivable - 15,549
Other current assets 22,197 31,813
Total current assets 517,982 490,003
Property, plant and equipment, net 147,660 142,145
Intangible assets, net 174,824 176,689
Other assets 53,563 46,501
Total assets $ 894,029 $ 855,338
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 110,029 $ 126,167
Accrued employee compensation and benefits 21,230 25,630
Accrued warranty expense 10,037 11,614
Line of Credit - 90,000
Other current liabilities 5,091 -
Total current liabilities 146,387 253,411
Long-term liabilities 20,603 21,559
Shareholders' equity 727,039 580,368
Total liabilities and shareholders' equity $ 894,029 $ 855,338
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Callaway Golf Company
Statements of Operations
(In thousands, except per share data)
(Unaudited)
Quarter Ended
September 30,
2009 2008
Net sales $ 190,864 $ 213,451
Cost of sales 131,287 133,320
Gross profit 59,577 80,131
Operating expenses:
Selling 56,972 65,730
General and administrative 20,452 20,201
Research and development 7,727 6,650
Total operating expenses 85,151 92,581
Income (loss) from operations (25,574 ) (12,450 )
Other income (expense), net 837 (1,669 )
Income (loss) before income taxes (24,737 ) (14,119 )
Income tax provision (benefit) (11,308 ) (6,676 )
Net income (loss) (13,429 ) (7,443 )
Dividends on convertible preferred stock 2,625 -
Net income (loss) allocable to common shareholders $ (16,054 ) $ (7,443 )
Earnings (loss) per common share:
Basic ($0.25 ) ($0.12 )
Diluted ($0.25 ) ($0.12 )
Weighted-average common shares outstanding:
Basic 63,240 62,494
Diluted 63,240 62,494
Nine Months Ended
September 30,
2009 2008
Net sales $ 764,947 $ 945,932
Cost of sales 479,341 519,187
Gross profit 285,606 426,745
Operating expenses:
Selling 204,016 226,352
General and administrative 59,797 65,480
Research and development 23,667 22,112
Total operating expenses 287,480 313,944
Income (loss) from operations (1,874 ) 112,801
Other expense, net (1,032 ) (3,574 )
Income (loss) before income taxes (2,906 ) 109,227
Income tax provision (benefit) (3,201 ) 39,897
Net income (loss) 295 69,330
Dividends on convertible preferred stock 3,063 -
Net income (loss) allocable to common shareholders $ (2,768 ) $ 69,330
Earnings (loss) per common share:
Basic ($0.04 ) $ 1.10
Diluted ($0.04 ) $ 1.08
Weighted-average common shares outstanding:
Basic 63,120 63,187
Diluted 63,120 64,029
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Callaway Golf Company
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
2009 2008
Cash flows from operating activities:
Net income $ 295 $ 69,330
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 30,244 28,747
Deferred taxes, net (12,147 ) 2,117
Non-cash share-based compensation 6,653 5,044
Gain on disposal of long-lived assets (574 ) (435 )
Changes in assets and liabilities 32,905 (44,461 )
Net cash provided by operating activities 57,376 60,342
Cash flows from investing activities:
Capital expenditures (29,782 ) (33,506 )
Other investing activities 103 42
Net cash used in investing activities (29,679 ) (33,464 )
Cash flows from financing activities:
Issuance of preferred stock 140,000 -
Equity issuance costs (5,923 ) -
Issuance of common stock 2,562 4,708
Dividends paid, net (8,326 ) (8,951 )
Acquisition of treasury stock - (22,970 )
Proceeds from (payments on) credit facilities, net (90,000 ) 3,493
Other financing activities 40 (223 )
Net cash provided by (used in) financing activities 38,353 (23,943 )
Effect of exchange rate changes on cash and cash equivalents 290 (2,168 )
Net increase in cash and cash equivalents 66,340 767
Cash and cash equivalents at beginning of period 38,337 49,875
Cash and cash equivalents at end of period $ 104,677 $ 50,642
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Callaway Golf Company
Consolidated Net Sales and Operating Segment Information
(In thousands)
(Unaudited)
Net Sales by Product Category
Quarter Ended Nine Months Ended
September 30, Growth/(Decline) September 30, Growth/(Decline)
2009 2008 Dollars Percent 2009 2008 Dollars Percent
Net sales: Net sales:
Woods $ 35,746 $ 34,499 $ 1,247 4 % Woods $ 191,584 $ 237,043 $ (45,459 ) -19 %
Irons 49,371 63,768 (14,397 ) -23 % Irons 186,780 260,311 (73,531 ) -28 %
Putters 17,099 21,305 (4,206 ) -20 % Putters 71,211 88,793 (17,582 ) -20 %
Golf balls 40,896 48,413 (7,517 ) -16 % Golf balls 146,489 181,081 (34,592 ) -19 %
Accessories and other 47,752 45,466 2,286 5 % Accessories and other 168,883 178,704 (9,821 ) -5 %
$ 190,864 $ 213,451 $ (22,587 ) -11 % $ 764,947 $ 945,932 $ (180,985 ) -19 %
Net Sales by Region
Quarter Ended Nine Months Ended
September 30, Growth/(Decline) September 30, Growth/(Decline)
2009 2008 Dollars Percent 2009 2008 Dollars Percent
Net sales: Net sales:
United States $ 93,867 $ 104,595 $ (10,728 ) -10 % United States $ 398,889 $ 465,053 $ (66,164 ) -14 %
Europe 27,010 33,371 (6,361 ) -19 % Europe 112,489 171,285 (58,796 ) -34 %
Japan 29,137 32,825 (3,688 ) -11 % Japan 113,593 132,723 (19,130 ) -14 %
Rest of Asia 20,981 18,497 2,484 13 % Rest of Asia 58,833 67,029 (8,196 ) -12 %
Other foreign countries 19,869 24,163 (4,294 ) -18 % Other foreign countries 81,143 109,842 (28,699 ) -26 %
$ 190,864 $ 213,451 $ (22,587 ) -11 % $ 764,947 $ 945,932 $ (180,985 ) -19 %
Operating Segment Information
Quarter Ended Nine Months Ended
September 30, Growth/(Decline) September 30, Growth/(Decline)
2009 2008 Dollars Percent 2009 2008 Dollars Percent
Net sales: Net sales:
Golf clubs $ 149,968 $ 165,038 $ (15,070 ) -9 % Golf clubs $ 618,458 $ 764,851 $ (146,393 ) -19 %
Golf balls 40,896 48,413 (7,517 ) -16 % Golf balls 146,489 181,081 (34,592 ) -19 %
$ 190,864 $ 213,451 $ (22,587 ) -11 % $ 764,947 $ 945,932 $ (180,985 ) -19 %
Income (loss) before income taxes: Income (loss) before income taxes:
Golf clubs $ (7,501 ) $ 2,825 $ (10,326 ) -366 % Golf clubs $ 46,149 $ 146,192 $ (100,043 ) -68 %
Golf balls (4,236 ) (2,654 ) (1,582 ) -60 % Golf balls (6,900 ) 10,048 (16,948 ) -169 %
Reconciling items ((1)) (13,000 ) (14,290 ) 1,290 9 % Reconciling items ((1)) (42,155 ) (47,013 ) 4,858 10 %
$ (24,737 ) $ (14,119 ) $ (10,618 ) -75 % $ (2,906 ) $ 109,227 $ (112,133 ) -103 %
((1)) Represents corporate general and administrative expenses and other income (expense) not utilized by management in determining segment profitability.
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Callaway Golf Company
Supplemental Financial Information
(In thousands, except per share data)
(Unaudited)
Quarter Ended September 30, Quarter Ended September 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 $ 190,864 $ - $ 190,864 $ 213,451 $ - $ 213,451
Gross profit 60,489 (912 ) 59,577 83,764 (3,633 ) 80,131
% of sales 32 % n/a 31 % 39 % n/a 38 %
Operating expenses 85,151 - 85,151 92,607 (26 ) 92,581
Income (loss) from operations (24,662 ) (912 ) (25,574 ) (8,843 ) (3,607 ) (12,450 )
Other income (loss), net 837 - 837 (1,669 ) - (1,669 )
Income (loss) before income taxes (23,825 ) (912 ) (24,737 ) (10,512 ) (3,607 ) (14,119 )
Income tax provision (benefit) (10,956 ) (352 ) (11,308 ) (5,288 ) (1,388 ) (6,676 )
Net income (loss) (12,869 ) (560 ) (13,429 ) (5,224 ) (2,219 ) (7,443 )
Dividends on convertible preferred stock 2,625 - 2,625 - - -
Net income (loss) allocable to common shareholders $ (15,494 ) $ (560 ) $ (16,054 ) $ (5,224 ) $ (2,219 ) $ (7,443 )
Diluted earnings (loss) per share: $ (0.24 ) $ (0.01 ) $ (0.25 ) $ (0.08 ) $ (0.04 ) $ (0.12 )
Weighted-average shares outstanding: 63,240 63,240 63,240 62,494 62,494 62,494
Nine Months Ended September 30, Nine Months Ended September 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 $ 764,947 $ - $ 764,947 $ 945,932 $ - $ 945,932
Gross profit 289,888 (4,282 ) 285,606 436,166 (9,421 ) 426,745
% of sales 38 % n/a 37 % 46 % n/a 45 %
Operating expenses 287,480 - 287,480 313,850 94 313,944
Income (loss) from operations 2,408 (4,282 ) (1,874 ) 122,316 (9,515 ) 112,801
Other expense, net (1,032 ) - (1,032 ) (3,574 ) - (3,574 )
Income (loss) before income taxes 1,376 (4,282 ) (2,906 ) 118,742 (9,515 ) 109,227
Income tax provision (benefit) (1,552 ) (1,649 ) (3,201 ) 43,560 (3,663 ) 39,897
Net income (loss) 2,928 (2,633 ) 295 75,182 (5,852 ) 69,330
Dividends on convertible preferred stock 3,063 - 3,063 - - -
Net income (loss) allocable to common shareholders $ (135 ) $ (2,633 ) $ (2,768 ) $ 75,182 $ (5,852 ) $ 69,330
Diluted earnings (loss) per share: $ (0.00 ) $ (0.04 ) $ (0.04 ) $ 1.17 $ (0.09 ) $ 1.08
Weighted-average shares outstanding: 63,120 63,120 63,120 64,029 64,029 64,029
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Adjusted EBITDA:
2009 Trailing Twelve Months Adjusted EBITDA 2008 Trailing Twelve Months Adjusted EBITDA
Quarter Ended Quarter Ended
December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30,
2008 2009 2009 2009 Total 2007 2008 2008 2008 Total
Net income (loss) $ (3,154 ) $ 6,812 $ 6,912 $ (13,429 ) $ (2,859 ) $ (16,157 ) $ 39,666 $ 37,107 $ (7,443 ) $ 53,173
Interest expense (income), net 272 (123 ) 551 (46 ) 654 (216 ) 591 994 497 1,866
Income tax provision (benefit) (4,766 ) 4,248 3,859 (11,308 ) (7,967 ) (12,415 ) 25,990 20,583 (6,676 ) 27,482
Depreciation and amortization expense 9,216 9,944 10,172 10,128 39,460 7,862 8,794 10,490 9,463 36,609
Change in energy derivative valuation acct. (19,922 ) - - - (19,922 ) - - - - -
Adjusted EBITDA $ (18,354 ) $ 20,881 $ 21,494 $ (14,655 ) $ 9,366 $ (20,926 ) $ 75,041 $ 69,174 $ (4,159 ) $ 119,130
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