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Callaway Golf Company Announces First Quarter 2012 Results; Provides Revised Guidance

 Callaway Golf Company Announces First Quarter 2012 Results; Provides Revised
                                   Guidance

- 2012 first quarter earnings per share of $0.37, compared to $0.15 in 2011

- 2012 first quarter pro forma earnings per share of $0.18, compared to $0.15
in 2011

- 2012 first quarter net sales of $285 million, compared to $286 million in
2011

- Completed several strategic initiatives

- Completed sale of Top-Flite and Ben Hogan brands

- Re-structured North America's apparel license with Perry Ellis Int'l

- Announced settlement of Acushnet litigation

PR Newswire

CARLSBAD, Calif., April 26, 2012

CARLSBAD, Calif., April 26, 2012 /PRNewswire/ -- Callaway Golf Company
(NYSE:ELY) today announced its first quarter 2012 financial results.

GAAP RESULTS.

For the first quarter of 2012, the Company reported the following results:

Dollars in millions except 2012   % of  2011  % of  Improvement/
per share amounts                 Sales       Sales (Decline)
Net Sales                  $285   -     $286  -     ($1)
Gross Profit               $124   44%   $124  43%   -
Operating Expenses         $97    34%   $101  35%   $4
Operating Income           $28    10%   $23   8%    $5
Income Tax                                      
Provision/(Benefit)
                           ($0.3) 0%    $9    3%    $9
Net Income                 $32    11%   $13   4%    $19
Earnings per share         $0.37  -     $0.15 -     $0.22
(Diluted)

NON-GAAP FINANCIAL RESULTS.

In addition to the Company's results prepared in accordance with GAAP, the
Company also provided additional information concerning its results on a
non-GAAP basis. The manner in which this non-GAAP information is derived is
discussed in more detail toward the end of this release and the Company has
provided in the tables to this release a reconciliation of this non-GAAP
information to the most directly comparable GAAP information.

For the first quarter of 2012, the Company reported the following non-GAAP
results:

                                              

Dollars in millions except 2012  % of  2011  % of  Improvement/
per share amounts                Sales       Sales (Decline)
                                                
Net Sales                  $285
                                 -     $286  -     ($1)
Gross Profit               $124  44%   $130  46%   ($6)
Operating Expenses         $103  36%   $107  37%   $4
Operating Income           $21   7%    $23   8%    ($2)
Income Tax Provision       $10   3%    $9    3%    ($1)
Net Income                 $15   5%    $13   5%    $2
Earnings per share         $0.18 -     $0.15 -     $0.03
(Diluted)

"I am very pleased to be a part of the Callaway Golf team and am excited about
the long-term potential of Callaway," commented Chip Brewer, President and
Chief Executive Officer. "There were many initiatives underway when I arrived
at Callaway targeted at reducing costs and simplifying the business and thus
providing greater focus on the Company's core business. I would like to thank
Tony Thornley for his time and efforts in initiating these actions over the
past several months. I believe there are tremendous growth opportunities with
our core Callaway Golf and Odyssey brands and believe that the Company's
renewed focus on these brands, together with the other actions we have taken,
will enable us to capture this growth and drive profitability."

"We are pleased with the progress we have made against these key strategic
initiatives and the year over year improvement in the Company's financial
performance," continued Mr. Brewer. "Sales of woods, premium golf balls, and
accessories are up, total sales in the United States and Japan have increased,
and our operating expenses have improved despite planned incremental
investment in brand and demand creation initiatives. We also completed the
sale of our Top-Flite and Ben Hogan brands, settled much of our outstanding
litigation, and expanded our apparel license agreement in North America, which
allows us to increase our focus on the Company's core business. With that
said, we are unsatisfied with the pace at which our financial performance and
market positions are improving and we will be taking actions to accelerate
this pace of recovery."

"While the actions we have taken recently to reduce costs and provide renewed
focus on the Company's core brands were important initiatives, there is more
work to be done to maximize the Company's full potential," continued Mr.
Brewer. "During my brief time here, we have already made changes aimed at
strengthening our business and increasing our long-term competitiveness and we
will continue to do so. With a renewed focus on our core business, strong
Callaway Golf and Odyssey brands, industry leading research and development
capabilities, and an outstanding group of employees, we believe we have all
the components necessary to drive sustainable long term growth and increase
shareholder value."

Business Outlook

"Our business is recovering compared to last year, albeit at a slower pace
than we estimated in our guidance provided in January," commented Brad
Holiday, Chief Financial Officer. "Given the current pace of recovery, the
impact of the sale of Top-Flite and Ben Hogan assets, and the expansion of the
North America apparel license, we are revising our first half financial
guidance. Additionally, while we expect a significant improvement in our full
year financials compared to 2011, both on a GAAP and pro forma basis, we are
suspending full year guidance at this time."

The Company provided revised guidance for the first half of 2012 as follows:

  oNet sales for the first half of 2012 are projected to be $560 - $575
    million, compared to $559 million in 2011 and compared to prior guidance
    of $610 - $630 million.
  oGross margins for the first half of 2012 are projected to be approximately
    43%, compared to 43% in 2011 and compared to prior guidance of 44%.*
  oOperating expenses for the first half of 2012 have not changed and are
    still projected to be $214 million compared to $209 million in 2011.*
  oEarnings per share is estimated at $0.20 to $0.25 compared to $0.15 in
    2011 and assumes shares outstanding at 64.5 million, and includes the
    after-tax impact of the Company's outstanding preferred equity.*



*Note: These estimates are generally non-GAAP estimates. The estimates for
the first half of 2012 exclude the $6.6 million gain on the sale of the
Top-Flite and Ben Hogan brands and for comparative purposes earnings per share
for 2012 assumes a tax rate of 38.5%. GAAP tax rates for 2012 are not
directly correlated to the Company's pre-tax results due to the effects of
deferred tax asset valuations that will continue to impact the tax rate until
the Company returns to sustained profitability as defined by accounting rules.
The 2011 results exclude charges associated with the Company's global
operations strategy, impairment of assets, non-cash tax adjustment,
restructuring, and gain on the sale of a building. These estimates are based
upon estimated foreign currency exchange rates.

Conference Call and Webcast

The Company will be holding a conference call at 2:00 p.m. PDT today to
discuss the Company's financial results and business. 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 three hours
after the call ends, and will remain available through 9:00 p.m. PDT on
Thursday, May 3, 2012. The replay may be accessed through the Internet at
www.callawaygolf.com or by telephone by calling 1-855-859-2056 toll free for
calls originating within the United States or 404-537-3406 for International
calls. The replay pass code is 69148430.

Non-GAAP Information: This press release and the financial statement
schedules attached to this press release have been prepared in accordance with
accounting principles generally accepted in the United States ("GAAP"). To
supplement the GAAP results, the Company has provided certain non-GAAP
financial information. The non-GAAP financial information included in the
press release and attached schedules present certain of the Company's
financial results excluding charges for (i) the Company's global operations
strategy, (ii) non-cash intangible asset charges, (iii) non-cash tax
adjustments relating to or as a result of the establishment of a deferred tax
valuation allowance, (iv) restructuring charges, (v) the gain on the sale of
three buildings, and (vi) the gain recognized in connection with the sale of
the Top-Flite and Ben Hogan brands. The non-GAAP financial information also
includes the Company's results excluding interest, taxes, depreciation and
amortization expenses, and the non-cash intangible asset charges ("Adjusted
EBITDA"). For comparative purposes, the Company applied an annualized
statutory tax rate of 38.5% to derive the non-GAAP income tax
provision/benefit, net loss, and loss per share. The non-GAAP information
should not be considered in isolation or as a substitute for any measure
derived in accordance with GAAP. The non-GAAP information may also be
inconsistent with the manner in which similar measures are derived or used by
other companies. Management uses such non-GAAP information for financial and
operational decision-making purposes and as a means to evaluate period over
period comparisons. Management believes that the presentation of such
non-GAAP information, when considered in conjunction with the most directly
comparable GAAP information, provides additional useful comparative
information for investors in their assessment of the underlying performance of
the Company's business without regard to these items. The Company has
provided reconciling information within the press release and attached
schedules.

Forward-Looking Statements: Statements used in this press release that relate
to future plans, events, financial results, performance or prospects,
including statements relating to estimated sales, gross margins, operating
expenses, and earnings in 2012, statements relating to the pace of the
Company's recovery and expected improvement in full year financials compared
to 2011, and statements relating to future growth, profitability, and
increased shareholder value are forward-looking statements as defined under
the Private Securities Litigation Reform Act of 1995. These statements are
based upon current information and expectations. Accurately estimating the
forward-looking statements 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 or in manufacturing the Company's
products; 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, the golf industry, and the Company's business,
see the Company's Annual Report on Form 10-K for the year ended December 31,
2011 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 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.

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 apparel, footwear and accessories, under the
Callaway Golf® and Odyssey® brands in more than 110 countries worldwide. For
more information please visit www.callawaygolf.com or shop.callawaygolf.com.

Contacts: Brad Holiday
          Patrick Burke
          Tim Buckman
          (760) 931-1771

(Logo: http://photos.prnewswire.com/prnh/20091203/CGLOGO)





Callaway Golf Company
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
                                                  March 31,   December 31,
                                                  2012        2011
ASSETS
Current assets:
       Cash and cash equivalents                  $  51,669  $     43,023
       Accounts receivable, net                   255,259     115,673
       Inventories                                236,240     233,070
       Deferred taxes, net                        3,950       4,029
       Income taxes receivable                    1,899       3,654
       Other current assets                       23,373      19,880
        Total current assets                   572,390     419,329
Property, plant and equipment, net                117,098     117,147
Intangible assets, net                            130,503     151,138
Other assets                                      39,243      39,498
        Total assets                           $ 859,234   $    727,112
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
       Accounts payable and accrued expenses      $ 150,472   $    129,193
       Accrued employee compensation and          23,508      23,785
       benefits
       Accrued warranty expense                   8,262       8,140
       Income tax liabilities                     4,628       6,666
       Asset-backed credit facility               85,900      -
        Total current liabilities              272,770     167,784
Long-term liabilities                             44,476      46,514
Shareholders' equity                              541,988     512,814
        Total liabilities and shareholders'    $ 859,234   $    727,112
       equity



Callaway Golf Company
Statements of Operations
(In thousands, except per share data)
(Unaudited)
                                            Quarter Ended
                                            March 31,
                                            2012         2011
Net sales                                   $ 285,098   $ 285,599
Cost of sales                               160,727      161,918
Gross profit                                124,371      123,681
Operating expenses:
 Selling                             76,838       75,219
 General and administrative          12,234       16,287
 Research and development            7,473        9,197
 Total operating expenses          96,545       100,703
Income from operations                      27,826       22,978
Other income (expense), net                 3,684        (1,380)
Income before income taxes                 31,510       21,598
Income tax provision (benefit)              (292)        8,780
Net income                                  31,802       12,818
Dividends on convertible preferred stock    2,625        2,625
Net income allocable to common shareholders $  29,177  $  10,193
Earnings per common share:
 Basic                                $0.45        $0.16
 Diluted                              $0.37        $0.15
Weighted-average common shares outstanding:
 Basic                                64,983       64,303
 Diluted                              84,930       84,719





Callaway Golf Company
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
                                                         Quarter Ended
                                                         March 31,
                                                         2012       2011
Cash flows from operating activities:
 Net income                                              $ 31,802  $ 12,818
 Adjustments to reconcile net income to net cash used in
 operating activities:
         Depreciation and amortization                   8,745      9,880
         Deferred taxes, net                             (2,321)    (125)
         Non-cash share-based compensation               788        2,305
         Gain on disposal of                             (559)      (6,242)
         long-lived assets
         Gain on sale of intangibles                     (6,616)    -
         Changes in assets and liabilities               (124,245)  (58,010)
 Net cash used in operating activities                   (92,406)   (39,374)
Cash flows from investing activities:
 Capital expenditures                                    (8,687)    (6,918)
 Proceeds from sales of property, plant and equipment    50         18,172
 Net proceeds from sale of intangibles                   26,861     -
 Net cash provided by investing activities               18,224     11,254
Cash flows from financing activities:
 Issuance of common stock                                1          1,160
 Dividends paid, net                                     (3,279)    (3,270)
 Proceeds from credit facilities, net                    85,900     3,000
 Other financing activities                              169        169
 Net cash provided by financing activities               82,791     1,059
Effect of exchange rate changes on cash and cash         37         560
equivalents
Net increase (decrease) in cash and cash equivalents     8,646      (26,501)
Cash and cash equivalents at beginning of period         43,023     55,043
Cash and cash equivalents at end of period               $ 51,669  $ 28,542



Callaway Golf Company
Consolidated Net Sales and Operating Segment Information
(In thousands)
(Unaudited)
                        Net Sales by Product Category
                        Quarter Ended
                        March 31,                      Growth/(Decline)
                        2012            2011           Dollars        Percent
Net sales:
   Woods                $           $          $         12%
                        90,729         81,027        9,702
   Irons               58,316          69,992         (11,676)       -17%
   Putters              24,092          28,831         (4,739)        -16%
   Golf balls           42,546          44,613         (2,067)        -5%
   Accessories and      69,415          61,136         8,279          14%
   other
Income before income    $            $           $         0%
taxes                   285,098        285,599       (501)
                        Net Sales by Region
                        Quarter Ended
                        March 31,                      Growth/(Decline)
                        2012            2011           Dollars        Percent
Net sales:
   United States        $            $           $         3%
                        149,699        145,373       4,326
   Europe               42,699          46,155         (3,456)        -7%
   Japan                42,254          37,535         4,719          13%
   Rest of Asia         17,997          23,506         (5,509)        -23%
   Other foreign        32,449          33,030         (581)          -2%
   countries
                        $            $           $         0%
                        285,098        285,599       (501)
                        Operating Segment Information
                        Quarter Ended
                        March 31,                      Growth/(Decline)
                        2012            2011           Dollars        Percent
Net sales:
   Golf clubs           $            $           $         1%
                        242,552        240,986       1,566
   Golf balls           42,546          44,613         (2,067)        -5%
                        $            $           $         0%
                        285,098        285,599       (501)
Income before income
taxes:
   Golf clubs^(1) (2)  $           $          $         11%
                        32,640         29,305        3,335
   Golf balls ^(1) (2)  1,577           2,300          (723)          -31%
   Reconciling items    (2,707)         (10,007)       7,300          -73%
   ^(3)
                        $           $          $         46%
                        31,510         21,598        9,912

^(1)Certain prior period amounts have been reclassified between product
categories to conform with the current period presentation.
^(2)In connection with the GOS Initiatives, the Company's golf club
and golf ball operating segments absorbed pre-tax charges of $4.5
million and $1.8 million, respectively, during the quarter ended March
31, 2011. The Company completed the final phase of its GOS
initiatives in December 2011 and, as such, charges incurred in 2012
were nominal.
^(3)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 March 31,                             Quarter Ended March 31,
                                         2012                                                2011
                                         Pro Forma                  Gain on                  Pro       Global      Gain on
                                         Callaway   Non-Cash Tax    Sale of    Total as      Forma     Operations  Sale of    Total as
                                         Golf ^(1)  Adjustment^(2)  TF/BH^(1)  Reported      Callaway  Strategy    Buildings  Reported
                                                                                             Golf
                                         $       $         $      $          $      $       $      $ 
Net sales                                285,098      -              285,098      285,599                285,599
                                                                    -                                     -   -
Gross profit                             124,371    -               -          124,371       129,983   (6,302)     -          123,681
% of sales                               44%        n/a           n/a      44%           46%       n/a       n/a      43%
Operating expenses                       103,161    -               (6,616)    96,545        106,646   227         (6,170)    100,703
Income (expense) from                    21,210     -               6,616      27,826        23,337    (6,529)     6,170      22,978
operations
Other income , net                       3,684      -               -          3,684         (1,380)   -           -          (1,380)
Income before income                     24,894     -               6,616      31,510        21,957    (6,529)     6,170      21,598
taxes
Income tax provision                     9,584      (12,423)        2,547      (292)         8,911     (2,378)     2,247      8,780
(benefit)
Net income                              15,310     12,423          4,069      31,802        13,046    (4,151)     3,923      12,818
Dividends on
convertible preferred                    2,625      -               -          2,625         2,625     -           -          2,625
stock
Net income allocable                     $      $          $      $         $      $       $      $  
to common                                12,685    12,423            4,069  29,177                         3,923    10,193
shareholders                                                                                 10,421   (4,151)
Diluted earnings per                     $      $         $      $         $      $       $      $   
share:                                     0.18   0.14                    0.37                     0.05    0.15
                                                                    0.05                     0.15     (0.05)
Weighted-average shares                  84,930     84,930          84,930     84,930        84,719    84,719      84,719     84,719
outstanding:
^(1) For comparative purposes, the Company applied an annualized statutory
tax rate of 38.5% to derive pro forma results.
^(2)Current period impact of the valuation allowance established against the Company's U.S. deferred tax assets
and the impact of applying a statutory tax rate of 38.5% to pro forma results.
                      2012 Trailing Twelve Months Adjusted EBITDA                            2011 Trailing Twelve Months Adjusted EBITDA
Adjusted EBITDA:      Quarter Ended                                                          Quarter Ended
                      June 30,           September  December 31,    March 31,                June 30,  September   December   March
                                         30,                                                           30,         31,       31,
                      2011               2011       2011            2012       Total         2010      2010        2010       2011      Total
                      $            $       $           $      $           $      $       $       $       $ 
Net income (loss)     (59,066)           (62,587)  (62,985)         31,802   (152,836)                      (32,255)   12,818    (26,289)
                                                                                             11,465   (18,317)
Interest expense      207                399        324             817        1,747         (242)     (1,234)     (444)      142       (1,778)
(income), net
Income tax provision  45,483             14,854     12,442          (292)      72,487        8,932     (22,100)    (13,231)   8,780     (17,619)
(benefit)
Depreciation and      9,311              9,247      10,198          8,745      37,501        9,606     10,687      10,707     9,880     40,880
amortization expense
Impairment charge     5,413              -          1,120           -          6,533         -         -           7,547      -         7,547
                      $          $       $           $      $          $      $       $       $       $   
Adjusted EBITDA       1,348              (38,087)  (38,901)         41,072   (34,568)                       (27,676)   31,620    2,741
                                                                                             29,761   (30,964)

SOURCE Callaway Golf Company
 
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