Callaway Golf Company Announces Fourth Quarter And Full Year 2012 Results And Provides 2013 Guidance

Callaway Golf Company Announces Fourth Quarter And Full Year 2012 Results And
                            Provides 2013 Guidance

- 2012 Fourth Quarter net sales of $118 million and pro forma loss per share
of $0.49 are consistent with the Company's guidance last quarter. GAAP loss
per share of $1.03.

- 2012 Full Year net sales of $832 million and pro forma loss per share of
$0.78. GAAP loss per share of $1.98.

- Callaway estimates full year 2013 net sales of approximately $850 million;
pro forma net income at breakeven; and pro forma loss per share of $0.04.

PR Newswire

CARLSBAD, Calif., Jan. 30, 2013

CARLSBAD, Calif., Jan. 30, 2013 /PRNewswire/ --Callaway Golf Company
(NYSE:ELY) today announced its fourth quarter and full year 2012 financial
results.

GAAP RESULTS.

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

Dollars in millions except 2012    % of Sales 2011    % of Sales Improvement /
per share amounts                                                (Decline)
Net Sales                  $118    -          $154    -          ($36)
Gross Profit               $8      7%         $38     24%        ($30)
Operating Expenses         $80     67%        $87     57%        $7
Operating Loss             ($71)   (61%)      ($50)   (32%)      ($21)
Loss per share             ($1.03) -          ($1.01) -          (0.02)

For the full year 2012, the Company reported the following results:

Dollars in millions except 2012    % of Sales 2011    % of Sales Improvement /
per share amounts                                                (Decline)
Net Sales                  $832    -          $887    -          ($55)
Gross Profit               $247    30%        $311    35%        ($64)
Operating Expenses         $364    44%        $392    44%        $28
Operating Loss             ($117)  (14%)      ($81)   (9%)       ($36)
Loss per share             ($1.98) -          ($2.82) -          $0.84

NON-GAAP PRO FORMA FINANCIAL RESULTS.

In addition to the Company's results prepared in accordance with GAAP, the
Company has also provided additional information concerning its results on a
non-GAAP pro forma basis. The manner in which the 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 fourth quarter of 2012, the Company reported the following non-GAAP
pro forma results:

Dollars in millions except 2012    % of Sales 2011    % of Sales Improvement /
per share amounts                                                (Decline)
Net Sales                  $118    -          $154    -          ($36)
Gross Profit               $16     14%        $41     27%        ($25)
Operating Expenses         $74     62%        $79     51%        $5
Operating Loss             ($57)   (49%)      ($38)   (25%)      ($19)
Loss per share             ($0.49) -          ($0.41) -          ($0.08)

For the full year 2012, the Company reported the following non-GAAP pro forma
results:

Dollars in millions except 2012    % of Sales 2011    % of Sales Improvement /
per share amounts                                                (Decline)
Net Sales                  $832    -          $887    -          ($55)
Gross Profit               $283    34%        $333    38%        ($50)
Operating Expenses         $353    42%        $373    42%        $20
Operating Loss             ($70)   (8%)       ($40)   (4%)       ($30)
Loss per share             ($0.78) -          ($0.63) -          ($0.15)

"Our pro forma financial results for the fourth quarter and full year reflect
both the previously reported challenges our business faced during 2012 as well
as the actions we took during the year to prepare our business for a
turnaround in 2013," commented Chip Brewer, President and Chief Executive
Officer. "While our 2012 financial results were disappointing, as I look back
on the year, I am very pleased with the pace and direction of change we
implemented. During 2012, we made several key additions to the senior
management team, sold the Top-Flite and Ben Hogan brands, licensed our
footwear and apparel businesses, began transitioning our GPS business to a
third party model, strengthened our presence on tour worldwide, restructured
our Americas and European sales organizations, improved our manufacturing and
supply chains, re-energized our global product development team, overhauled
our approach to global marketing, refinanced a majority of our outstanding
convertible preferred stock with less expensive 3.75% convertible debt and
implemented major reductions in force and other cost reductions which should
result in annualized savings of $60 million. These changes are also driving
cultural and behavioral changes at Callaway which, along with our renewed
focus on our core golf clubs and golf ball businesses, should serve as the
keystone to our turnaround."

"Looking forward, I am encouraged on several fronts," continued Mr. Brewer.
"On a macro basis, we continue to anticipate a slow but steady market recovery
in the U.S. as well as growth opportunities in Asia. During the second half of
2012, we saw stabilization of our overall market share and lower retail
inventory as a result of improved sell-through performance in most of our key
markets. Additionally, we are encouraged with the early response we've
received on our 2013 product line and marketing message. Our expectation is
to re-gain hard goods market share in each of our major markets (Americas,
East Asia, Southeast Asia Pacific and Europe). Despite this optimism, we
remain mindful that there is much work to be done, we continue to anticipate
an extremely competitive market place, and we know that our success ultimately
will be determined by the consumer as measured by both sell-through and
customer loyalty generated from our product performance and brand appeal. All
things considered, I remain confident in our turnaround plans and optimistic
on our long-term outlook. All of us at Callaway are excited for the start of
the 2013 season."

Business Outlook

The Company provided guidance for the full year and first half of 2013 as
follows:

Net Sales

The Company estimates that net sales for the full year 2013 will be
approximately $850 million compared to $832 million in 2012. Net sales
related to the Company's continuing brands and business were $772 million in
2012, with net sales relating to the brands and businesses that were sold or
transitioned to a third party model of approximately $60 million. 

The Company estimates that net sales for the first half of 2013 will be
approximately $555 million compared to $566 million in 2012. The Company's
estimated net sales for the first half of 2013 would represent an increase of
7% over the first half 2012 net sales of $519 million related to the Company's
continuing brands and business.

Earnings

The Company estimates that 2013 full year non-GAAP pro-forma net income will
be breakeven with a non-GAAP pro forma loss per share of $0.04 due to the
impact of dividends paid on the Company's outstanding convertible preferred
stock. In 2012, the Company's non-GAAP pro forma loss was $43.9 million with
a non-GAAP pro forma loss per share of $0.78.

The Company estimates that first half 2013 non-GAAP pro forma net income will
be approximately $28 million (an increase of 33% compared to $21 million for
the same period last year) and that non-GAAP pro forma earnings per share will
be approximately $0.33 per share as compared to $0.25 per share for the first
half of 2012.

The non-GAAP pro forma estimates of net income and earnings per share exclude
for 2013 carryover charges related to the Company's prior cost-reduction
initiatives and exclude for 2012 gains and charges relating to the sale of the
Top Flite/Ben Hogan brands and the cost-reduction initiatives. The pro forma
estimates for both 2013 and 2012 are based upon an assumed tax rate of 38.5%.
The schedules to this release include a reconciliation of the non-GAAP
information to the most directly comparable GAAP information.

Conference Call and Webcast 

The Company will be holding a conference call at 2:00 p.m. PST today to
discuss the Company's financial results, business and outlook for 2013. 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. PST on Wednesday, February 6, 2013. 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
90593160.

Non-GAAP Pro Forma Information: The GAAP results contained in 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 pro forma 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 impairment 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, (vi) the gain recognized in connection
with the sale of the Top-Flite and Ben Hogan brands, and (vii) the
cost-reduction initiatives. In addition, the Company also provided additional
non–GAAP information about its results, excluding interest, taxes,
depreciation and amortization expenses as well as impairment charges
("Adjusted EBITDA"). For comparative purposes, the Company applied an
annualized statutory tax rate of 38.5% to derive the non-GAAP earnings/loss
per share and Adjusted EBITDA. 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 and in forecasting the Company's business going forward.
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 in
the 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 the estimated sales, income and per share
resultsfor 2013, the estimated savings or charges (or timing thereof) related
to the cost-reduction initiatives, future market recovery, growth
opportunities, or market share gains, success of the 2013 product line, the
Company's recovery/turnaround, and long-term outlook 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
risks and unknowns including delays, difficulties, or increased costs in
implementing the cost-reduction initiatives, consumer acceptance of 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, as well as future changes in foreign currency exchange
rates. 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 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® and Odyssey® brands
worldwide. For more information please visit www.callawaygolf.com or
shop.callawaygolf.com.

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

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

Callaway Golf Company
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
                                           December 31,      December 31,
                                           2012              2011
ASSETS
Current assets:
 Cash and cash equivalents                 $     52,003  $     43,023
 Accounts receivable, net                  89,272            115,673
 Inventories                               212,563           233,070
 Deferred taxes, net                       4,170             4,029
 Income taxes receivable                   1,810             3,654
 Assets held for sale                      2,396             -
 Other current assets                      23,811            19,880
  Total current assets                  386,025           419,329
Property, plant and equipment, net         89,093            117,147
Intangible assets, net                     118,223           151,138
Other assets                               43,324            39,498
  Total assets                          $    636,665   $    727,112
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
 Accounts payable and accrued expenses     $    129,021   $    129,193
 Accrued employee compensation and         20,171            23,785
 benefits
 Accrued warranty expense                  7,539             8,140
 Income tax liabilities                    4,357             6,666
  Total current liabilities             161,088           167,784
Long-term liabilities                      155,126           46,514
Shareholders' equity                       320,451           512,814
  Total liabilities and shareholders'   $    636,665   $    727,112
 equity

Callaway Golf Company
Statements of Operations
(In thousands, except per share data)
(Unaudited)
                                            Quarter Ended
                                            December 31,
                                            2012          2011
Net sales                                   $ 117,881    $ 153,872
Cost of sales                               109,766       116,299
Gross profit                                8,115         37,573
Operating expenses:
        Selling                            54,753        53,637
        General and administrative         17,634        25,570
        Research and development           7,161         8,113
               Total operating expenses     79,548        87,320
Loss from operations                        (71,433)      (49,747)
Other income (expense), net                 2,435         (796)
Loss before income taxes                   (68,998)      (50,543)
Income tax provision                       3,008         12,442
Net loss                                    (72,006)      (62,985)
Dividends on convertible preferred stock    783           2,625
Net loss allocable to common shareholders   $  (72,789)  $  (65,610)
Loss per common share:
        Basic                               ($1.03)       ($1.01)
        Diluted                             ($1.03)       ($1.01)
Weighted-average common shares outstanding:
        Basic                               70,996        64,887
        Diluted                             70,996        64,887
                                            Year Ended
                                            December 31,
                                            2012          2011
Net sales                                   $ 832,008    $ 886,528
Cost of sales                               585,069       575,226
Gross profit                                246,939       311,302
Operating expenses:
        Selling                             267,575       265,325
        General and administrative          66,552        92,756
        Research and development            29,542        34,309
               Total operating expenses     363,669       392,390
Loss from operations                        (116,730)     (81,088)
Other expense, net                          (1,811)       (9,173)
Loss before income taxes                   (118,541)     (90,261)
Income tax provision                       5,662         81,559
Net loss                                    (124,203)     (171,820)
Dividends on convertible preferred stock    8,447         10,500
Net loss allocable to common shareholders   $ (132,650)   $ (182,320)
Loss per common share:
        Basic                               ($1.98)       ($2.82)
        Diluted                             ($1.98)       ($2.82)
Weighted-average common shares outstanding:
        Basic                               67,061        64,601
        Diluted                             67,061        64,601

Callaway Golf Company
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
                                                     Year Ended
                                                     December 31,
                                                     2012         2011
Cash flows from operating activities:
 Net loss                                            $ (124,203)  $ (171,820)
 Adjustments to reconcile net loss to net cash (used
 in) provided by operating activities:
           Depreciation and amortization             34,411       38,636
           Impairment charges                        21,933       6,533
           Deferred taxes, net                       (1,925)      55,930
           Non-cash share-based compensation         3,142        9,570
           Gain on disposal of long-lived assets     (1,261)      (7,491)
           Gain on sale of intangible assets         (6,602)      -
           Debt discount amortization                235          -
           Changes in assets and liabilities         45,462       78,740
 Net cash (used in) provided by operating activities (28,808)     10,098
Cash flows from investing activities:
 Capital expenditures                                (18,403)     (28,931)
 Net proceeds from sale of intangible assets         26,861       -
 Proceeds from sale of property, plant and equipment 355          19,371
 Other investing activities                          (3,268)      -
 Net cash provided by (used in) investing activities 5,545        (9,560)
Cash flows from financing activities:
 Proceeds from issuance of convertible notes         46,819       -
 Debt issuance cost                                  (3,534)      -
 Issuance of common stock                            -            2,195
 Dividends paid                                      (11,019)     (13,093)
 Issuance of treasury stock                          19           -
 Credit facility origination fees                    -            (2,467)
 Other financing activities                          (159)        80
 Net cash provided by (used in) financing activities 32,126       (13,285)
Effect of exchange rate changes on cash             117          727
Net increase (decrease) in cash and cash equivalents 8,980        (12,020)
Cash and cash equivalents at beginning of period     43,023       55,043
Cash and cash equivalents at end of period           $  52,003  $  43,023

Callaway Golf Company
Consolidated Net Sales and Operating Segment Information
(In thousands)
(Unaudited)
             Net Sales by Product Category            Net Sales by Product Category
             Quarter Ended                            Year Ended
             December 31,        Growth/(Decline)     December 31,         Growth/(Decline)
             2012      2011      Dollars   Percent    2012       2011^(2)  Dollars   Percent
Net sales:
 Woods       $        $        $        -21%       $          $         $         -5%
             20,163    25,383    (5,220)              200,588   211,191   (10,603)
 Irons      23,624    38,129    (14,505)  -38%       170,794    206,817   (36,023)  -17%
 Putters     14,626    21,131    (6,505)   -31%       93,325     88,160    5,165     6%
 Golf balls  20,572    28,273    (7,701)   -27%       139,576    160,359   (20,783)  -13%
 Accessories
 and other   38,896    40,956    (2,060)   -5%        227,725    220,001   7,724     4%
 ^(1)
             $         $         $         -23%       $          $         $         -6%
             117,881   153,872   (35,991)             832,008   886,528   (54,520)
             Net Sales by Region                     Net Sales by Region
             Quarter Ended                           Year Ended
             December 31,        Growth/(Decline)     December 31,         Growth/(Decline)
             2012      2011      Dollars   Percent    2012       2011      Dollars   Percent
Net sales:
 United      $        $        $         -34%       $          $         $         -7%
 States      40,840    61,682    (20,842)             390,030   419,448   (29,418)
 Europe      14,830    19,129    (4,299)   -22%       120,160    133,572   (13,412)  -10%
 Japan       36,443    41,644    (5,201)   -12%       157,315    149,768   7,547     5%
 Rest of     14,276    14,152    124       1%         75,035     82,746    (7,711)   -9%
 Asia
 Other
 foreign     11,492    17,265    (5,773)   -33%       89,468     100,994   (11,526)  -11%
 countries
             $         $         $         -23%       $          $         $         -6%
             117,881   153,872   (35,991)             832,008   886,528   (54,520)
             Operating Segment Information           Operating Segment Information
             Quarter Ended                           Year Ended
             December 31,        Growth/(Decline)     December 31,         Growth/(Decline)
             2012      2011      Dollars   Percent    2012       2011      Dollars   Percent
Net sales:
 Golf clubs  $        $         $         -23%       $          $         $         -5%
             97,309    125,599   (28,290)             692,432   726,169   (33,737)
 Golf balls  20,572    28,273    (7,701)   -27%       139,576    160,359   (20,783)  -13%
             $         $         $         -23%       $          $         $         -6%
             117,881   153,872   (35,991)             832,008   886,528   (54,520)
Income
(loss)
before
income
taxes:
 Golf        $         $         $         -141%      $         $        $         1358%
 clubs^     (49,590)  (20,591)  (28,999)             (56,838)   (3,899)   (52,939)
 Golf balls (10,675)  (10,382)  (293)     -3%        (18,724)   (12,655)  (6,069)   -48%
 Reconciling (8,733)   (19,570)  10,837    55%        (42,979)   (73,707)  30,728    42%
 items ^(3)
             $         $         $         -37%       $          $         $         31%
             (68,998)  (50,543)  (18,455)             (118,541)  (90,261)  (28,280)

^(1)Accessories & other include packaged sets as well as pre-owned product
sales.
^(2)Certain prior period amounts have been reclassified between product
categories to conform with the current period presentation.
^(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 - Non-GAAP Reconciliation
(In thousands, except per share data)
(Unaudited)
                                        Quarter Ended December 31,                                           Quarter Ended December 31,
                                        2012                                                                 2011
                                        Pro                                                                  Pro                     Non-Cash
                                        Forma     Cost Reduction   Non-Cash Tax     Total as                 Forma     Global        Impairment                     Non-Cash Tax    Total as
                                        Callaway  Initiatives^(1)  Adjustment^(2)   Reported                 Callaway  Operations    Charge      Restructuring^(1)  Adjustment^(2)  Reported
                                        Golf      (3)                                                        Golf      Strategy^(1)  ^(1)
                                        ^(1)                                                                 ^(1)
                                        $      $         $         $                    $      $        $       $          $         $    
Net sales                                           -          -        117,881                           -                   -               -      153,872
                                        117,881                                                             153,872                 -
Gross profit                            16,084    (7,969)          -                8,115                    41,025    (3,250)       -           (202)              -               37,573
% of sales                              14%       n/a            n/a            7%                       27%       n/a         n/a       n/a              n/a           24%
Operating expenses                      73,566    5,982            -                79,548                   78,771    3,859         1,120       3,570              -               87,320
Expense from operations                 (57,482)  (13,951)         -                (71,433)                 (37,746)  (7,109)       (1,120)     (3,772)            -               (49,747)
Other income (expense), net             2,435     -                -                2,435                    (796)     -             -           -                  -               (796)
Loss before income taxes                (55,047)  (13,951)         -                (68,998)                 (38,542)  (7,109)       (1,120)     (3,772)            -               (50,543)
Income tax provision (benefit)          (21,193)  (5,372)          29,573           3,008                    (14,839)  (2,737)       (431)       (1,453)            31,902          12,442
Net loss                                (33,854)  (8,579)          (29,573)         (72,006)                 (23,703)  (4,372)       (689)       (2,319)            (31,902)        (62,985)
Dividends on convertible preferred      783       -                -                783                      2,625     -             -           -                  -               2,625
stock
Net loss allocable to common            $      $         $           $                    $      $           $       $           $          $    
shareholders                                  (8,579)         (29,573)        (72,789)                      (4,372)        (689)  (2,319)            (31,902)        (65,610)
                                        (34,637)                                                             (26,328)
                                        $                                        $                    $                                                                   $    
Diluted loss per share:                       $         $                                      $          $       $          $          
                                                 (0.12)        (0.42)          (1.03)                          (0.07)         (0.01)  (0.03)              (0.49)        (1.01)
                                        (0.49)                                                               (0.41)
Weighted-average shares                 70,996    70,996           70,996           70,996                   64,887    64,887        64,887      64,887             64,887          64,887
outstanding:
                                        Year Ended Ended December 31,                                        Year Ended Ended December 31,
                                        2012                                                                 2011
                                        Pro                                         Non-Cash                 Pro                     Non-Cash                                       Non-Cash
                                        Forma     Gain on Sale of  Cost Reduction   Tax         Total as     Forma     Global        Impairment  Restructuring      Gain on Sale    Tax         Total as
                                        Callaway  Top-Flite & Ben  Initiatives^(1)  Adjustment  Reported     Callaway  Operations    Charge      ^(1)               of Buildings    Adjustment  Reported
                                        Golf      Hogan^(1)        (3)              ^(2)                     Golf      Strategy^(1)  ^(1)                           ^(1)            ^(2)
                                        ^(1)                                                                ^(1)
                                        $      $         $         $       $          $      $        $       $          $         $       $  
Net sales                                           -          -               832,008               -                   -               -             886,528
                                        832,008                                     -                      886,528                 -                                             -
Gross profit                            283,171   -                (36,232)         -           246,939      333,143   (20,590)      -           (1,251)            -               -           311,302
% of sales                              34%       n/a            n/a            n/a       30%          38%       n/a         n/a     n/a              n/a          n/a       35%
Operating expenses                      352,797   (6,602)          17,474           -           363,669      372,859   4,090         6,533       15,078             (6,170)         -           392,390
Income (expense) from operations        (69,626)  6,602            (53,706)         -           (116,730)    (39,716)  (24,680)      (6,533)     (16,329)           6,170           -           (81,088)
Other expense, net                      (1,811)   -                -                -           (1,811)      (9,173)   -             -           -                  -               -           (9,173)
Income (loss) before income taxes       (71,437)  6,602            (53,706)         -           (118,541)    (48,889)  (24,680)      (6,533)     (16,329)           6,170           -           (90,261)
Income tax provision (benefit)          (27,503)  2,542            (20,678)         51,301      5,662        (18,822)  (9,502)       (2,515)     (6,287)            2,247           116,438     81,559
Net income (loss)                       (43,934)  4,060            (33,028)         (51,301)    (124,203)    (30,067)  (15,178)      (4,018)     (10,042)           3,923           (116,438)   (171,820)
Dividends on convertible preferred      8,447     -                -                -           8,447        10,500    -             -           -                  -               -           10,500
stock
Net income (loss) allocable to common   $      $         $           $       $           $      $            $       $            $         $        $ 
shareholders                                   4,060         (33,028)        (51,301)   (132,650)          (15,178)      (4,018)   (10,042)            3,923         (116,438)  (182,320)
                                        (52,381)                                                             (40,567)
                                        $                                        $                    $                                                                   $    
Diluted earnings (loss) per share:            $         $                   $              $          $       $          $                   $    
                                                  0.06        (0.49)          (0.77)     (1.98)               (0.23)         (0.06)  (0.16)               0.06        (1.80)     (2.82)
                                        (0.78)                                                               (0.63)
Weighted-average shares                 67,061    67,061           67,061           67,061      67,061       64,601    64,601        64,601      64,601             64,601          64,601      64,601
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 valuation allowance established against the Company's U.S. deferred tax assets and impact of applying
statutory tax rate of 38.5% to pro forma results.
^(3)Includes costs associated with workforce reductions, transition costs associated with licensing the Company's North American apparel and footwear businesses, transition costs associated
with outsourcing the development of any new technology
 in the Company's uPro GPS business, and cost associated with the reorganization of the Company's golf
ball manufacturing supply chain.
                                        2012 Trailing Twelve Month Adjusted EBITDA                           2011 Trailing Twelve Month Adjusted EBITDA
Adjusted EBITDA:                        Quarter Ended                                                        Quarter Ended
                                        March     June 30,         September 30,    December                 March     June 30,      September   December 31,
                                        31,                                         31,                      31,                     30,
                                        2012      2012             2012             2012        Total        2011      2011          2011        2011               Total
                                        $      $         $           $       $           $      $            $       $            $    
Net income (loss)                              2,799         (86,798)        (72,006)   (124,203)          (59,066)     (62,587)    (62,985)           (171,820)
                                        31,802                                                              12,818
Interest expense, net                   817       884              1,343            1,919       4,963        142       207           399         324                1,072
Income tax provision (benefit)          (292)     2,196            750              3,008       5,662        8,780     45,483        14,854      12,442             81,559
Depreciation and amortization expense   8,745     9,489            8,342            7,835       34,411       9,880     9,311         9,247       10,198             38,636
Impairment charge                       -         -                17,056           4,877       21,933       -         5,413         -           1,120              6,533
                                        $      $         $           $       $          $      $          $       $            $     
Adjusted EBITDA                               15,368          (59,307)        (54,367)   (57,234)           1,348        (38,087)    (38,901)           (44,020)
                                        41,072                                                              31,620

                                        Callaway Golf Company
                                        Supplemental Financial Information - Non-GAAP
                                        Reconciliation
                                        (In thousands, except per share data)
                                        (Unaudited)
                                        Six Months Ended June 30,
                                        2012
                                        Pro                                    Gain on
                                        Forma     Non-Cash    Cost Reduction   Sale of
                                                  Tax         Initiatives^(1)  Top-Flite  Total as
                                        Callaway  Adjustment  (3)              & Ben      Reported
                                        Golf      ^(2)                         Hogan^(1)
                                        ^(1)
Net sales                               $       $       $         $      $
                                        566,221     -       -                   -   566,221
Gross profit                            235,985   -           (961)            -          235,024
% of sales                              42%       n/a       n/a            n/a      42%
Operating expenses                      200,524   -           3,710            (6,602)    197,632
Income (expense) from operations        35,461    -           (4,671)          6,602      37,392
Other expense, net                      (887)     -           -                -          (887)
Income (loss) before income taxes       34,574    -           (4,671)          6,602      36,505
Income tax provision (benefit)          13,311    (12,151)    (1,798)          2,542      1,904
Net income (loss)                       21,263    12,151      (2,873)          4,060      34,601
Dividends on convertible preferred      5,250     -           -                -          5,250
stock
Net income (loss) allocable to common   $      $  12,151  $   (2,873)    $       $ 
shareholders                            16,013                                 4,060     29,351
Diluted earnings (loss) per share:      $      $        $    (0.03)   $      $   
                                          0.25  0.14                         0.05      0.41
Weighted-average shares                 84,950    84,950      84,950           84,950     84,950
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 valuation allowance established against the
Company's U.S. deferred tax assets and impact of applying statutory tax rate
of 38.5% to pro forma results.
^(3)Includes costs associated with workforce reductions and transition costs
associated with licensing the Company's North American apparel business and
footwear business.
2013 Non-GAAP Reconciliation
The non-GAAP pro forma estimates of net income and earnings per share for full
year 2013 exclude carryover charges of $4.2 million (or $0.06 per share)
related to the Company's prior cost-reduction initiatives. The non-GAAP pro
forma estimates of net income and earnings per share for the first half of
2013 exclude carryover charges of $3.8 million (or $0.05 per share) related to
the Company's prior cost-reduction initiatives. Additionally, the Company's
pro forma estimates assume a tax rate of 38.5%.

Callaway Golf Company
Summary of Ongoing and Sold or Transitioned Pro Forma Net Sales and Gross Profit
(In thousands)
(Unaudited)
       Quarter Ended March, 31, 2012   Quarter Ended June 30, 2012       Quarter Ended September 30, 2012  Quarter Ended December 31, 2012   Year Ended December 31, 2012
       Pro                 Sold or       Pro                 Sold or       Pro                 Sold or       Pro                 Sold or       Pro                 Sold or
       Forma     Ongoing   Transitioned  Forma     Ongoing   Transitioned  Forma     Ongoing   Transitioned  Forma     Ongoing   Transitioned  Forma     Ongoing   Transitioned
       Results   Business  Business      Results   Business  Business      Results   Business  Business      Results   Business  Business      Results   Business  Business
                           ^(1)                              ^(1)                              ^(1)                              ^(1)                              ^(1)
Net    $       $       $         $       $       $         $       $       $        $       $       $        $       $       $    
sales  285,098  263,792  21,306        281,123  255,137  25,986        147,906  138,902  9,004         117,881  113,931  3,950         832,008  771,762  60,246
Gross  $       $       $        $       $       $        $      $      $         $      $      $         $       $       $     
profit 124,395  121,907  2,488         111,590  106,485  5,105         31,102   32,731   (1,629)       16,084   17,529   (1,445)       283,171  278,652  4,519
% of   44%       46%       12%           40%       42%       20%           21%       24%       -18%          14%       15%       -37%          34%       36%       8%
Sales
       Quarter Ended March, 31, 2011   Quarter Ended June 30, 2011       Quarter Ended September 30, 2011  Quarter Ended December 31, 2011   Year Ended December 31, 2011
       Pro                 Sold or       Pro                 Sold or       Pro                 Sold or       Pro                 Sold or       Pro                 Sold or
       Forma     Ongoing   Transitioned  Forma     Ongoing   Transitioned  Forma     Ongoing   Transitioned  Forma     Ongoing   Transitioned  Forma     Ongoing   Transitioned
       Results   Business  Business      Results   Business  Business      Results   Business  Business      Results   Business  Business      Results   Business  Business
                           ^(1)                              ^(1)                              ^(1)                              ^(1)                              ^(1)
Net    $       $       $         $       $       $         $       $       $         $       $       $         $       $       $    
sales  285,599  260,203  25,396        273,814  247,886  25,928        173,243  158,011  15,232        153,872  139,643  14,229        886,528  805,743  80,785
Gross  $       $       $        $       $       $        $      $      $         $      $      $         $       $       $     
profit 129,983  126,345  3,638         108,509  104,667  3,842         53,626   55,160   (1,534)       41,025   43,500   (2,475)       333,143  329,673  3,470
% of   46%       49%       14%           40%       42%       15%           31%       35%       -10%          27%       31%       -17%          38%       41%       4%
Sales

(1) Includes: Top-Flite and Ben Hogan branded products, apparel and footwear
in North America and uPro GPS devices.

SOURCE Callaway Golf

Website: http://www.callawaygolf.com
 
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