Callaway Golf Company Announces Significantly Improved Full Year Financial Results And Provides 2014 Financial Guidance

  Callaway Golf Company Announces Significantly Improved Full Year Financial
                 Results And Provides 2014 Financial Guidance

- 2013 full year net sales of the Company's current business, on a constant
currency basis, increased 14%. On a GAAP basis, net sales increased 1% for the
full year.

- 2013 non-GAAP operating income/loss improved by $74 million to $5 million of
income in 2013, compared to a non-GAAP operating loss of $69 million in 2012.
On a GAAP basis, 2013 operating loss improved by $105 million to a loss of $11
million compared to a loss of $116 million in 2012.

- 2013 full year non-GAAP loss per share of ($0.02) compared to a non-GAAP
loss per share of ($0.77) in 2012. On a GAAP basis, 2013 full year loss per
share of ($0.31), compared to a loss per share of ($1.96) in 2012.

PR Newswire

CARLSBAD, Calif., Jan. 29, 2014

CARLSBAD, Calif., Jan. 29, 2014 /PRNewswire/ -- Callaway Golf Company
(NYSE:ELY) today announced its fourth quarter and year-to-date 2013 financial
results, clearly demonstrating that its turnaround is well underway. Led by a
more than $55 million (28%) increase in driver and fairway woods sales, the
Company's full year results include sales growth as well as significant
improvements in gross margins and operating expenses. As a result, the
Company's operating income/loss improved by $105 million to a loss of $11
million compared to a loss of $116 million in 2012, and on a non-GAAP basis
was profitable for the first time in several years. Given this significantly
improved financial performance, along with the initial trade reception to the
Company's 2014 product line, the Company's annual guidance announced today
predicts a return to profitability in 2014 on a GAAP basis.

The Company achieved these financial results despite a late start to the golf
season in the Americas and Europe due to weather, adverse changes in foreign
currency rates, and a significantly reduced base business resulting from the
2012 sale of the Top-Flite and Ben Hogan Brands and the transition to a
licensing arrangement for apparel and footwear in North America. As compared
to 2012, the sale of these brands and licensing arrangements negatively
impacted 2013 sales by approximately $57 million for the full year
(approximately $4 million for the fourth quarter). In addition, as compared
to 2012, changes in foreign currency rates negatively affected 2013 net sales
by approximately $40 million for the full year (approximately $8 million for
the fourth quarter). Unfortunately, these factors mask the strength of the
Company's improved performance of its current business. For example, compared
to 2012, on a constant currency basis, the Company's current business, which
excludes the sold or licensed brands and businesses, actually achieved 14%
sales growth for the full year of 2013 (17% sales growth for the fourth
quarter of 2013). Overall, these results reflect not only the continued
success of the Company's turnaround plan but also the increased hard goods
market share and brand momentum the Company experienced in 2013.

GAAP RESULTS

For the fourth quarter of 2013, the Company reported the following GAAP
results:

Dollars in millions except 2013    % of Sales 2012    % of Sales Improvement /
per share amounts                                                (Decline)
Net Sales                  $127    -          $120    -          $7
Gross Profit               $29     23%        $9      8%         $20
Operating Expenses         $75     59%        $80     67%        $5
Operating Loss             ($45)   (36%)      ($71)   (59%)      $26
Net Loss                   ($49)   (39%)      ($71)   (59%)      $22
Diluted Loss Per Share     ($0.65) -          ($1.01) -          $0.36



For the full year of 2013, the Company reported the following GAAP results:

Dollars in millions except 2013    % of Sales 2012    % of Sales Improvement /
per share amounts                                                (Decline)
Net Sales                  $843    -          $834    -          $9
Gross Profit               $315    37%        $248    30%        $67
Operating Expenses         $326    39%        $364    44%        $38
Operating Loss             ($11)   (1%)       ($116)  (14%)      $105
Net Income Loss            ($19)   (2%)       ($123)  (15%)      $104
Diluted Loss Per Share     ($0.31) -          ($1.96) -          $1.65



NON-GAAP 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 basis. The non-GAAP results exclude charges related to the Company's
previously announced cost-reduction initiatives and the gain on the sale of
the Top-Flite and Ben Hogan brands. The non-GAAP results are also based upon
an assumed tax rate of 38.5%. 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 2013, the Company reported the following non-GAAP
results:

Dollars in millions except 2013    % of Sales 2012    % of Sales Improvement /
per share amounts                                                (Decline)
Net Sales                  $127    -          $120    -          $7
Gross Profit               $33     26%        $17     14%        $16
Operating Expenses         $73     57%        $74     62%        $1
Operating Loss             ($40)   (31%)      ($57)   (47%)      $17
Net Loss                   ($26)   (21%)      ($33)   (28%)      $7
Diluted Loss Per Share     ($0.34) -          ($0.48) -          $0.14



For the full year of 2013, the Company reported the following non-GAAP
results:

Dollars in millions except per  2013    % of Sales 2012    % of  Improvement /
share amounts                                              Sales (Decline)
Net Sales                       $843    -          $834    -     $9
Gross Profit                    $326    39%        $284    34%   $42
Operating Expenses              $321    38%        $353    42%   $32
Operating Income/(Loss)         $5      1%         ($69)   (8%)  $74
Net Income/(Loss)               $2      -          ($43)   (5%)  $45
Diluted Loss Per Share          ($0.02) -          ($0.77) -     $0.75



"We are pleased with our financial results during the first full year of our
new operating model," commented Chip Brewer, President and Chief Executive
Officer. "Despite challenging market conditions throughout much of the year,
we were able to grow sales of our current business, on a constant currency
basis, by 14%. This sales growth, together with the benefits resulting from
the many actions we have taken this year to improve our operations, have a
resulted in a $74 million improvement in non-GAAP operating income and even
more on a GAAP basis. In fact, this year we achieved positive operating income
on a non-GAAP basis for the first time since 2008, which is an important
milestone in our turnaround and clear evidence we are on the right track."

"We have made great progress to date in our turnaround," continued Mr. Brewer.
"In addition to refocusing our business on golf equipment and more
performance-oriented products, leveraging our strengths in research and
development, and changing our approach to sales and marketing, we have also
retired all of our preferred stock, increased our presence on tour, and
completed the transition of our golf ball and golf club manufacturing
platforms. The progress we made continued through the fourth quarter with
improvements in sales, gross margins, and operating expenses. We believe that
this continued progress and the initial positive trade reception to our 2014
product line position us for a good start to the new golf season and a return
to creating shareholder value in 2014."

Business Outlook

Although the Company in recent years has provided guidance on a pro forma
basis, for 2014 the Company has provided guidance on a GAAP basis as it has
completed its previously announced cost reduction initiatives and it does not
currently foresee any significant one-time charges in 2014. The Company's
GAAP financial guidance is based upon a forecasted income tax provision,
taking into account the Company's deferred tax valuation allowance, and is not
based upon an assumed tax rate as was the case with prior non-GAAP
estimates.

The Company provided the following 2014 full year estimated financial guidance
on a GAAP basis as follows:

  oBased upon foreign currency rates at the beginning of the year, net sales
    for the full year 2014 are currently estimated to range from $880 to $900
    million, compared to $843 million in 2013. Any changes during the year to
    the foreign currency rates would affect net sales and the Company's
    estimates.
  oGross margins are estimated to improve to approximately 41.7%, compared to
    37.3% in 2013. These improvements are expected to result from the positive
    full year impact of the many supply chain initiatives implemented as part
    of the turnaround strategy as well as anticipated improved pricing and mix
    of full price product sales.
  oOperating expenses are estimated to be approximately $345 million,
    compared to $326 million in 2013. The increase in operating expenses is
    due to a planned increase in investments in tour and marketing, higher
    variable sales related expenses, and inflationary pressures.
  oPre-tax income is estimated to range from $15.0 to $19.0 million, with a
    corresponding tax provision of approximately $6.5 million. On a comparable
    GAAP basis, pre-tax income in 2013 was a loss of $13.3 million with a
    corresponding tax provision of $5.6 million.
  oFully diluted earnings per share is estimated to range from $0.12 to $0.16
    per share on a base of 78.0 million shares, compared to a 2013 GAAP loss
    per share of $0.31 on a base of 72.8 million shares.

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. 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 5, 2014. 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
35580882.

Non-GAAP 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
financial information as follows:

Constant Currency Basis. The Company provided certain information regarding
the Company's net sales or projected net sales on a "constant currency
basis." This information estimates the impact of changes in foreign currency
rates on the translation of the Company's current or projected future period
net sales as compared to the applicable comparable prior period. This impact
is derived by taking the current or projected local currency results and
translating them into U.S. Dollars based upon the foreign currency exchange
rates for the applicable comparable prior period. It does not include any
other effect of changes in foreign currency rates on the Company's results or
business.

Excluded Items. The Company presented certain of the Company's financial
results excluding (i) the gain recognized in connection with the sale of the
Top-Flite and Ben Hogan brands, (ii) charges related to the Company's
cost-reduction initiatives, or (iii) sales related to the Top-Flite and Ben
Hogan brands or the products that were transitioned in 2012 to a third party
model, including North American apparel and footwear.

Adjusted EBITDA. The Company provided information about its results, excluding
interest, taxes, depreciation and amortization expenses, and impairment
charges ("Adjusted EBITDA").

Assumed Tax Rate. As a result of the Company's previously reported deferred
tax valuation allowance that was first established in 2011, the Company's GAAP
tax rate is not directly correlated to the Company's pre-tax results. For
comparative purposes, the Company has provided certain of the Company's
income/loss and earnings/loss per share information and Adjusted EBITDA
information based upon an assumed tax rate of 38.5%. The difference between
the Company's actual tax rate and this assumed tax rate for historical periods
is reflected on the attached schedules under "Non-Cash Tax Adjustment."

The non-GAAP information presented 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 this press release and 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 2014 sales, sales growth, gross
margins, operating expenses, pre-tax income, and earnings per share, 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 Company's turnaround strategy; consumer acceptance
of and demand for the Company's products; the level of promotional activity in
the marketplace; future consumer discretionary purchasing activity, which can
be significantly adversely affected by unfavorable economic or market
conditions; and future changes in foreign currency exchange rates and the
degree of effectiveness of the Company's hedging programs. Actual results may
differ materially from those estimated or anticipated as a result of these
risks and 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, 2012
as well as other risks and uncertainties detailed from time to time in the
Company's reports on Forms 10-K, 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.

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,
                                                 2013          2012
ASSETS
Current assets:
 Cash and cash equivalents                       $ 36,793      $ 52,003
 Accounts receivable, net                        92,203        91,072
 Inventories                                     263,492       211,734
 Other current assets                            29,115        29,791
 Assets held for sale                            -             2,396
 Total current assets                       421,603       386,996
Property, plant and equipment, net               71,341        89,093
Intangible assets, net                           118,113       118,223
Other assets                                     52,806        43,324
 Total assets                               $ 663,863     $ 637,636
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
 Accounts payable and accrued expenses           $ 157,120     $ 129,021
 Accrued employee compensation and benefits      31,585        20,649
 Accrued warranty expense                        6,406         7,539
 Deferred tax liability                          -             927
 Income tax liability                            5,425         3,430
 Asset-based credit facility                     25,660        -
 Total current liabilities                  226,196       161,566
Long-term liabilities                            153,048       154,362
Shareholders' equity                             284,619       321,708
 Total liabilities and shareholders' equity $ 663,863     $ 637,636



Callaway Golf Company
Statements of Operations
(In thousands, except per share data)
(Unaudited)
                                            Quarter Ended
                                            December 31,
                                            2013        2012
Net sales                                   $ 127,170   $ 119,938
Cost of sales                               97,909      110,594
Gross profit                                29,261      9,344
Operating expenses:
        Selling                             46,645      55,266
        General and administrative          19,461      17,855
        Research and development            8,502       7,161
               Total operating expenses     74,608      80,282
Loss from operations                        (45,347)    (70,938)
Other income (expense), net                 (3,494)     2,435
Loss before income taxes                    (48,841)    (68,503)
Income tax provision                        658         2,246
Net loss                                    (49,499)    (70,749)
Dividends on convertible preferred stock    -           783
Net loss allocable to common shareholders   $ (49,499)  $ (71,532)
Loss per common share:
        Basic                               ($0.65)     ($1.01)
        Diluted                             ($0.65)     ($1.01)
Weighted-average common shares outstanding:
        Basic                               76,358      70,996
        Diluted                             76,358      70,996
                                            Year Ended
                                            December 31,
                                            2013        2012
Net sales                                   $ 842,801   $ 834,065
Cost of sales                               528,043     585,897
Gross profit                                314,758     248,168
Operating expenses:
        Selling                             226,496     268,088
        General and administrative          68,087      66,773
        Research and development            30,937      29,542
               Total operating expenses     325,520     364,403
Loss from operations                        (10,762)    (116,235)
Other expense, net                          (2,560)     (1,811)
Loss before income taxes                    (13,322)    (118,046)
Income tax provision                        5,599       4,900
Net loss                                    (18,921)    (122,946)
Dividends on convertible preferred stock    3,332       8,447
Net loss allocable to common shareholders   $ (22,253)  $ (131,393)
Loss per common share:
        Basic                               ($0.31)     ($1.96)
        Diluted                             ($0.31)     ($1.96)
Weighted-average common shares outstanding:
        Basic                               72,809      67,061
        Diluted                             72,809      67,061



Callaway Golf Company
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
                                                       Year Ended
                                                       December 31,
                                                       2013        2012
Cash flows from operating activities:
 Net loss                                              $ (18,921)  $ (122,946)
 Adjustments to reconcile net loss to net cash used in
 operating activities:
          Depreciation and amortization                25,543      34,411
          Impairment charges                           -           21,933
          Deferred taxes, net                          (2,309)     (1,925)
          Non-cash share-based compensation            3,533       3,142
          Loss (gain) on disposal of long-lived assets 2,242       (1,261)
          Gain on sale of intangible assets            -           (6,602)
          Discount amortization on convertible notes   702         235
          Changes in assets and liabilities            (19,739)    44,205
 Net cash used in operating activities                 (8,949)     (28,808)
Cash flows from investing activities:
 Capital expenditures                                  (13,038)    (18,403)
 Net proceeds from sale of intangible assets           -           26,861
 Proceeds from sale of property, plant and equipment   4,148       355
 Other investing activities                            (13,637)    (3,268)
 Net cash (used in) provided by investing activities   (22,527)    5,545
Cash flows from financing activities:
 Proceeds from asset-based credit facilities, net      25,660      -
 Proceeds from issuance of convertible notes           -           46,819
 Debt issuance cost                                    -           (3,534)
 Exercise of stock options                             1,652       19
 Equity issuance cost                                  (341)       -
 Dividends paid, net                                   (5,599)     (11,019)
 Other financing activities                            (32)        (159)
 Net cash provided by financing activities             21,340      32,126
Effect of exchange rate changes on cash                (5,074)     117
Net (decrease) increase in cash and cash equivalents   (15,210)    8,980
Cash and cash equivalents at beginning of period       52,003      43,023
Cash and cash equivalents at end of period             $ 36,793    $ 52,003



Callaway Golf Company
Consolidated Net Sales, Operating Segment Information and Non-GAAP Reconciliation
(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)
               2013      2012      Dollars  Percent            2013           2012       Dollars   Percent
Net sales:
               $        $        $                          $        $          $ 
 Woods         28,472    20,163    8,309    41%                          200,588   55,856    28%
                                                               256,444
 Irons        29,349    23,624    5,725    24%                181,842        170,794    11,048    6%
 Putters       13,742    14,626    (884)    -6%                89,560         93,325     (3,765)   -4%
 Golf balls    20,116    20,572    (456)    -2%                132,147        139,576    (7,429)   -5%
 Accessories   35,491    40,953    (5,462)  -13%               182,808        229,782    (46,974)  -20%
 and other
               $         $         $                          $        $          $  
               127,170   119,938   7,232    6%                           834,065   8,736     1%
                                                               842,801
               Net Sales by Region                                                       Net Sales by Region
                                                               Constant                                                                   Constant
                                                               Currency                                                                   Currency
                                                               Excluding                                                                  Excluding
                                                               Businesses                                                                 Businesses
               Quarter Ended                         Constant  Sold or                   Year Ended                             Constant  Sold or
                                                     Currency  Transitioned                                                    Currency  Transitioned
                                                     Growth    Growth vs.                                                      Growth    Growth vs.
               December 31,        Growth/(Decline)  vs.       2012 ^(1) (2)             December 31,       Growth/(Decline)    vs.       2012 ^(1) (2)
                                                     2012^(1)                                                                   2012^(1)
               2013      2012      Dollars  Percent  Percent   Percent                   2013      2012     Dollars   Percent   Percent   Percent
Net sales:
 United States $        $        $       17%      17%       21%                       $         $        $ 9,391  2%        2%        14%
               50,335    42,898    7,437                                                 401,478   392,087
 Europe        16,535    14,830    1,705    11%      11%       15%                       121,477   120,160  1,317     1%        3%        8%
 Japan         32,177    36,443    (4,266)  -12%     9%        9%                        161,598   157,315  4,283     3%        26%       26%
 Rest of Asia  17,363    14,276    3,087    22%      20%       20%                       84,073    75,035   9,038     12%       10%       10%
 Other foreign 10,760    11,491    (731)    -6%      2%        21%                       74,175    89,468   (15,293)  -17%      -14%      -1%
 countries
               $         $         $       6%       13%       17%                       $         $        $ 8,736  1%        6%        14%
               127,170   119,938   7,232                                                 842,801   834,065
^(1)Calculated by applying 2012 exchange rates to 2013 reported sales in regions outside the U.S.
^(2)Calculated by applying 2012 exchange rates to 2013 reported sales in regions outside the U.S. and excludes sales related to businesses sold or
transitioned to a third party model.
               Operating Segment Information                   Operating Segment Information
               Quarter Ended                                   Year Ended
               December 31,        Growth/(Decline)            December 31,              Growth/(Decline)
               2013      2012      Dollars  Percent            2013           2012       Dollars   Percent
Net sales:
               $         $        $                          $        $          $ 
 Golf clubs    107,054   99,366    7,688    8%                           694,489   16,165    2%
                                                               710,654
 Golf balls    20,116    20,572    (456)    -2%                132,147        139,576    (7,429)   -5%
               $         $         $                          $        $          $  
               127,170   119,938   7,232    6%                           834,065   8,736     1%
                                                               842,801
Income (loss) before
income taxes:
 Golf          $         $         $                           $        $         $ 
 clubs^(1)     (32,727)  (52,588)  19,861   38%                         (59,827)   87,511    146%                       `
                                                               27,684
 Golf balls    (1,891)   (6,964)   5,073    73%                1,582          (15,019)   16,601    111%
 ^(1)
 Reconciling   (14,223)  (8,951)   (5,272)  -59%               (42,588)       (43,200)   612       1%
 items ^(2)
               $         $         $                           $        $          $
               (48,841)  (68,503)  19,662   29%                          (118,046)  104,724   89%
                                                               (13,322)
^(1)Included in the golf clubs and golf balls segments are pre-tax charges of $6.4 million and $7.0 million, respectively, for the year ended December
31, 2013, and $30.4 million and $16.6 million, respectively, for the year ended December 31, 2012 in connection with the Company's Cost Reduction
Initiatives, and $0.8 million and $0.2 million, respectively, for the year ended December31, 2012 in connection with the Company's Reorganization and
Reinvestment Initiatives.
^(2)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 Information and Reconciliation
(In thousands, except per share data)
(Unaudited)
Non-GAAP Reconciliation
to GAAP Reported Results:
                 Quarter Ended December 31,                                     Quarter Ended December 31,
                 2013                                                           2012
                 Non-GAAP  Cost Reduction                                       Non-GAAP  Cost Reduction
                 Callaway  Initiatives^(1)  Non-Cash Tax    Total as            Callaway  Initiatives^(1)  Non-Cash Tax    Total as
                 Golf      (3)              Adjustment^(2)  Reported            Golf      (3)              Adjustment^(2)  Reported
                 ^(1)                                                           ^(1)
Net sales        $         $ -              $ -             $                   $         $ -              $ -             $ 119,938
                 127,170                                    127,170             119,938
Gross profit     33,036    (3,775)          -               29,261              17,309    (7,965)          -               9,344
% of sales       26%       -3%              n/a             23%                 14%       -7%              n/a             8%
Operating        72,880    1,728            -               74,608              73,941    6,341            -               80,282
expenses
Loss from        (39,844)  (5,503)          -               (45,347)            (56,632)  (14,306)         -               (70,938)
operations
Other (expense)  (2,806)   (688)            -               (3,494)             2,435     -                -               2,435
income, net
Loss before      (42,650)  (6,191)          -               (48,841)            (54,197)  (14,306)         -               (68,503)
income taxes
Income tax
provision        (16,420)  (2,383)          19,461          658                 (20,866)  (5,508)          28,620          2,246
(benefit)
Net loss         (26,230)  (3,808)          (19,461)        (49,499)            (33,331)  (8,798)          (28,620)        (70,749)
Dividends on
convertible      -         -                -               -                   783       -                -               783
preferred stock
Net loss
allocable to     $         $ (3,808)        $ (19,461)      $                   $         $ (8,798)        $ (28,620)      $ (71,532)
common           (26,230)                                   (49,499)            (34,114)
shareholders
Diluted loss per $ (0.34)  $ (0.05)         $ (0.26)        $ (0.65)            $ (0.48)  $ (0.13)         $ (0.40)        $ (1.01)
share:
Weighted-average
shares           76,358    76,358           76,358          76,358              70,996    70,996           70,996          70,996
outstanding:
^(1)For comparative purposes, the Company applied an annualized statutory tax rate of 38.5% to derive non-GAAP results.
^(2)Impact of applying statutory tax rate of 38.5% to non-GAAP results.
^(3)Includes costs associated with the reorganization of the Company's golf ball manufacturing supply chain, Canada warehouse/office move,
workforce reductions and costs related to transitioning to a third party model for the European apparel business.
                 Year Ended December 31,                                        Year Ended December 31,
                 2013                                                           2012
                 Non-GAAP  Cost Reduction   Non-Cash Tax                        Non-GAAP  Cost Reduction   Gain on Sale    Non-Cash
                 Callaway  Initiatives^(1)  Adjustment      Total as            Callaway  Initiatives^(1)  of Top-Flite &  Tax         Total as
                 Golf      (3)              ^(2)            Reported            Golf      (3)              Ben Hogan^(1)   Adjustment  Reported
                 ^(1)                                                           ^(1)                                       ^(2)
Net sales        $         $ -              $ -             $                   $         $ -              $ -             $ -         $ 834,065
                 842,801                                    842,801             834,065
Gross profit     325,907   (11,149)         -               314,758             284,396   (36,228)         -               -           248,168
% of sales       39%       -1%              n/a             37%                 34%       -4%              n/a             n/a         30%
Operating        320,801   4,719            -               325,520             353,172   17,833           (6,602)         -           364,403
expenses
Income (expense) 5,106     (15,868)         -               (10,762)            (68,776)  (54,061)         6,602           -           (116,235)
from operations
Other expense,   (1,872)   (688)            -               (2,560)             (1,811)   -                -               -           (1,811)
net
Income (loss)
before income    3,234     (16,556)         -               (13,322)            (70,587)  (54,061)         6,602           -           (118,046)
taxes
Income tax
provision        1,245     (6,374)          10,728          5,599               (27,176)  (20,814)         2,542           50,348      4,900
(benefit)
Net income       1,989     (10,182)         (10,728)        (18,921)            (43,411)  (33,247)         4,060           (50,348)    (122,946)
(loss)
Dividends on
convertible      3,332     -                -               3,332               8,447     -                -               -           8,447
preferred stock
Net income
(loss) allocable $         $ (10,182)       $ (10,728)      $                   $         $ (33,247)       $ 4,060         $ (50,348)  $
to common        (1,343)                                    (22,253)            (51,858)                                               (131,393)
shareholders
Diluted earnings
(loss) per       $ (0.02)  $ (0.14)         $ (0.15)        $ (0.31)            $ (0.77)  $ (0.50)         $ 0.06          $ (0.75)    $ (1.96)
share:
Weighted-average
shares           72,809    72,809           72,809          72,809              67,061    67,061           67,061          67,061      67,061
outstanding:
^(1)For comparative purposes, the Company applied an annualized statutory tax rate of 38.5% to derive non-GAAP results.
^(2)Impact of applying statutory tax rate of 38.5% to non-GAAP results.
^(3)Includes costs associated with the reorganization of the Company's golf ball manufacturing supply chain, Canada warehouse/office move,
workforce reductions and costs related to transitioning to a third party model for the U.S. and European apparel and footwear and worldwide uPro
GPS businesses.
                 2013 Trailing Twelve Month Adjusted EBITDA                     2012 Trailing Twelve Month Adjusted EBITDA
Adjusted EBITDA: Quarter Ended                                                  Quarter Ended
                 March     June 30,         September 30,   December            March     June 30,         September 30,   December
                 31,                                        31,                 31,                                        31,
                 2013      2013             2013            2013      Total     2012      2012             2012            2012        Total
Net income       $ 41,660  $ 10,071         $ (21,153)      $         $         $ 31,802  $ 2,799          $ (86,798)      $ (70,749)  $
(loss)                                                      (49,499)  (18,921)                                                         (122,946)
Interest         2,157     2,470            1,975           1,963     8,565     817       884              1,343           1,919       4,963
expense, net
Income tax
provision        2,469     1,435            1,037           658       5,599     (292)     2,196            750             2,246       4,900
(benefit)
Depreciation and
amortization     6,956     6,472            6,265           5,850     25,543    8,745     9,489            8,342           7,835       34,411
expense
Impairment       -         -                -               -         -         -         -                17,056          4,877       21,933
charges
Adjusted EBITDA  $ 53,242  $ 20,448         $ (11,876)      $         $ 20,786  $ 41,072  $ 15,368         $ (59,307)      $ (53,872)  $
                                                            (41,028)                                                                   (56,739)



Callaway Golf Company
Supplemental Financial Information - Non-GAAP Information and Reconciliation
Constant Currency Net Sales Excluding Businesses Sold or Transitioned
(In thousands)
(Unaudited)
                      Constant Currency Net Sales Excluding Businesses Sold or
                      Transitioned
                      Quarter Ended              Year Ended
                      December 31,               December 31,
                      2013     2012     Percent  2013     2012      Percent
Net sales:            $        $        6%       $        $         1%
                      127,170  119,938           842,801  834,065
 Businesses           (167)    (3,950)           (3,042)  (60,244)
 sold/transitioned
  Sales, net of
  businesses          127,003  115,988  9%       839,759  773,821   9%
  sold/transitioned
 Currency impact ^(1) 8,273    -                 39,793   -
  Sales, net of
  businesses          $        $        17%      $        $         14%
  sold/transitioned   135,276  115,988           879,552  773,821
  and currency impact
^(1)Calculated by applying 2012 exchange rates to 2013 reported sales in
regions outside the U.S.

SOURCE Callaway Golf

Website: http://www.callawaygolf.com
 
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