Callaway Golf Announces Results for Fourth Quarter and Full Year 2004
CARLSBAD, Calif.--(BUSINESS WIRE)--Jan. 20, 2005--Callaway Golf Company (NYSE:ELY) today announced its financial results for the quarter and the year ended December 31, 2004. For the quarter, the Company reported net sales of $144.4 million, a net loss of $28.5 million, or $0.42 per fully diluted share, on 68.0 million shares. Included in both the net loss and fully diluted net loss per share were charges of $3.2 million and $0.05, respectively, associated with the integration of the Top-Flite operations acquired in late 2003. On a pro forma basis, which excludes these charges, the Company would have reported a net quarterly loss of $25.3 million, or $0.37 per fully diluted share, compared with "analyst consensus" estimates (which also excluded integration charges) of a net loss of $0.31 per fully diluted share. Reported net sales, net loss and fully diluted net loss per share for the same quarter in 2003 (which included integration charges of $16.2 million or $0.24 per share) were $146.6 million, a net loss of $33.4 million and a net loss of $0.50 per share on 66.7 million shares, respectively.
For the year ended December 31, 2004, the Company reported net sales of $934.6 million, a net loss of $10.1 million, or $0.15 per fully diluted share, on 67.7 million shares. Net income and earnings per share for the year were reduced by $17.5 million and $0.26, respectively, due to charges associated with the integration of the Top-Flite operations. On a pro forma basis, which excludes these charges, the Company would have reported net income for the year of $7.4 million, and fully diluted earnings per share of $0.11, compared with "analyst consensus" estimates (which also excluded integration charges) of fully diluted earnings per share of $0.19. Reported net sales, net income and fully diluted earnings per share for the same period in 2003 (which included sixteen weeks of Top-Flite results and integration charges of $16.2 million or $0.24 per share) were $814.0 million, $45.5 million and $0.68 on 66.5 million shares, respectively.
"Our fourth quarter results reflect the pricing initiatives taken mid-year, to reduce inventory levels at retail prior to the start of 2005," said William C. Baker, Chairman and CEO. "Reports from the field indicate that our efforts have met with success, and we enter 2005 in far better position than six months ago. In addition to correcting specific channel inventory issues, we continue to pull together as a team and evaluate every aspect of the business. Fortunately, our brands are strong, and we are excited about our new product introductions for 2005."
For more details, including pro forma reconciliations to assist in year-over-year comparison, please see the attached "Supplemental Financial Information."
In accordance with the Company's usual dividend practice, the next dividend will be determined by the Board of Directors at its upcoming meeting.
BUSINESS OUTLOOK
"We have a wide range of new products across our brands for 2005," reported Brad Holiday, Senior Executive Vice President and Chief Financial Officer. "In addition to the Callaway Golf(R) Heavenwood(R) Hybrids, Big Bertha(R) Fusion(R) Irons, and the Odyssey(R) White Steel(TM) putters launched in late 2004, we have recently launched our new Big Bertha Titanium 454 Driver, X-18 and X-18(TM) Pro Series Irons, and the HX(R) Hot Golf Ball. These products are selling into golf shops at a good pace, and will be supported by marketing plans developed in conjunction with our new advertising agency, Young & Rubicam."
"At the same time, Top-Flite and Ben Hogan are launching their first families of new products developed since joining forces with Callaway Golf in late 2003," continued Mr. Holiday. "Those new products for 2005 include several new Top-Flite(R) golf ball models, as well as the Ben Hogan(R) Big Ben(R) C.S3(TM) Drivers, Big Ben C455(TM) Fairway Woods, BH-5(TM) and BH-5 Offset Irons, Ben Hogan Sure Out(R) Wedges, Ben Hogan by Bettinardi The Hawk(TM) Putters, and the Hogan Tour Deep(TM) Golf Ball. We are also rolling out a new branding icon and market position for the Top-Flite brand in the marketplace. Most of these new Top-Flite and Ben Hogan products have already started shipping to retailers."
The Company will be holding a conference call at 2:00 p.m. PST on January 20, 2005, which will be hosted by William C. Baker, Chairman and Chief Executive Officer, and Bradley J. Holiday, Senior Executive Vice President and Chief Financial Officer. The call will be broadcast live over the Internet and can be accessed at www.callawaygolf.com. To listen to the call, please go to the website at least 15 minutes before the call to register and for instructions on how to access the broadcast. A replay of the conference call will be available approximately two hours after the conclusion of the conference call. The replay may be accessed through the Internet at www.callawaygolf.com or by telephone by calling 1-800-642-1687 toll free for calls originating within the United States, or 706-645-9291 for International calls. The replay pass code is 3388356 and the replay will be available through 9:00 p.m. PST on January 27, 2005.
Disclaimer: Statements used in this press release that relate to future plans, events, financial results, performance or prospects, including statements relating to anticipated consumer response to and sell-through of the Company's products, retail inventory levels, the Company's ability to compete effectively and success of the Company's future marketing initiatives, are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements are based upon current information and expectations. Actual results may differ materially from those anticipated as a result of certain risks and uncertainties, including but not limited to delays, difficulties or unanticipated costs in integrating the Top-Flite Golf and Callaway Golf assets, brands and businesses, the maintenance of good vendor relationships, adverse market and economic conditions, market acceptance of current and future products, adverse weather conditions (including the lasting effects from severe adverse weather) and seasonality, competitive pressures, fluctuations in foreign currency exchange rates, delays, difficulties or increased costs in the manufacturing of the Company's golf club or ball products, or in the procurement of materials or resources needed to manufacture the Company's golf club or ball products, any rule changes or other actions taken by the USGA or other golf association that could have an adverse impact upon demand for the Company's products, a decrease in participation levels in golf and the effect of terrorist activity or armed conflict 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, see Part I, Item 2 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, 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 from time to time with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
"Analyst Consensus" Estimates: Analyst consensus estimates reported in this press release are based upon the public reports of Thomson First Call and are provided for informational purposes only. The Company does not support, endorse or otherwise adopt the estimates of analysts, either individually or as a group. The use of an analyst consensus estimate in this release or otherwise does not suggest or imply that the Company believes that such estimate provides a reasonable basis for evaluating, measuring or predicting the Company's performance.
Regulation G: The financial results reported in this press release have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). In addition to the GAAP results, the Company has also provided additional information concerning its results, which includes certain financial measures not prepared in accordance with GAAP. The non-GAAP financial measures included in this press release exclude the 2004 charges associated with the integration of the Top-Flite Golf business acquired in late 2003. They also report the results of the Callaway Golf and Top-Flite operations each on a stand-alone basis, although such operations are not reportable business segments. These non-GAAP financial measures should not be considered a substitute for any measure derived in accordance with GAAP. These non-GAAP financial measures may also be inconsistent with the manner in which similar measures are derived or used by other companies. Management believes that the presentation of such non-GAAP financial measures, when considered in conjunction with the most directly comparable GAAP financial measures, provides useful information to investors by permitting additional relevant period-to-period comparisons of the historical operations of the Callaway Golf business excluding the operations of the recently acquired Top-Flite Golf business, as well as information concerning operations notwithstanding the Top-Flite integration charges. For certain non-GAAP financial measures, the Company has provided Supplemental Financial Information as an attachment to this press release which reconciles those non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP. In other circumstances, the reconciling information is presented in the text of this press release.
Callaway Golf Company makes and sells Metal Woods, Irons, Hybrids and Golf Balls. Callaway Golf Company also makes and sells Odyssey(R) Putters. Callaway Golf also owns and operates The Top-Flite Golf Company, a wholly owned subsidiary that includes the Top-Flite(R), Strata(R) and Ben Hogan(R) brands and Bettinardi Putters. For more information about Callaway Golf Company, please visit our websites at www.callawaygolf.com, www.topflite.com and www.odysseygolf.com. The Top-Flite Golf Company is a wholly owned subsidiary of Callaway Golf Company and is the world's largest golf ball manufacturer. It is the first US manufacturer of golf balls, dimpled golf balls, two-piece golf balls, multi-layer golf balls, and American-made golf clubs. Under The Top-Flite Golf Company umbrella are the TOP-FLITE(R) and BEN HOGAN(R) brands. To find more information on The Top-Flite Golf Company, visit our website at www.topflite.com or call Consumer Relations at TFGOLFCO (866-834-6532).The BEN HOGAN(R) brand has been inspired for 50 years by Mr. Hogan's ability to grasp the mechanics of the game and translate them into the finest instruments. The Ben Hogan Company was formed in 1953, with a quest to make golf equipment "as close to perfect as modern tools and technology would allow." Today the team of Ben Hogan craftsmen continues to build Ben Hogan golf equipment one club at a time, ever mindful of Mr. Hogan's vision of perfection for the equipment that bears his signature. To find more information on Ben Hogan Golf, visit our website at http://www.benhogan.com or call the Consumer Relations Department at 866-834-6532.
Callaway Golf Company
Consolidated Condensed Statements of Operations
(In thousands, except per share data)
(Unaudited)
Quarter Ended
December 31,
--------- --------------
2004 2003
--------- ---------
Net sales $144,413 100% $146,602 100%
Cost of goods sold 105,689 73% 112,538 77%
--------- ---------
Gross profit 38,724 27% 34,064 23%
Operating expenses:
Selling 59,098 41% 58,256 40%
General and administrative 21,964 15% 22,294 15%
Research and development 7,034 5% 8,881 6%
--------- ---------
Total operating expenses 88,096 61% 89,431 61%
Loss from operations (49,372) -34% (55,367) -38%
Other income, net 1,219 684
--------- ---------
Loss before income taxes (48,153) -33% (54,683) -37%
Income tax benefit (19,685) (21,252)
--------- ---------
Net loss $(28,468) -20% $(33,431) -23%
========= =========
Loss per common share:
Basic ($0.42) ($0.50)
Diluted ($0.42) ($0.50)
Weighted-average shares outstanding:
Basic 67,961 66,731
Diluted 67,961 66,731
Year Ended
December 31,
-----------------------
2004 2003
--------- ---------
Net sales $934,564 100% $814,032 100%
Cost of goods sold 575,742 62% 445,417 55%
--------- ---------
Gross profit 358,822 38% 368,615 45%
Operating expenses:
Selling 263,089 28% 207,783 26%
General and administrative 89,878 10% 65,448 8%
Research and development 30,557 3% 29,529 4%
--------- ---------
Total operating expenses 383,524 41% 302,760 37%
Income (loss) from operations (24,702) -3% 65,855 8%
Other income, net 989 2,028
--------- ---------
Income (loss) before income taxes (23,713) -3% 67,883 8%
Income tax provision (13,610) 22,360
--------- ---------
Net income (loss) $(10,103) -1% $45,523 6%
========= =========
Earnings (loss) per common share:
Basic ($0.15) $0.69
Diluted ($0.15) $0.68
Weighted-average shares outstanding:
Basic 67,721 66,027
Diluted 67,721 66,471
Callaway Golf Company
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
December December
31, 31,
2004 2003
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $31,657 $47,340
Accounts receivable, net 105,153 100,664
Inventories, net 181,230 185,389
Deferred taxes 32,959 36,707
Income tax receivable 32,377 -
Other current assets 14,036 13,362
--------- ---------
Total current assets 397,412 383,462
Property, plant and equipment, net 135,865 164,763
Intangible assets, net 179,636 169,851
Deferred taxes 9,837 12,289
Other assets 16,667 18,201
--------- ---------
$739,417 $748,566
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $75,501 $79,787
Accrued employee compensation and benefits 20,215 25,544
Accrued warranty expense 12,043 12,627
Line of Credit 13,000 -
Income taxes payable - 11,962
Other current liabilities 39 240
--------- ---------
Total current liabilities 120,798 130,160
Long-term liabilities 28,622 29,023
Shareholders' equity 589,997 589,383
--------- ---------
$739,417 $748,566
========= =========
Callaway Golf Company
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Year Ended
December 31,
-------------------
2004 2003
--------- ---------
Cash flows from operating activities:
Net income (loss) $(10,103) $45,523
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 51,154 44,496
Loss on disposal of assets 7,669 24,163
Tax benefit for exercise of stock options 5,841 (982)
Net non-cash foreign currency hedging
losses 1,811 2,619
Other 9,448 (8,207)
Changes in assets and liabilities, net of
effects of acquisition (57,283) 11,131
--------- ---------
Net cash provided by operating activities 8,537 118,743
--------- ---------
Cash flows from investing activities:
Acquisitions, net of cash acquired (9,204) (160,321)
Capital expenditures (25,986) (7,810)
Other 431 202
--------- ---------
Net cash used in investing activities (34,759) (167,929)
--------- ---------
Cash flows from financing activities:
Issuance of Common Stock 20,312 17,994
Acquisition of Treasury Stock (6,298) (4,755)
Dividends paid, net (19,069) (18,536)
Other 13,000 (8,117)
--------- ---------
Net cash provided by (used in) financing
activities 7,945 (13,414)
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents 2,594 1,488
Net decrease in cash and cash equivalents (15,683) (61,112)
Cash and cash equivalents at beginning of period 47,340 108,452
--------- ---------
Cash and cash equivalents at end of period $31,657 $47,340
========= =========
Callaway Golf Company
Consolidated Net Sales and Operating Segment Information
(In thousands)
(Unaudited)
Net Sales by Product Category
--------------------------------------
Quarter Ended
December 31, Growth/(Decline)
------------------- -----------------
2004 2003 Dollars Percent
--------- --------- --------- -------
Net sales:
Woods $24,992 $38,524 $(13,532) -35%
Irons 39,266 38,033 1,233 3%
Putters 18,751 25,449 (6,698) -26%
Golf balls 43,582 34,783 8,799 25%
Accessories and other 17,822 9,813 8,009 82%
--------- --------- ---------
$144,413 $146,602 $(2,189) -1%
========= ========= =========
-------------------------------------
Year Ended
December 31, Growth/(Decline)
------------------- -----------------
2004 2003 Dollars Percent
--------- --------- --------- -------
Net sales:
Woods $238,555 $252,421 $(13,866) -5%
Irons 259,058 280,758 (21,700) -8%
Putters 100,482 142,814 (42,332) -30%
Golf balls 231,337 78,378 152,959 195%
Accessories and other 105,132 59,661 45,471 76%
--------- --------- ---------
$934,564 $814,032 $120,532 15%
========= ========= =========
Net Sales by Region
-------------------------------------
Quarter Ended
December 31, Growth/(Decline)
------------------- ----------------
2004 2003 Dollars Percent
--------- --------- -------- -------
Net sales:
United States $85,856 $79,231 $6,625 8%
Europe 22,580 21,267 1,313 6%
Japan 12,137 23,692 (11,555) -49%
Rest of Asia 8,616 9,449 (833) -9%
Other foreign countries 15,224 12,963 2,261 17%
--------- --------- --------
$144,413 $146,602 $(2,189) -1%
========= ========= ========
-------------------------------------
Year Ended
December 31, Growth/(Decline)
------------------- -----------------
2004 2003 Dollars Percent
--------- --------- --------- -------
Net sales:
United States $546,219 $449,424 $96,795 22%
Europe 169,519 145,148 24,371 17%
Japan 70,536 101,259 (30,723) -30%
Rest of Asia 51,662 58,327 (6,665) -11%
Other foreign countries 96,628 59,874 36,754 61%
--------- --------- ---------
$934,564 $814,032 $120,532 15%
========= ========= =========
Operating Segment Information
---------------------------------------
Quarter Ended Year Ended
December 31, December 31,
------------------- -------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Net sales:
Golf clubs $100,831 $111,620 $703,227 $735,654
Golf balls 43,582 34,982 231,337 78,378
--------- --------- --------- ---------
$144,413 $146,602 $934,564 $814,032
========= ========= ========= =========
Income (loss) before income taxes:
Golf clubs $(29,713) $(2,729) $39,295 $167,996
Golf balls (6,594) (35,606) (8,911) (52,687)
Reconciling items (1) (11,846) (16,348) (54,097) (47,426)
--------- --------- --------- ---------
$(48,153) $(54,683) $(23,713) $67,883
========= ========= ========= =========
(1) 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 December 31,
--------------------------------------------------
2004 2003(a)
---------------------------------------- ---------
Callaway Top-Flite Integration Total Total
Golf Golf Charges
--------- --------- -------------------- ---------
Net sales $108,244 $36,169 $ - $144,413 $146,602
Gross profit 35,534 4,721 (1,531) 38,724 34,064
% of sales 33% 13% n/a 27% 23%
Operating expenses 66,321 18,070 3,705 88,096 89,431
--------- --------- ---------- --------- ---------
Loss from operations (30,787) (13,349) (5,236) (49,372) (55,367)
Other income
(expense), net 1,261 (42) - 1,219 684
--------- --------- ---------- --------- ---------
Loss before income
taxes (29,526) (13,391) (5,236) (48,153) (54,683)
Income tax benefit (12,476) (5,182) (2,027) (19,685) (21,252)
--------- --------- ---------- --------- ---------
Net loss $(17,050) $(8,209) $(3,209) $(28,468) $(33,431)
========= ========= ========== ========= =========
Diluted loss per
share $(0.25) $(0.12) $(0.05) $(0.42) $(0.50)
Weighted-average shares
outstanding 67,961 67,961 67,961 67,961 66,731
Year Ended December 31,
--------------------------------------------------
2004 2003(a)
---------------------------------------- ---------
Callaway Top-Flite Integration Total Total
Golf Golf Charges
--------- --------- -------------------- ---------
Net sales $722,801 $211,763 $ - $934,564 $814,032
Gross profit 314,024 60,487 (15,689) 358,822 368,615
% of sales 43% 29% n/a 38% 45%
Operating expenses 288,207 82,506 12,811 383,524 302,760
--------- --------- ---------- --------- ---------
Income (loss) from
operations 25,817 (22,019) (28,500) (24,702) 65,855
Other income, net 846 143 - 989 2,028
--------- --------- ---------- --------- ---------
Income (loss) before
income taxes 26,663 (21,876) (28,500) (23,713) 67,883
Income tax provision 5,886 (8,466) (11,030) (13,610) 22,360
--------- --------- ---------- --------- ---------
Net income (loss) $20,777 $(13,410) $(17,470) $(10,103) $45,523
========= ========= ========== ========= =========
Diluted earnings
(loss) per share $0.31 $(0.20) $(0.26) $(0.15) $0.68
Weighted-average
shares
outstanding 67,721 67,721 67,721 67,721 66,471
(a) During the latter part of 2003, Callaway Golf Company
completed the acquisition of substantially all of the golf-related
assets of The Top-Flite Golf Company. The results reported for the
periods ended December 31, 2003 are primarily representative of
the Callaway Golf and Odyssey brand operations, but also include
107 days of Top-Flite Golf operating results in the United States.
CONTACT: Callaway Golf Company
Brad Holiday or Larry Dorman, 760-931-1771
SOURCE: Callaway Golf Company