Callaway Golf Announces First Quarter Results
CARLSBAD, Calif.--(BUSINESS WIRE)--April 21, 2005--Callaway Golf Company (NYSE:ELY) today released its consolidated financial results for the quarter ended March 31, 2005, announcing consolidated net sales for the quarter of $299.9 million, net income of $18.4 million, and diluted earnings per share of $0.27 on 68.6 million shares. Reported net income and earnings per share include after tax charges of $2.3 million and $0.03, 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 had net income of $20.7 million and diluted earnings per share of $0.30. Reported net sales, net income and diluted earnings per share for the same quarter in 2004 (which included after tax integration charges of $3.2 million or $0.05 per share) were $363.8 million, $40.5 million and $0.59, respectively.
"Our first quarter results are in line with the preliminary estimates we provided in early April," said William C. Baker, Chairman and CEO. "Staggered product launches and closely monitoring retail inventory have allowed us to achieve our reported sales and profit levels without overloading the retail channel."
In accordance with the Company's dividend practice, the next dividend will be determined by the Board of Directors at its May meeting.
BUSINESS OUTLOOK
"Sales in the first quarter were solid and retail inventories are at the appropriate levels," said Bradley J. Holiday, Senior Executive Vice President and Chief Financial Officer. "We will continue to ship our current products into the market based upon demand generated by the opening of the true golf season in most of our markets, and have additional new product launches planned for later in the year, including the launch of the Callaway Golf X-Tour Irons and increased shipments of the Ben Hogan drivers and fairway woods during the second quarter."
The Company will be holding a conference call at 2:00 p.m. PDT today. The call will be broadcast live over the Internet and can be accessed at www.callawaygolf.com. To listen to the call, please go to the website at least 15 minutes before the call to register and for instructions on how to access the broadcast. A replay of the conference call will be available approximately two hours after the conclusion of the conference call and will remain available through 9:00 P.M. PDT on April 28, 2005. The replay may be accessed through the Internet at www.callawaygolf.com or by telephone by calling (800) 642-1687 for calls originating within the United States or (706) 645-9291 for International calls. The replay pass code is 5523396.
Disclaimer: Statements used in this press release that relate to future plans, events, financial results, performance or prospects, including statements under the Business Outlook Section of the press release relating to future demand for the Company's products, retail inventory levels, new product launches and future shipments, 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 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 II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 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, as well as in the supplemental financial information attached to this release.
Regulation G: The Company's 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 charges associated with the integration of the Callaway Golf Company and Top-Flite Golf Company operations. These non-GAAP financial measures should not be considered a substitute for any measure derived in accordance with GAAP. These non-GAAP financial measures may also be inconsistent with the manner in which similar measures are derived or used by other companies. Management believes that the presentation of such non-GAAP financial measures, when considered in conjunction with the most directly comparable GAAP financial measures, provides additional useful information concerning the Company's operating performance. The Company has provided reconciling information in the text of this press release.
Callaway Golf Company manufactures and sells golf clubs and golf balls, and sells golf accessories, under the Callaway Golf(R), Top-Flite(R), Odyssey(R) and Ben Hogan(R) brands. For more information visit www.callawaygolf.com.
Callaway Golf Company
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
March 31, December 31,
2005 2004
---------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 27,869 $ 31,657
Accounts receivable, net 227,789 105,153
Inventories, net 172,492 181,230
Deferred taxes 41,383 32,959
Income taxes receivable -- 28,697
Other current assets 13,982 14,036
--------- ---------
Total current assets 483,515 393,732
Property, plant and equipment, net 134,274 135,865
Intangible assets, net 178,463 179,636
Deferred taxes 7,520 9,837
Other assets 18,241 16,667
--------- ---------
$822,013 $735,737
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 93,658 $ 75,501
Accrued employee compensation and
benefits 22,549 20,215
Accrued warranty expense 12,902 12,043
Line of credit 59,500 13,000
Income taxes payable 5,232 --
Other current liabilities 28 39
--------- ---------
Total current liabilities 193,869 120,798
Long-term liabilities 27,380 28,622
Shareholders' equity 600,764 586,317
--------- ---------
$822,013 $735,737
========= =========
Callaway Golf Company
Statements of Operations
(In thousands, except per share data)
(Unaudited)
Quarter Ended
March 31,
------------------------
2005 2004
------------------------
Net sales $299,857 100% $363,786 100%
Cost of sales 167,251 56% 197,595 54%
--------- ---------
Gross profit 132,606 44% 166,191 46%
Operating expenses:
Selling expenses 75,745 25% 71,195 20%
General and administrative expenses 19,085 6% 22,861 6%
Research and development expenses 6,240 2% 8,109 2%
--------- ---------
Total operating expenses 101,070 34% 102,165 28%
Income from operations 31,536 11% 64,026 18%
Other (expense) income, net (1,181) 271
--------- ---------
Income before income taxes 30,355 10% 64,297 18%
Provision for income taxes 11,995 23,752
--------- ---------
Net income $ 18,360 6% $ 40,545 11%
========= =========
Earnings per common share:
Basic $ 0.27 $ 0.60
Diluted $ 0.27 $ 0.59
Weighted-average shares outstanding:
Basic 68,181 67,285
Diluted 68,624 68,365
Callaway Golf Company
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Quarter Ended
March 31,
------------------
2005 2004
------------------
Cash flows from operating activities:
Net income $ 18,360 $ 40,545
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 12,186 13,812
Non-cash compensation 1,479 2
Loss (gain) on disposal of long-lived assets 210 (106)
Tax benefit from exercise of stock options 41 996
Net non-cash foreign currency hedging losses -- 1,764
Deferred taxes (589) 754
Changes in assets and liabilities, net (73,067) (142,543)
-------- ---------
Net cash used in operating activities (41,380) (84,776)
-------- ---------
Cash flows from investing activities:
Capital expenditures (10,198) (2,622)
Proceeds from sale of capital assets 3 271
-------- ---------
Net cash used in investing activities (10,195) (2,351)
-------- ---------
Cash flows from financing activities:
Proceeds from financing arrangements 102,000 106,487
Payments on financing arrangements (55,500) (53,900)
Issuance of Common Stock 2,053 8,874
-------- ---------
Net cash provided by financing activities 48,553 61,461
-------- ---------
Effect of exchange rate changes on cash and cash
equivalents (766) (741)
Net decrease in cash and cash equivalents (3,788) (26,407)
Cash and cash equivalents at beginning of period 31,657 47,340
-------- ---------
Cash and cash equivalents at end of period $ 27,869 $ 20,933
======== =========
Callaway Golf Company
Consolidated Net Sales and Operating Segment Information
(In thousands)
(Unaudited)
Net Sales by Product Category
-----------------------------------------
Quarter Ended
March 31, Growth/(Decline)
------------------- ---------------------
2005 2004 Dollars Percent
--------- --------- --------- ---------
Net sales:
Woods $ 65,464 $123,797 $(58,333) -47%
Irons 107,948 96,505 11,443 12%
Putters 31,848 37,277 (5,429) -15%
Golf balls 59,033 72,096 (13,063) -18%
Accessories and other 35,564 34,111 1,453 4%
--------- --------- ---------
$299,857 $363,786 $(63,929) -18%
========= ========= =========
Net Sales by Region
-----------------------------------------
Quarter Ended
March 31, Growth/(Decline)
------------------- ---------------------
2005 2004 Dollars Percent
--------- --------- --------- ---------
Net sales:
United States $185,101 $217,642 $(32,541) -15%
Europe 48,909 67,213 (18,304) -27%
Japan 24,852 31,705 (6,853) -22%
Rest of Asia 14,665 15,981 (1,316) -8%
Other foreign
countries 26,330 31,245 (4,915) -16%
--------- --------- ---------
$299,857 $363,786 $(63,929) -18%
========= ========= =========
Operating Segment Information
-----------------------------------------
Quarter Ended
March 31, Growth/(Decline)
------------------- ---------------------
2005 2004 Dollars Percent
--------- --------- --------- ---------
Net sales:
Golf clubs $240,824 $291,690 $(50,866) -17%
Golf balls 59,033 72,096 (13,063) -18%
--------- --------- ---------
$299,857 $363,786 $(63,929) -18%
========= ========= =========
Income (loss) before
income taxes:
Golf clubs (2) $40,379 $78,843 $(38,464) -49%
Golf balls (2) 1,726 (1,647) 3,373 205%
Reconciling items (1) (11,750) (12,899) 1,149 9%
--------- --------- ---------
$30,355 $64,297 $(33,942) -53%
========= ========= =========
(1) Represents corporate general and administrative expenses and
other income (expense) not utilized by management in determining
segment profitability.
(2) Prior period amounts have been reclassified to conform with
current period presentation
Callaway Golf Company
Supplemental Financial Information
(In thousands, except per share data)
(Unaudited)
Quarter Ended March 31,
--------------------------------
2005
--------------------------------
Pro Forma Integration Total as
Callaway Charges Reported
Golf
---------- ----------- ----------
Net sales $299,857 $ - $299,857
Gross profit 135,689 (3,083) 132,606
% of sales 45% n/a 44%
Operating expenses 100,326 744 101,070
--------- ---------- ---------
Income (loss) from operations 35,363 (3,827) 31,536
Other income (expense), net (1,181) - (1,181)
--------- ---------- ---------
Income (loss) before income taxes 34,182 (3,827) 30,355
Provision for income taxes 13,449 (1,454) 11,995
--------- ---------- ---------
Net income (loss) $ 20,733 $ (2,373) $ 18,360
========= ========== =========
Diluted earnings (loss) per share: $ 0.30 $ (0.03) $ 0.27
Weighted-average shares outstanding: 68,624 68,624 68,624
Quarter Ended March 31,
--------------------------------
2004
--------------------------------
Pro Forma Integration Total as
Callaway Charges Reported
Golf
---------- ----------- ---------
Net sales $363,786 $ - $363,786
Gross profit 169,661 (3,470) 166,191
% of sales 47% n/a 46%
Operating expenses 100,527 1,638 102,165
--------- ---------- ---------
Income (loss) from operations 69,134 (5,108) 64,026
Other income (expense), net 271 - 271
--------- ---------- ---------
Income (loss) before income taxes 69,405 (5,108) 64,297
Provision for income taxes 25,639 (1,887) 23,752
--------- ---------- ---------
Net income (loss) $ 43,766 $ (3,221) $ 40,545
========= ========== =========
Diluted earnings (loss) per share: $ 0.64 $ (0.05) $ 0.59
Weighted-average shares outstanding: 68,365 68,365 68,365
CONTACT: Callaway Golf Company
Brad Holiday or Larry Dorman, 760-931-1771
SOURCE: Callaway Golf Company