Callaway Golf Announces Results for First Quarter 2006
CARLSBAD, Calif.--(BUSINESS WIRE)--April 26, 2006--Callaway Golf Company (NYSE:ELY) today announced its financial results for the first quarter ended March 31, 2006, reporting significant improvements in earnings over the same period a year ago. Highlights for the quarter include:
- Net sales of $302.4 million, as compared to $299.9 million for the same period in 2005.
- Fully diluted earnings per share of $0.33 on 70.1 million shares, or growth of 22%, as compared to $0.27 on 68.6 million shares in 2005.
- Fully diluted earnings per share include $0.02 of after-tax charges for employee equity-based compensation associated with FAS 123R as well as $0.01 for the integration of Top-Flite operations. The first quarter of 2005 included after-tax charges of $0.03 for the integration of Top-Flite operations. Excluding these charges, the Company's pro forma fully diluted earnings per share for the first quarter of 2006 would have increased 20% to $0.36, as compared to pro forma fully diluted earnings per share of $0.30 for the first quarter of 2005.
"We are pleased with the initial consumer acceptance of our new products this year and the fact that we achieved the second highest first quarter sales level in the history of the Company," commented George Fellows, President and CEO. "Achieving this level of sales was significant because product launches in the first quarter of 2006 were timed later in the quarter as compared with product launches last year. We are even more pleased that we were able to leverage 1% growth in revenue to achieve 22% growth in fully diluted earnings per share," continued Mr. Fellows. "Our cost reduction and other initiatives permitted us to bring this substantial increase to our bottom line despite an additional 1.5 million shares in our base.
"Although we were particularly pleased with our results this quarter and remain optimistic about significant improvement in 2006 earnings compared to last year, our focus is on our longer term goals. We are right on track with those targets and we look forward to Callaway Golf's long term prospects and our continued leadership in the golf industry."
For more details, including pro forma reconciliations to assist in year-over-year comparison, please see the attached "Supplemental Financial Information."
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, and will remain available through 9:00 p.m. PDT on Friday, May 5, 2006. The replay may be accessed through the Internet at www.callawaygolf.com or by telephone by calling 1-800-475-6701 toll free for calls originating within the United States or 320-365-3844 for International calls. The replay pass code is 826757.
Disclaimer: Statements used in this press release that relate to future plans, events, financial results, performance or prospects, including statements relating to earnings improvement in 2006 and achievement of longer-term targets, are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These estimates and 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, market acceptance of current and future products, adverse market and economic conditions, 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 for 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 and the Company's business, see Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2005, 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.
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 preliminary 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 employee equity based compensation and 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 operations without these charges. The Company has provided reconciling information in the text of this press release and in the attachment to this release.
Through an unwavering commitment to innovation, Callaway Golf creates products and services designed to make every golfer a better golfer. Callaway Golf Company manufactures and sells golf clubs and golf balls, and sells golf accessories, under the Callaway Golf®, Top-Flite®, Odyssey® and Ben Hogan® brands. For more information visit www.callawaygolf.com.
Callaway Golf Company
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
March 31, December 31,
2006 2005
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $24,414 $49,481
Accounts receivable, net 245,195 98,082
Inventories, net 247,397 241,577
Deferred taxes 38,906 38,192
Income taxes receivable - 2,026
Other current assets 16,152 9,232
------------- ------------
Total current assets 572,064 438,590
Property, plant and equipment, net 128,519 127,739
Intangible assets, net 174,560 175,191
Deferred taxes 5,994 6,516
Other assets 15,198 16,462
------------- ------------
$896,335 $764,498
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $121,256 $102,134
Accrued employee compensation and
benefits 26,428 24,783
Accrued warranty expense 15,196 13,267
Bank line of credit 85,000 -
Other current liabilities 10,815 21
------------- ------------
Total current liabilities 258,695 140,205
Long-term liabilities 27,006 28,245
Shareholders' equity 610,634 596,048
------------- ------------
$896,335 $764,498
============= ============
Callaway Golf Company
Statements of Operations
(In thousands, except per share data)
(Unaudited)
Quarter Ended
March 31,
------------------------
2006 2005
--------- ---------
Net sales $302,445 100% $299,857 100%
Cost of sales 170,933 57% 167,251 56%
--------- ---------
Gross profit 131,512 43% 132,606 44%
Operating expenses:
Selling 68,128 23% 75,745 25%
General and administrative 20,224 7% 19,085 6%
Research and development 6,804 2% 6,240 2%
--------- ---------
Total operating expenses 95,156 31% 101,070 34%
Income from operations 36,356 12% 31,536 11%
Other income (expense), net 302 (1,181)
--------- ---------
Income before income taxes 36,658 12% 30,355 10%
Income tax provision 13,797 11,995
--------- ---------
Net Income $22,861 8% $18,360 6%
========= =========
Earnings per common share:
Basic $0.33 $0.27
Diluted $0.33 $0.27
Weighted-average shares outstanding:
Basic 69,166 68,181
Diluted 70,143 68,624
Callaway Golf Company
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Quarter Ended
March 31,
------------------
2006 2005
--------- --------
Cash flows from operating activities:
Net income $22,861 $18,360
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 7,290 12,186
Loss on disposal of assets 138 210
Non-cash compensation 4,401 1,479
Deferred taxes (227) (589)
Changes in assets and liabilities (128,828) (73,067)
--------- --------
Net cash used in operating activities (94,365) (41,421)
--------- --------
Cash flows from investing activities:
Capital expenditures (7,576) (10,198)
Proceeds from sale of capital assets 120 3
--------- --------
Net cash used in investing activities (7,456) (10,195)
--------- --------
Cash flows from financing activities:
Issuance of Common Stock 5,761 2,053
Acquisition of Treasury Stock (14,788) -
Tax benefit from exercise of stock options 426 41
Proceeds on Line of Credit 122,150 102,000
Payments on Line of Credit (37,150) (55,500)
Payments on financing arrangements (20) -
--------- --------
Net cash provided by financing activities 76,379 48,594
--------- --------
Effect of exchange rate changes on cash and cash
equivalents 375 (766)
Net decrease in cash and cash equivalents (25,067) (3,788)
Cash and cash equivalents at beginning of period 49,481 31,657
--------- --------
Cash and cash equivalents at end of period $24,414 $27,869
========= ========
Callaway Golf Company
Consolidated Net Sales and Operating Segment Information
(In thousands)
(Unaudited)
Net Sales by Product Category
-------------------------------------
Quarter Ended
March 31, Growth/(Decline)
------------------- ----------------
2006 2005 Dollars Percent
--------- --------- -------- -------
Net sales:
Woods $97,120 $65,464 $31,656 48%
Irons 86,560 107,948 (21,388) -20%
Putters 24,878 31,848 (6,970) -22%
Golf balls 55,730 59,033 (3,303) -6%
Accessories and other 38,157 35,564 2,593 7%
--------- --------- --------
$302,445 $299,857 $2,588 1%
========= ========= ========
Net Sales by Region
-------------------------------------
Quarter Ended
March 31, Growth/(Decline)
------------------- ----------------
2006 2005 Dollars Percent
--------- --------- -------- -------
Net sales:
United States $181,283 $185,102 $(3,819) -2%
Europe 50,085 52,128 (2,043) -4%
Japan 26,114 24,852 1,262 5%
Rest of Asia 16,988 14,664 2,324 16%
Other foreign countries 27,975 23,111 4,864 21%
--------- --------- --------
$302,445 $299,857 $2,588 1%
========= ========= ========
Operating Segment Information
-------------------------------------
Quarter Ended
March 31, Growth/(Decline)
------------------- -----------------
2006 2005 Dollars Percent
--------- --------- -------- -------
Net sales:
Golf clubs $246,715 $240,824 $5,891 2%
Golf balls 55,730 59,033 (3,303) -6%
--------- --------- --------
$302,445 $299,857 $2,588 1%
========= ========= ========
Income before provision for
income taxes:
Golf clubs $45,067 $40,379 $4,688 12%
Golf balls 6,356 1,726 4,630 268%
Reconciling items (1) (14,765) (11,750) (3,015) -26%
--------- --------- --------
$36,658 $30,355 $6,303 21%
========= ========= ========
(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 March 31,
-------------------------------------------
2006
-------------------------------------------
Pro Forma Integration Employee Total as
Callaway Charges Stock Reported
Golf Compensation
--------------------------------------------
Net sales $302,445 $- $- $302,445
Gross profit 132,282 (669) (101) 131,512
% of sales 44% n/a n/a 43%
Operating expenses 92,688 351 2,117 95,156
--------- ---------- ------------ ---------
Income from operations 39,594 (1,020) (2,218) 36,356
Other income (expense),
net 302 - - 302
--------- ---------- ------------ ---------
Loss before income taxes 39,896 (1,020) (2,218) 36,658
Income tax provision 14,993 (395) (801) 13,797
--------- ---------- ------------ ---------
Net Income $24,903 $(625) $(1,417) $22,861
========= ========== ============ =========
Diluted earnings (loss)
per share: $0.36 $(0.01) $(0.02) $0.33
Weighted-average shares
outstanding: 70,143 70,143 70,143 70,143
Quarter Ended March 31,
-------------------------------------------
2005
-------------------------------------------
Pro Forma Integration Employee Total as
Callaway Charges Stock Reported
Golf Compensation
-------------------------------------------
Net sales $299,857 $- $- $299,857
Gross profit 135,689 (3,083) - 132,606
% of sales 45% -1% n/a 44%
Operating expenses 100,228 744 98 101,070
--------- ---------- ------------ ---------
Income from operations 35,461 (3,827) (98) 31,536
Other income (expense), net (1,181) - - (1,181)
--------- ---------- ------------ ---------
Loss before income taxes 34,280 (3,827) (98) 30,355
Income tax provision 13,486 (1,454) (37) 11,995
--------- ---------- ------------ ---------
Net Income $20,794 $(2,373) $(61) $18,360
========= ========== ============ =========
Diluted earnings (loss) per
share: $0.30 $(0.03) $(0.00) $0.27
Weighted-average shares
outstanding: 68,624 68,624 68,624 68,624
CONTACT: Callaway Golf Company
Brad Holiday/Patrick Burke/Larry Dorman, 760-931-1771
SOURCE: Callaway Golf Company