Callaway Golf Company Announces 2009 Fourth Quarter and Annual Results
CARLSBAD, Calif., Jan 26, 2010 /PRNewswire via COMTEX/ -- Callaway Golf Company (NYSE: ELY) today announced its financial results for the fourth quarter and full year ended December 31, 2009.
For the fourth quarter, the Company reported:
- Net sales of $186 million, an increase of 9% compared to $171 million for the fourth quarter of 2008. On a currency neutral basis, net sales would have been $177 million, an increase of 3% compared to the fourth quarter of 2008.
- Gross profit of $58 million (31% of net sales) compared to gross profit of $60 million (35% of net sales) in the fourth quarter of 2008.
- Operating expenses of $87 million (47% of net sales), a decrease of 2% compared to $89 million (52% of net sales) for the same period in 2008.
- A pro forma loss of $0.27 per share (on 63.5 million common shares outstanding), compared to a pro forma loss of $0.24 per share (on 62.7 million common shares outstanding) in 2008. The pro forma loss per share for the fourth quarter of 2009 excludes a charge of $0.02 per share associated with the Company's gross margin improvement initiatives. The loss per share for the fourth quarter of 2008 excludes a non-cash gain of $0.22 per share associated with the reversal of the Company's previous energy derivative valuation account and a charge of $0.03 per share for the gross margin improvement initiatives. Including the gross margin initiative charges and energy derivative gain, the Company's reported fourth quarter results were a loss of $0.29 per share for 2009 and a loss of $0.05 per share for 2008.
For the full year, the Company reported:
- Net sales of $951 million, a decrease of 15% compared to $1.1 billion for the same period last year. On a currency neutral basis, net sales would have been $987 million, a decrease of 12% compared to 2008.
- Gross profit of $344 million (36% of net sales), compared to $487 million (44% of net sales) for 2008, reflecting the unusually heavy discounting in the marketplace as a result of the economic environment.
- Operating expenses of $374 million (39% of net sales), a decrease of 7% compared to $403 million (36% of net sales) for 2008.
- A pro forma loss per share of $0.27 (on 63.2 million common shares outstanding) compared to pro forma fully diluted earnings per share of $0.94 (on 63.8 million common shares outstanding) for 2008. The pro forma loss per share for 2009 excludes $0.06 per share associated with the Company's gross margin improvement initiatives. Pro forma fully diluted earnings per share for 2008 excludes a gain of $0.22 associated with the reversal of the energy derivative valuation account and charges of $0.12 per share for the gross margin improvement initiatives. Including the gross margin initiative charges and energy derivative gain, the Company's reported full year results were a loss of $0.33 per share for 2009 and earnings of $1.04 per share for 2008.
"The economic and market conditions in 2009 were without a doubt the most challenging in recent history," commented George Fellows, President and Chief Executive Officer. "The actions we took in 2009 to manage those difficult conditions not only allowed us to weather 2009 but they also put us in a good position to take advantage of what we expect will be improving economic and market conditions in 2010," added Mr. Fellows. "Our balanced approach to managing expenses while at the same time investing in targeted growth initiatives allowed us both to reduce our operating expenses in 2009 and at the same time prepare for new market expansion, including the India launch earlier this month. Improved processes resulting from our gross margin initiatives have also allowed us to reduce our inventory levels to their lowest year end levels for the past five years and finish 2009 with inventory as a percent of net sales of 23%, despite declining sales in 2009. All of these actions and others should benefit us in 2010."
"We are cautiously optimistic that the economy and the golf industry will begin to recover in 2010," continued Mr. Fellows. "Factors contributing to our optimistic outlook include positive customer and media feedback on our 2010 product line, conservative inventory levels at retail, improving economic and foreign currency trends, and an anticipated decrease in discounting in the marketplace. While it will take more than 2010 for the golf industry to fully recover, we believe this year will be a good step toward that full recovery."
Business Outlook
The Company estimates sales in 2010 will improve to a range of $990 million to $1.05 billion due to improved economic and market conditions in addition to favorable foreign currency exchange rates compared to 2009. Gross margins for the year are estimated to improve to a range of approximately 42% to 44%, due to a strong product offering and anticipated lower discounting activity at retail. Operating expenses for the year are estimated to be approximately $375 - $405 million compared to $374 million in 2009. This estimate includes increased expenses associated with re-instatement of several employee benefits suspended during 2009 and additional expenses associated with new market expansion, such as India, as well as other growth initiatives. The Company estimates full year pro forma earnings per share of $0.25 to $0.35, which includes a reduction of approximately $0.16 per share related to the Company's preferred stock, and which excludes after tax charges of approximately $0.10 per share associated with the Company's global operations strategy targeted at improved gross margins.
Conference Call and Webcast
The Company will be holding a conference call at 2:00 p.m. PST 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 call ends, and will remain available through 9:00 p.m. PST on Tuesday, February 2, 2010. 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 51600663.
Disclaimer: Statements used in this press release that relate to future plans, events, financial results, performance or prospects, including statements relating to an economic or golf industry recovery, future growth, improvement in foreign currency exchange rates, future discounting, and estimated 2010 sales, gross margins, operating expenses, and earnings, 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. Accurately estimating the Company's reported future financial performance is based upon various unknowns, including future changes in foreign currency exchange rates, consumer acceptance 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. 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, in manufacturing the Company's products, or in connection with the implementation of the Company's planned gross margin initiatives or the implementation of future initiatives; 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 and the Company's business, see the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 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 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.
Currency Neutral Basis: This press release includes information regarding certain aspects of the Company's financial results for the fourth quarter and full year 2009 that is presented on a "currency neutral basis." This information estimates the impact of the effect of foreign currency translation on the Company's 2009 results as compared to the same period in 2008. This impact is derived by taking the Company's 2009 local currency results and translating them into U.S. dollars based upon 2008 foreign currency exchange rates for the periods presented and does not include any other effect of changes in foreign currency rates on the Company's results.
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 include certain financial measures not prepared in accordance with GAAP. The non-GAAP financial measures included in this press release present certain of the Company's financial results on a "currency neutral basis" or exclude charges related to the Company's gross margin initiatives or the gain from the reversal of the Company's prior energy derivative valuation account. 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 for investors as to the underlying performance of the Company's business without regard to these items. The Company has provided reconciling information in the text of this press release or in the schedules attached to this release.
About Callaway Golf
Through an unwavering commitment to innovation, Callaway Golf Company (NYSE: ELY) 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(R), Odyssey(R), Top-Flite(R), Ben Hogan(R) and uPro(TM) brands in more than 110 countries worldwide. For more information please visit www.callawaygolf.com or Shop.CallawayGolf.com
Contacts: Brad Holiday
Eric Struik
(760) 931-1771
Callaway Golf Company
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
December 31, December 31,
2009 2008
---- ----
ASSETS
Current assets:
Cash and cash equivalents $78,314 $38,337
------- -------
Accounts receivable, net 139,776 120,067
------- -------
Inventories 219,178 257,191
------- -------
Deferred taxes, net 21,276 27,046
------ ------
Income taxes receivable 19,730 15,549
------ ------
Other current assets 34,713 31,813
------ ------
Total current assets 512,987 490,003
-------
Property, plant and equipment, net 143,436 142,145
Intangible assets, net 174,017 176,689
Other assets 45,490 46,501
------ ------
Total assets $875,930 $855,338
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $118,294 $126,167
======== ========
Accrued employee compensation and
benefits 22,219 25,630
====== ======
Accrued warranty expense 9,449 11,614
===== ======
Income tax liability 1,492 -
===== ===
Credit facilities - 90,000
--- ------
Total current liabilities 151,454 253,411
Long-term liabilities 14,594 21,559
------ ------
Shareholders' equity 709,882 580,368
------- -------
Total liabilities and shareholders'
equity $875,930 $855,338
======== ========
Callaway Golf Company
Statements of Operations
(In thousands, except per share data)
(Unaudited)
Quarter Ended
December 31,
------------
2009 2008
---- ----
Net sales $185,852 $171,272
--------
Cost of sales 127,695 111,184
------- -------
Gross profit 58,157 60,088
------
Operating expenses:
Selling 56,581 61,450
------
General and administrative 21,690 19,993
------
Research and development 8,546 7,258
----- -----
Total operating expenses 86,817 88,701
Loss from operations (28,660) (28,613)
-------
Other income, net 1,963 20,693
----- ------
Loss before income taxes (26,697) (7,920)
-------
Income tax benefit (11,142) (4,766)
------- ------
Net loss (15,555) (3,154)
Dividends on convertible
preferred stock 2,625 -
----- ---
Net loss allocable to common
shareholders $(18,180) $(3,154)
======== =======
Loss per common share:
Basic ($0.29) ($0.05)
======
Diluted ($0.29) ($0.05)
Weighted-average common shares outstanding:
Basic 63,472 62,662
Diluted 63,472 62,662
Year Ended
December 31,
------------
2009 2008
---- ----
Net sales $950,799 $1,117,204
Cost of sales 607,036 630,371
------- -------
Gross profit 343,763 486,833
Operating expenses:
Selling 260,597 287,802
General and administrative 81,487 85,473
Research and development 32,213 29,370
------ ------
Total operating expenses 374,297 402,645
Income (loss) from operations (30,534) 84,188
Other income, net 931 17,119
--- ------
Income (loss) before income
taxes (29,603) 101,307
Income tax provision (benefit) (14,343) 35,131
------- ------
Net income (loss) (15,260) 66,176
Dividends on convertible
preferred stock 5,688 -
----- ---
Net income (loss) allocable to
common shareholders $(20,948) $66,176
======== =======
Earnings (loss) per common share:
Basic ($0.33) $1.05
Diluted ($0.33) $1.04
Weighted-average common shares outstanding:
Basic 63,176 63,055
Diluted 63,176 63,798
Callaway Golf Company
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Year Ended
December 31,
------------
2009 2008
---- ----
Cash flows from operating activities:
Net income (loss) $(15,260) $66,176
--------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 40,748 37,963
------
Deferred taxes, net 3,424 13,977
----- ------
Non-cash share-based compensation 8,756 6,375
----- -----
(Gain) loss on disposal of long-lived
assets (594) 510
---- ---
Non-cash change in energy derivative
valuation account - (19,922)
--- -------
Changes in assets and liabilities 5,797 (63,374)
----- -------
Net cash provided by operating activities 42,871 41,705
------ ------
Cash flows from investing activities:
Capital expenditures (38,845) (51,005)
Acquisitions, net of cash acquired - (9,797)
Other investing activities 166 (718)
--- ----
Net cash used in investing activities (38,679) (61,520)
------- -------
Cash flows from financing activities:
Issuance of preferred stock 140,000 -
Equity issuance costs (6,031) -
Issuance of common stock 2,562 4,708
Dividends paid, net (11,590) (17,794)
Acquisition of treasury stock - (23,650)
Proceeds from (payments on) credit
facilities, net (90,000) 53,493
------- ------
Other financing activities 172 307
--- ---
Net cash provided by financing activities 35,113 17,064
------ ------
Effect of exchange rate changes on cash and
cash equivalents 672 (8,787)
--- ------
Net increase (decrease) in cash and cash
equivalents 39,977 (11,538)
Cash and cash equivalents at beginning of
period 38,337 49,875
------ ------
Cash and cash equivalents at end of period $78,314 $38,337
======= =======
Callaway Golf Company
Consolidated Net Sales and Operating Segment Information
(In thousands)
(Unaudited)
Net Sales by Product Category
-----------------------------
Quarter Ended
December 31, Growth/(Decline)
------------ ----------------
2009 2008 Dollars Percent
---- ---- ------- -------
Net sales:
Woods $32,019 $31,243 $776 2%
Irons 47,205 48,245 (1,040) -2%
Putters 26,923 12,883 14,040 109%
Golf balls 34,396 41,994 (7,598) -18%
Accessories and
other 45,309 36,907 8,402 23%
------ ------ -----
$185,852 $171,272 $14,580 9%
======== ======== =======
Year Ended
December 31, Growth/(Decline)
------------ ----------------
2009 2008 Dollars Percent
---- ---- ------- -------
Net sales:
Woods $223,603 $268,286 $(44,683) -17%
Irons 233,985 308,556 (74,571) -24%
Putters 98,134 101,676 (3,542) -3%
Golf balls 180,885 223,075 (42,190) -19%
Accessories and
other 214,192 215,611 (1,419) -1%
------- ------- ------
$950,799 $1,117,204 $(166,405) -15%
======== ========== =========
Net Sales by Region
Quarter Ended
December 31, Growth/(Decline)
------------ ----------------
2009 2008 Dollars Percent
---- ---- ------- -------
Net sales:
United States $76,494 $88,976 $(12,482) -14%
Europe 22,019 19,804 2,215 11%
Japan 49,102 33,753 15,349 45%
Rest of Asia 18,130 12,983 5,147 40%
Other foreign
countries 20,107 15,756 4,351 28%
------ ------ -----
$185,852 $171,272 $14,580 9%
======== ======== =======
Year Ended
December 31, Growth/(Decline)
------------ ----------------
2009 2008 Dollars Percent
---- ---- ------- -------
Net sales:
United States $475,383 $554,029 $(78,646) -14%
Europe 134,508 191,089 (56,581) -30%
Japan 162,695 166,476 (3,781) -2%
Rest of Asia 76,963 80,011 (3,048) -4%
Other foreign
countries 101,250 125,599 (24,349) -19%
------- ------- -------
$950,799 $1,117,204 $(166,405) -15%
======== ========== =========
Operating Segment Information
Quarter Ended
December 31, Growth/(Decline)
------------ ----------------
2009 2008 Dollars Percent
---- ---- ------- -------
Net sales:
Golf clubs $151,456 $129,278 $22,178 17%
Golf balls 34,396 41,994 (7,598) -18%
------ ------ ------
$185,852 $171,272 $14,580 9%
======== ======== =======
Income (loss)
before income
taxes:
Golf clubs $(7,215) $(12,174) $4,959 41%
------- --------
Golf balls (6,964) (3,145) (3,819) -121%
------ ------
Reconciling items
(1) (12,518) 7,399 (19,917) 269%
------- ----- -------
$(26,697) $(7,920) $(18,777) -237%
======== ======= ========
Year Ended
December 31, Growth/(Decline)
------------ ----------------
2009 2008 Dollars Percent
---- ---- ------- -------
Net sales:
Golf clubs $769,914 $894,129 $(124,215) -14%
Golf balls 180,885 223,075 (42,190) -19%
------- ------- -------
$950,799 $1,117,204 $(166,405) -15%
======== ========== =========
Income (loss)
before income
taxes:
Golf clubs $38,934 $134,018 $(95,084) -71%
Golf balls (13,864) 6,903 (20,767) -301%
Reconciling items
(1) (54,673) (39,614) (15,059) -38%
------- ------- -------
$(29,603) $101,307 $(130,910) -129%
======== ======== =========
(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,
--------------------------
2009
----
Pro Forma Gross Margin
Callaway Improvement Total as
Golf Initiatives Reported
---------- ------------- ---------
Net sales $185,852 $- $185,852
Gross profit 60,031 (1,874) 58,157
% of sales 32% n/a 31%
Operating expenses 86,817 - 86,817
------ --- ------
Loss from operations (26,786) (1,874) (28,660)
Other income, net 1,963 - 1,963
----- --- -----
Income (loss) before income
taxes (24,823) (1,874) (26,697)
Income tax provision (benefit) (10,369) (773) (11,142)
------- ---- -------
Net income (loss) (14,454) (1,101) (15,555)
Dividends on convertible
preferred stock 2,625 - 2,625
----- --- -----
Net income (loss) allocable to
common shareholders $(17,079) $(1,101) $(18,180)
======== ======= ========
Diluted earnings (loss) per
share: $(0.27) $(0.02) $(0.29)
Weighted-average shares
outstanding: 63,472 63,472 63,472
Quarter Ended December 31,
--------------------------
2008
----
Pro Forma Gross Margin
Callaway Improvement Enron Total as
Golf Initiatives Derivative Reported
---------- ------------- ----------- ---------
Net sales $171,272 $- $- $171,272
Gross profit 63,201 (3,113) - 60,088
% of sales 37% n/a - 35%
Operating expenses 88,619 82 - 88,701
------ --- --- ------
Loss from
operations (25,418) (3,195) - (28,613)
Other income, net 771 - 19,922 20,693
--- --- ------ ------
Income (loss)
before income
taxes (24,647) (3,195) 19,922 (7,920)
Income tax
provision
(benefit) (9,400) (1,230) 5,864 (4,766)
------ ------ ----- ------
Net income (loss) (15,247) (1,965) 14,058 (3,154)
Dividends on
convertible
preferred stock - - - -
--- --- --- ---
Net income (loss)
allocable to
common
shareholders $(15,247) $(1,965) $14,058 $(3,154)
======== ======= ======= =======
Diluted earnings
(loss) per share: $(0.24) $(0.03) $0.22 $(0.05)
Weighted-average
shares
outstanding: 62,662 62,662 62,662 62,662
Year Ended December 31,
-----------------------
2009
----
Pro Forma Gross Margin
Callaway Improvement Total as
Golf Initiatives Reported
---------- ------------- ---------
Net sales $950,799 $- $950,799
Gross profit 349,919 (6,156) 343,763
% of sales 37% n/a 36%
Operating expenses 374,297 - 374,297
------- --- -------
Income (loss) from
operations (24,378) (6,156) (30,534)
Other income (expense), net 931 - 931
--- --- ---
Income (loss) before income
taxes (23,447) (6,156) (29,603)
Income tax provision
(benefit) (11,921) (2,422) (14,343)
------- ------ -------
Net income (loss) (11,526) (3,734) (15,260)
Dividends on convertible
preferred stock 5,688 - 5,688
----- --- -----
Net income (loss) allocable
to common shareholders $(17,214) $(3,734) $(20,948)
======== ======= ========
Diluted earnings (loss) per
share: $(0.27) $(0.06) $(0.33)
Weighted-average shares
outstanding: 63,176 63,176 63,176
Year Ended December 31,
-----------------------
2008
----
Pro Forma Gross Margin
Callaway Improvement Enron Total as
Golf Initiatives Derivative Reported
---------- ------------- ----------- ---------
Net sales $1,117,204 $- $- $1,117,204
Gross profit 499,367 (12,534) - 486,833
% of sales 45% n/a - 44%
Operating expenses 402,469 176 - 402,645
------- --- -------
Income (loss)
from operations 96,898 (12,710) - 84,188
Other income
(expense), net (2,803) - 19,922 17,119
------ --- ------ ------
Income (loss)
before income
taxes 94,095 (12,710) 19,922 101,307
Income tax
provision
(benefit) 34,160 (4,893) 5,864 35,131
------ ------ ----- ------
Net income (loss) 59,935 (7,817) 14,058 66,176
Dividends on
convertible
preferred stock - - - -
--- --- --- ---
Net income (loss)
allocable to
common
shareholders $59,935 $(7,817) $14,058 $66,176
======= ======= ======= =======
Diluted earnings
(loss) per share: $0.94 $(0.12) $0.22 $1.04
Weighted-average
shares
outstanding: 63,798 63,798 63,798 63,798
Adjusted EBITDA:
2009 Trailing Twelve Months Adjusted EBITDA
-------------------------------------------
Quarter Ended
-------------
September
March 31, June 30, 30, December 31,
2009 2009 2009 2009 Total
---- ---- ---- ---- -----
Net income
(loss) $6,812 $6,912 $(13,429) $(15,555) $(15,260)
------ ------ -------- --------
Interest
expense
(income),
net (123) 551 (46) (435) (53)
---- --- --- ----
Income tax
provision
(benefit) 4,248 3,859 (11,308) (11,142) (14,343)
----- ----- ------- -------
Depreciation
and
amortization
expense 9,944 10,172 10,128 10,504 40,748
----- ------ ------ ------
Change in
energy
derivative
valuation
acct. - - - - -
--- --- --- --- ---
Adjusted
EBITDA $20,881 $21,494 - $(14,655) $(16,628) $11,092
======= ======= ======== ======== =======
2008 Trailing Twelve Months Adjusted EBITDA
-------------------------------------------
Quarter Ended
-------------
September December
March 31, June 30, 30, 31,
--------- --------
2008 2008 2008 2008 Total
---- ---- ---- ---- -----
Net income (loss) $39,666 $37,107 $(7,443) $(3,154) $66,176
------- ------- ------- -------
Interest expense
(income), net 591 994 497 272 2,354
--- --- --- ---
Income tax
provision
(benefit) 25,990 20,583 (6,676) (4,766) 35,131
------ ------ ------ ------
Depreciation and
amortization
expense 8,794 10,490 9,463 9,216 37,963
----- ------ ----- -----
Change in energy
derivative
valuation acct. - - - (19,922) (19,922)
--- --- --- ------- -------
Adjusted EBITDA $75,041 $69,174 $(4,159) $(18,354) $121,702
======= ======= ======= ======== ========
SOURCE Callaway Golf Company