Unassociated Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

July 27, 2010
Date of Report (Date of earliest event reported)

CALLAWAY GOLF COMPANY
 
(Exact name of registrant as specified in its charter)

DELAWARE
1-10962
95-3797580
 
(State or other jurisdiction
(Commission
(IRS Employer
of incorporation)
File Number)
Identification No.)

2180 RUTHERFORD ROAD, CARLSBAD, CALIFORNIA
92008-7328
   
(Address of principal executive offices)
(Zip Code)

(760) 931-1771

Registrant’s telephone number, including area code

NOT APPLICABLE
 
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 

 

Item 2.02    Results of Operations and Financial Condition.*
 
On July 28, 2010, Callaway Golf Company (the “Company”) issued a press release captioned “Callaway Golf Company Announces Second Quarter and First Half 2010 Results.”  A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by this reference.

Item 2.05    Costs Associated with Exit or Disposal Activities.

The Company previously announced that it had adopted a global operations strategy targeted at improving the Company’s gross margins (the “Global Operations Strategy”).  On July 27, 2010, the Company announced the next phase of its Global Operations Strategy.  More specifically, the Company announced that it will be restructuring its global manufacturing and distribution operations over the next 18 months to add speed and flexibility to customer service demands, optimize efficiencies and facilitate long-term gross margin improvements (the “M&D Restructuring”).  This initiative will include the reorganization of the Company’s manufacturing and distribution centers located in Carlsbad, California and Toronto, Canada, the creation of third party logistics sites in Dallas, Texas and Toronto, Canada, as well as the establishment of a new production facility in Monterrey, Mexico. A copy of the July 27, 2010 press release is attached hereto as Exhibit 99.2 and incorporated herein by this reference.

Set forth below are the current estimated charges that are expected to be incurred over the next 18 months in connection with the M&D Restructuring (in thousands):

   
Cash
   
Non-cash
   
Total
 
Termination benefits
  $ 5,447     $ -     $ 5,447  
Asset write-offs
    -       100       100  
Transition costs1
    18,753       -       18,753  
Total
  $ 24,200     $ 100     $ 24,300  

1Transition costs consist primarily of consulting expenses, costs associated with redundancies during the start-up and training phase of the new production facility in Monterrey, Mexico, start-up costs associated with the establishment of third party logistics sites, travel expenses, and costs associated with the transfer of inventory and equipment.

The above enumerated charges reflect the Company’s best estimate as of the filing of this report based upon the Company’s current plans.  Any change in the Company’s plans during implementation, or any delays, difficulties, or increased costs associated with the implementation of these initiatives, could affect the estimated amounts or timing of the charges.

Item 9.01 Financial Statements and Exhibits.*

 
(c)
Exhibits.

The following exhibits are being furnished herewith:

 
Exhibit 99.1
Press Release, dated July 28, 2010, captioned “Callaway Golf Company Announces Second Quarter and First Half 2010 Results.”

 
Exhibit 99.2
Press Release, dated July 27, 2010, captioned “Callaway Golf Announces Redesign of Global Operations System.”

*  The information furnished under Item 2.02 and Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any registration statement or other filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
  

 
 
 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
CALLAWAY GOLF COMPANY
   
Date:  July 28, 2010
By:
/s/ Brian P. Lynch
 
Name:
Brian P. Lynch
 
Title:
Vice President and
   
Corporate Secretary

 
 

 

Exhibit Index

Exhibit Number
 
Description
     
99.1
 
Press Release, dated July 28, 2010, captioned “Callaway Golf Company Announces Second Quarter and First Half 2010 Results.”
     
99.2
 
Press Release, dated July 27, 2010, captioned “Callaway Golf Announces Redesign of Global Operations System.”
 
 
 

 
Unassociated Document
Exhibit 99.1
Contacts:  Brad Holiday
Eric Struik
Tim Buckman
(760) 931-1771

CALLAWAY GOLF COMPANY ANNOUNCES
SECOND QUARTER AND FIRST HALF 2010 RESULTS
 
CARLSBAD, CA /July 28, 2010/ Callaway Golf Company (NYSE:ELY) today announced its financial results for the second quarter and first half of the year ended June 30, 2010, which were consistent with the Company’s June 14th guidance.
 
For the second quarter, the Company reported:
 
 
·
Net sales of $304 million, an increase of 1% compared to $302 million for the second quarter of 2009.  Changes in foreign currency rates favorably affected net sales by $6 million in the second quarter of 2010 compared to the same period in 2009.
 
 
·
Gross profit of $124 million (41% of net sales), compared to gross profit of $110 million (36% of net sales) for the second quarter of 2009.
 
 
·
Operating expenses for the quarter of $99 million (32% of net sales) compared to $100 million (33% of net sales) for the same period in 2009.
 
 
·
Operating profit of $25 million (8% of net sales) compared to $10 million (3% of net sales) for the same period in 2009.
 
 
·
Earnings per diluted share of $0.14 (on 84.3 million weighted average shares outstanding), compared to $0.10 (on 66.8 million weighted average shares outstanding) in 2009.  Fully diluted earnings per share for the second quarter include after-tax charges for the Company’s Global Operations Strategy initiatives of $0.01 per share in 2010 and $0.02 per share in 2009.
 
For the first six months, the Company reported:
 
 
·
Net sales of $606 million, an increase of 6% compared to last year’s net sales of $574 million. Changes in foreign currency rates favorably affected net sales by $21 million for the first six months of 2010 compared to the same period in 2009.
 
 
·
Gross profit of $261 million (43% of net sales) compared to $226 million (39% of net sales) for 2009.

 
 

 
 
 
·
Operating expenses of $207 million (34% of net sales) compared to $202 million (35% of net sales) for 2009.
 
 
·
Operating profit of $53 million (9% of net sales) compared to $24 million (4% of net sales) for 2009.
 
 
·
Earnings per diluted share of $0.38 (on 84.1 million weighted average shares outstanding) compared to earnings per diluted share of $0.21 (on 65.1 million weighted average shares outstanding) for 2009.  Fully diluted earnings per share for the period include after-tax charges for the Company’s Global Operations Strategy initiatives of $0.02 per share in 2010 and $0.03 per share in 2009.

“Global economic conditions and the golf industry have recovered more slowly than our original expectations coming into 2010,” commented George Fellows, President and CEO.   “Consumer spending remains constrained by high unemployment, modest income growth, lower housing wealth and tight credit. These constraints, together with unfavorable weather conditions in many key markets for a significant portion of 2010, have resulted in an overall decline in sales in the golf industry for the year. Despite this industry decline, our first half results have improved over last year, driven in large part by our improved gross margins, more favorable foreign currency rates, and significant growth in our putters and accessories businesses.”

“While the golf industry will recover, given recent increased uncertainty regarding retailer and consumer spending in the back half of the year, it does not appear that the industry will fully recover during 2010,” continued Mr. Fellows. “We are therefore focused on the controllable portions of our business, including tight management of discretionary spending, investment in emerging markets and other key growth initiatives to drive long-term shareholder value, and improvements in our operations such as the restructuring of our global operations announced yesterday. These actions, together with the strength of our brands, will allow us to maximize results in the current environment and prepare us to take advantage of a better market once global conditions improve.”

Restructuring of Global Operations

The Company announced yesterday that it will be restructuring its global operations  over the next 18 months as a part of its overall Global Operations Strategy to add speed and flexibility to customer service demands, optimize efficiencies and facilitate long-term gross margin improvements.  This initiative will include the reorganization of the Company’s manufacturing and distribution centers located in Carlsbad, California and Toronto Canada and the creation of third party logistics sites in Dallas, Texas and Toronto, Canada as well as the establishment of a new production facility in Monterrey, Mexico.
 
 
 

 

Business Outlook

“While we expect that our overall financial results will be better than last year, the unusual uncertainty caused by the current macroeconomic and market conditions make it impossible to forecast retailer and consumer demand for golf products with any reliability,” commented Brad Holiday, Chief Financial Officer of the Company.  “We do expect that our full year gross margins will be improved compared to last year and that our full year operating expenses will be approximately flat compared to last year, even after taking into account the restoration of employee compensation and benefits that were temporarily suspended in 2009.  Because of the lack of visibility into sales, however, we are not providing specific financial guidance for the balance of the year.”

The Company previously estimated that charges for 2010 for its overall Global Operations Strategy initiatives would be approximately $.10 per share.  The scope of the initiatives has been expanded and the Company now estimates that charges for such initiatives in 2010 will be approximately $0.16 per share. Given the expanded scope of the initiatives, the Company now estimates that the savings from its overall Global Operations Strategy initiatives will be approximately $45-$55 million from 2010-2013 as compared to its prior estimate of $25-$45 million through 2012.

Conference Call and Webcast

The Company will be holding a conference call at 2:00 p.m. PDT today to discuss the Company’s financial results and the recently announced restructuring of its global operations.  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. PDT on Wednesday, August 4, 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 85601986.

* * * * *

Disclaimer:  Statements used in this press release that relate to future plans, events, financial results, performance or prospects, including statements relating to a golf industry recovery, the Company’s future performance, estimated 2010 gross margins and operating expenses, and the estimated amount and timing of the charges and savings related to the Company’s global operations strategy initiatives, 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 forward-looking statements 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 global operations strategy 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 golf industry and the Company’s business, see the Company’s Annual Report on Form 10-K for the year ended December 31, 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.
 
 
 

 

Regulation G:  The financial statement schedules attached to this press release have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).  In addition to these schedules, the Company has also provided certain supplemental financial information concerning its results, which include certain financial measures not prepared in accordance with GAAP.  The non-GAAP financial measures included in the supplemental financial information present certain of the Company’s financial results (i) excluding charges for the Company’s global operations strategy and (ii) excluding interest, taxes, depreciation and amortization expenses, and changes in the Company’s prior derivative valuation account (“Adjusted EBITDA”). 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 within the supplemental financial information attached to this press 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®, Odyssey®, Top-Flite®, Ben Hogan® and uPro™ brands in more than 110 countries worldwide. For more information please visit www.callawaygolf.com or Shop.CallawayGolf.com
 
 
 

 
 
Callaway Golf Company
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)

   
June 30,
   
December 31,
 
   
2010
   
2009
 
             
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 53,594     $ 78,314  
Accounts receivable, net
    254,549       139,776  
Inventories
    214,490       219,178  
Deferred taxes, net
    21,251       21,276  
Income taxes receivable
    584       19,730  
Other current assets
    35,246       34,713  
Total current assets
    579,714       512,987  
                 
Property, plant and equipment, net
    132,700       143,436  
Intangible assets, net
    170,455       174,017  
Other assets
    46,167       45,490  
Total assets
  $ 929,036     $ 875,930  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable and accrued expenses
  $ 134,558     $ 118,294  
Accrued employee compensation and benefits
    22,574       22,219  
Accrued warranty expense
    9,390       9,449  
Income tax liability
    14,730       1,492  
Total current liabilities
    181,252       151,454  
                 
Long-term liabilities
    13,011       14,594  
Shareholders' equity
    734,773       709,882  
Total liabilities and shareholders' equity
  $ 929,036     $ 875,930  
 
 
 

 

Callaway Golf Company
Statements of Operations
(In thousands, except per share data)
(Unaudited)
 
   
Quarter Ended
 
   
June 30,
 
   
2010
   
2009
 
             
Net sales
  $ 303,609     $ 302,219  
Cost of sales
    179,983       192,371  
Gross profit
    123,626       109,848  
Operating expenses:
               
Selling
    70,730       72,394  
General and administrative
    19,147       19,358  
Research and development
    8,648       7,837  
Total operating expenses
    98,525       99,589  
Income from operations
    25,101       10,259  
Other (expense) income, net
    (4,704 )     512  
Other income before income taxes
    20,397       10,771  
Income tax provision
    8,932       3,859  
Net income
    11,465       6,912  
Dividends on convertible preferred stock
    2,625       438  
Net income allocable to common shareholders
  $ 8,840     $ 6,474  
                 
Earnings per common share:
               
Basic
  $ 0.14     $ 0.10  
Diluted
  $ 0.14     $ 0.10  
Weighted-average common shares outstanding:
               
Basic
    63,844       63,121  
Diluted
    84,259       66,807  
 
   
Six Months Ended
 
   
June 30,
 
   
2010
   
2009
 
             
Net sales
  $ 606,484     $ 574,083  
Cost of sales
    345,563       348,054  
Gross profit
    260,921       226,029  
Operating expenses:
               
Selling
    145,358       147,044  
General and administrative
    44,123       39,345  
Research and development
    17,966       15,940  
Total operating expenses
    207,447       202,329  
Income from operations
    53,474       23,700  
Other expense, net
    (3,133 )     (1,869 )
Income before income taxes
    50,341       21,831  
Income tax provision
    18,573       8,107  
Net income
    31,768       13,724  
Dividends on convertible preferred stock
    5,250       438  
Net income allocable to common shareholders
  $ 26,518     $ 13,286  
                 
Earnings per common share:
               
Basic
  $ 0.42     $ 0.21  
Diluted
  $ 0.38     $ 0.21  
Weighted-average common shares outstanding:
               
Basic
    63,749       63,060  
Diluted
    84,093       65,105  
 
 
 

 
 
Callaway Golf Company
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)

   
Six Months Ended
 
   
June 30,
 
   
2010
   
2009
 
Cash flows from operating activities:
           
Net income
  $ 31,768     $ 13,724  
Adjustments to reconcile net income to net cash used in operating activities:
               
Depreciation and amortization
    19,555       20,116  
Deferred taxes, net
    (1,914 )     (5,509 )
Non-cash share-based compensation
    5,002       3,684  
Gain (loss) on disposal of long-lived assets
    73       (375 )
Changes in assets and liabilities
    (64,216 )     (40,708 )
Net cash used in operating activities
    (9,732 )     (9,068 )
                 
Cash flows from investing activities:
               
Capital expenditures
    (7,549 )     (19,448 )
Other investing activities
    (1,870 )     (31 )
Net cash used in investing activities
    (9,419 )     (19,479 )
                 
Cash flows from financing activities:
               
Issuance of common stock
    1,683       1,498  
Issuance of preferred stock
    -       140,000  
Equity issuance cost
    (60 )     (5,871 )
Dividends paid, net
    (6,530 )     (4,430 )
Payments on credit facilities, net
    -       (90,000 )
Other financing activities
    (249 )     54  
Net cash (used in) provided by financing activities
    (5,156 )     41,251  
                 
Effect of exchange rate changes on cash and cash equivalents
    (413 )     (570 )
Net (decrease) increase in cash and cash equivalents
    (24,720 )     12,134  
Cash and cash equivalents at beginning of period
    78,314       38,337  
Cash and cash equivalents at end of period
  $ 53,594     $ 50,471  
 
 
 

 

Callaway Golf Company
Consolidated Net Sales and Operating Segment Information
(In thousands)
(Unaudited)

   
Net Sales by Product Category
 
   
Quarter Ended
         
Six Months Ended
       
   
June 30,
   
Growth/(Decline)
   
June 30,
   
Growth/(Decline)
 
   
2010
   
2009
   
Dollars
   
Percent
   
2010
   
2009
   
Dollars
   
Percent
 
Net sales:
                                               
Woods
  $ 63,263     $ 75,956     $ (12,693 )     -17 %   $ 157,752     $ 155,838     $ 1,914       1 %
Irons
    71,489       72,222       (733 )     -1 %     128,924       137,409       (8,485 )     -6 %
Putters
    33,520       26,421       7,099       27 %     71,667       54,112       17,555       32 %
Golf balls
    58,003       58,245       (242 )     0 %     109,138       105,593       3,545       3 %
Accessories and other
    77,334       69,375       7,959       11 %     139,003       121,131       17,872       15 %
    $ 303,609     $ 302,219     $ 1,390       0 %   $ 606,484     $ 574,083     $ 32,401       6 %

   
Net Sales by Region
 
   
Quarter Ended
         
Six Months Ended
       
   
June 30,
   
Growth/(Decline)
   
June 30,
   
Growth/(Decline)
 
   
2010
   
2009
   
Dollars
   
Percent
   
2010
   
2009
   
Dollars
   
Percent
 
Net sales:
                                               
United States
  $ 162,363     $ 163,739     $ (1,376 )     -1 %   $ 313,419     $ 305,020     $ 8,399       3 %
Europe
    41,475       42,477       (1,002 )     -2 %     83,734       85,480       (1,746 )     -2 %
Japan
    30,179       37,061       (6,882 )     -19 %     83,562       84,456       (894 )     -1 %
Rest of Asia
    24,726       21,300       3,426       16 %     49,315       37,852       11,463       30 %
Other foreign countries
    44,866       37,642       7,224       19 %     76,454       61,275       15,179       25 %
    $ 303,609     $ 302,219     $ 1,390       0 %   $ 606,484     $ 574,083     $ 32,401       6 %

   
Operating Segment Information
 
   
Quarter Ended
         
Six Months Ended
       
   
June 30,
   
Growth/(Decline)
   
June 30,
   
Growth/(Decline)
 
   
2010
   
2009
   
Dollars
   
Percent
   
2010
   
2008
   
Dollars
   
Percent
 
Net sales:
                                               
Golf clubs
  $ 245,606     $ 243,974     $ 1,632       1 %   $ 497,346     $ 468,490     $ 28,856       6 %
Golf balls
    58,003       58,245       (242 )     0 %     109,138       105,593       3,545       3 %
    $ 303,609     $ 302,219     $ 1,390       0 %   $ 606,484     $ 574,083     $ 32,401       6 %
                                                                 
Income (loss) before income taxes:
                                                               
Golf clubs
  $ 30,838     $ 25,367     $ 5,471       22 %   $ 74,453     $ 53,648     $ 20,805       39 %
Golf balls
    5,751       (965 )     6,716    
NM
      7,646       (2,663 )     10,309    
NM
 
Reconciling items (1)
    (16,192 )     (13,631 )     (2,561 )     -19 %     (31,758 )     (29,154 )     (2,604 )     -9 %
    $ 20,397     $ 10,771     $ 9,626       89 %   $ 50,341     $ 21,831     $ 28,510       131 %

(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 June 30,
   
Quarter Ended June 30,
 
   
2010
   
2009
 
   
Pro Forma
Callaway Golf
   
Global
Operations
Strategy
Initiatives
   
Total as
Reported
   
Pro Forma
Callaway Golf
   
Global
Operations
Strategy
Initiatives
   
Total as
Reported
 
Net sales
  $ 303,609     $ -     $ 303,609     $ 302,219     $ -     $ 302,219  
Gross profit
    124,823       (1,197 )     123,626       111,662       (1,814 )     109,848  
% of sales
    41 %     n/a       41 %     37 %     n/a       36 %
Operating expenses
    98,417       108       98,525       99,589       -       99,589  
Income (loss) from operations
    26,406       (1,305 )     25,101       12,073       (1,814 )     10,259  
Other income (loss), net
    (4,704 )     -       (4,704 )     512       -       512  
Income (loss) before income taxes
    21,702       (1,305 )     20,397       12,585       (1,814 )     10,771  
Income tax provision (benefit)
    9,428       (496 )     8,932       4,557       (698 )     3,859  
Net income (loss)
    12,274       (809 )     11,465       8,028       (1,116 )     6,912  
                                                 
Dividends on convertible preferred stock
    2,625       -       2,625       438       -       438  
Net income (loss) allocable to common shareholders
  $ 9,649     $ (809 )   $ 8,840     $ 7,590     $ (1,116 )   $ 6,474  
                                                 
Diluted earnings (loss) per share:
  $ 0.15     $ (0.01 )   $ 0.14     $ 0.12     $ (0.02 )   $ 0.10  
Weighted-average shares outstanding:
    84,259       84,259       84,259       66,807       66,807       66,807  

   
Six Months Ended June 30,
   
Six Months Ended June 30,
 
   
2010
   
2009
 
   
Pro Forma
Callaway Golf
   
Global
Operations
Strategy
Initiatives
   
Total as
Reported
   
Pro Forma
Callaway Golf
   
Global
Operations
Strategy
Initiatives
   
Total as
Reported
 
Net sales
  $ 606,484     $ -     $ 606,484     $ 574,083     $ -     $ 574,083  
Gross profit
    263,118       (2,197 )     260,921       229,399       (3,370 )     226,029  
% of sales
    43 %     n/a       43 %     40 %     n/a       39 %
Operating expenses
    207,286       161       207,447       202,329       -       202,329  
Income (loss)  from operations
    55,832       (2,358 )     53,474       27,070       (3,370 )     23,700  
Other expense, net
    (3,133 )     -       (3,133 )     (1,869 )     -       (1,869 )
Income (expense) before income taxes
    52,699       (2,358 )     50,341       25,201       (3,370 )     21,831  
Income tax provision (benefit)
    19,493       (920 )     18,573       9,404       (1,297 )     8,107  
Net income (loss)
    33,206       (1,438 )     31,768       15,797       (2,073 )     13,724  
                                                 
Dividends due to preferred shareholders
    5,250       -       5,250       438       -       438  
Net income (loss) available to common shareholders
  $ 27,956     $ (1,438 )   $ 26,518     $ 15,359     $ (2,073 )   $ 13,286  
                                                 
Diluted earnings (loss) per share:
  $ 0.40     $ (0.02 )   $ 0.38     $ 0.24     $ (0.03 )   $ 0.21  
Weighted-average shares outstanding:
    84,093       84,093       84,093       65,105       65,105       65,105  
 
   
2010 Trailing Twelve Months Adjusted EBITDA
 
Adjusted EBITDA:
 
Quarter Ended
 
   
September 30,
   
December 31,
   
March 31,
   
June 30,
       
   
2009
   
2009
   
2010
   
2010
   
Total
 
Net income (loss)
  $ (13,429 )   $ (15,555 )   $ 20,303     $ 11,465     $ 2,784  
Interest expense (income), net
    (46 )     (435 )     (118 )     (242 )     (841 )
Income tax provision (benefit)
    (11,308 )     (11,142 )     9,641       8,932       (3,877 )
Depreciation and amortization expense
    10,128       10,504       9,949       9,606       40,187  
Change in energy derivative valuation acct.
    -       -       -       -       -  
Adjusted EBITDA
  $ (14,655 )   $ (16,628 ) -   $ 39,775     $ 29,761     $ 38,253  
 
   
2009 Trailing Twelve Months Adjusted EBITDA
 
Adjusted EBITDA:
 
Quarter Ended
 
   
September 30,
   
December 31,
   
March 31,
   
June 30,
       
   
2008
   
2008
   
2009
   
2009
   
Total
 
Net income (loss)
  $ (7,443 )   $ (3,154 )   $ 6,812     $ 6,912     $ 3,127  
Interest expense (income), net
    497       272       (123 )     551       1,197  
Income tax provision (benefit)
    (6,676 )     (4,766 )     4,248       3,859       (3,335 )
Depreciation and amortization expense
    9,463       9,216       9,944       10,172       38,795  
Change in energy derivative valuation acct.
    -       (19,922 )     -       -       (19,922 )
Adjusted EBITDA
  $ (4,159 )   $ (18,354 )   $ 20,881     $ 21,494     $ 19,862  
 
 
 

 
Unassociated Document
Exhibit 99.2
CONTACT:
Tim Buckman
Callaway Golf
(760) 804-4133
Tim.Buckman@CallawayGolf.com

CALLAWAY GOLF ANNOUNCES REDESIGN OF GLOBAL OPERATIONS SYSTEM

New Manufacturing and Distribution Model Optimizes Efficiencies, Supports Global Operations Strategy

CARLSBAD, Calif., July 27, 2010 – Callaway Golf Company (NYSE: ELY) today announced a restructuring of its global operations to occur over the next 18 months.  The initiative encompasses the reorganization of manufacturing and distribution centers located in Carlsbad, Calif. and Toronto, Canada; the creation of third-party logistics sites in Dallas, Texas, and Toronto; and the establishment of a new production facility in Monterrey, Mexico.  The redesign, which is part of the Company’s previously announced Global Operations Strategy, increases speed and flexibility to the support of customer service demands, optimizes efficiencies and furthers long-term gross margin improvements.

Callaway’s global operations restructure is the result of a comprehensive analysis to identify improved manufacturing and supply chain processes.  This undertaking will provide greater flexibility to shift global production and distribution in response to specific needs and changing global economic factors, and is consistent with the Company’s recent distribution network renovations in Europe, Japan and Southeast Asia.  Callaway’s International business is expected to represent more than half of the Company’s future annual revenue, and this redesign of its global operations allows the Company to better serve this expanding International footprint.

Manufacturing and distribution capabilities will remain in Carlsbad and Toronto, however a gradual reduction in workforce will impact each location over the next 18 months.  Consistent with the Company’s core values, Callaway Golf will provide transition support to impacted employees.

“The redesign of Callaway’s global operations creates a stronger, more flexible model that better positions our business for the future,” said George Fellows, President and CEO, Callaway Golf.  “This decision was based on an extensive review of our operations structure and supports the gross margin improvements necessary to secure our leadership position in a competitive market.”

Callaway Golf announced previously that it will release its second quarter 2010 financial results on Wednesday afternoon, July 28, 2010.  The Company will subsequently hold a conference call to review 2nd quarter financial results and discuss specifics of its global operations redesign at 2:00 p.m. PDT that same day. The call will be broadcast live over the Internet and can be accessed at www.callawaygolf.com.

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®, Odyssey®, Top-Flite®, and Ben Hogan® brands in more than 110 countries worldwide. For more information please visit www.callawaygolf.com or shop.callawaygolf.com.

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