Callaway Golf Company Announces 2009 Fourth Quarter and Annual Results

CARLSBAD, Calif., Jan. 26 /PRNewswire-FirstCall/ -- 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®, 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

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SOURCE Callaway Golf Company