CARLSBAD, Calif., July 25 /PRNewswire/ -- Callaway Golf Company
(NYSE: ELY) today reported second quarter and six months operating results for
the period ended June 30, 2001.
Net sales for the six months ended June 30, 2001 increased 6% to a record
$515.0 million, compared to $487.3 million during the same period in 2000.
Net income during the period increased 9% to $61.1 million from $56.3 million
for the comparable period last year, and earnings per diluted share increased
6% to $0.83 per diluted share from $0.78 per diluted share for the comparable
period last year. Excluding a non-cash charge related to a long-term energy
supply contract, Callaway Golf's net income for the first six months increased
20% to $67.3 million, and diluted earnings per share increased 17% to $0.91.
"We are pleased to announce a record first half of the year given today's
challenging worldwide economic environment," said Ron Drapeau, President and
CEO of Callaway Golf. "In particular, we are pleased with first half earnings
growth of 9% in contrast to industry trends. Given the current environment, I
believe the sales and earnings growth are testaments to our products, brand
strength, and team of managers and employees."
Second quarter net sales declined 13% to $253.7 million from
$289.9 million during the same quarter in 2000. Net income during the quarter
declined 39% to $27.0 million from $44.2 million the previous year. Second
quarter 2001 diluted earnings per share decreased 41% to $0.36 from $0.61 in
the same period last year. Excluding the non-cash energy supply contract
charge, Callaway Golf's net income decreased 25% to $33.2 million and diluted
earnings per share decreased 28% to $0.44.
Callaway Golf entered into a long-term energy supply contract during the
second quarter to manage its electricity costs in light of uncertainty in the
California energy market. Accounting rules mandate the value of such
contracts be adjusted based on current market rates and any resulting gain or
loss be recorded as either income or expense. During the quarter, Callaway
Golf recorded a non-cash expense of $6.2 million after-tax or $0.08 per
diluted share, as a result of fluctuating electricity rates. The Company may
report non-cash income or expense charges in the future as California's
underlying energy prices fluctuate in relation to the contract price.
"Our second quarter results were in line with our guidance," continued Mr.
Drapeau. "While our international business remains solid, our consolidated
results were negatively impacted by the strong U.S. dollar relative to other
currencies. When measured in constant dollars, our first half net income
increased 25% from last year. Furthermore, we believe our inventories, both
domestically and internationally, are well controlled and will allow us to
capitalize on sales opportunities as industry conditions improve."
Mr. Drapeau added, "Our strategic initiatives into the golf ball business
and direct sales in Japan continue to trend positively. The May launch of our
CB1(TM) two piece golf ball was very well received by retailers and consumers,
resulting in a 12% U.S. market share in its price category. Combined with
sales of our Rule 35(R) golf balls, our golf ball sales in the first half of
2001 nearly equaled all of 2000. We also remain pleased with our decision to
invest in our Japanese subsidiary, which posted a 32% year-over-year sales
increase during the first six months of 2001 despite the weak yen. This
increase partially offset sales declines in Europe and the rest of Asia. We
continue executing on our business and brand strategies with an eye toward
maintaining our market-leading position, while exploring reasonable growth and
expansion opportunities."
* Six month net sales of $515 million by product category and region were
as follows:
-- Metal woods sales increased 19% to $279 million
-- Irons sales decreased 25% to $136 million
-- Golf ball sales increased 95% to $32 million
-- Putters, accessories, and other sales increased 26% to $68 million
-- U.S. market sales increased 7% to $287 million
-- International sales increased 4% to $228 million (in constant dollars,
international sales increased 14% to $250 million)
* Second quarter net sales of $254 million by product category and region
were as follows:
-- Metal woods sales decreased 11% to $126 million
-- Irons sales decreased 32% to $72 million
-- Golf ball sales increased 97% to $21 million
-- Putters, accessories, and other sales increased 8% to $35 million
-- U.S. market sales decreased 10% to $140 million
-- International sales decreased 16% to $114 million (in constant dollars,
international sales decreased 7% to $126 million)
*Prior year amounts have been restated to reflect the Company's current
year presentation including the adoption of Staff Accounting Bulletin No. 101
and Emerging Issues Task Force Issue No. 00-10.
Second quarter gross margin as a percent of net sales increased to
52% versus 50% for the same period last year. This improvement was primarily
attributable to higher golf club and golf ball margins resulting from lower
production costs and a more favorable product mix.
Selling and tour expenses for the second quarter were $54.1 million
(21% of net sales), compared to $48.0 million (17% of net sales) in 2000.
This increase was primarily due to higher marketing costs associated with new
product launches, additional advertising, the rollout of the new fitting cart
systems and store-in-store project, and other demand creation initiatives.
General and administrative expenses for the second quarter of 2001 were
$20.6 million (8% of net sales), compared to $17.6 million (6% of net sales)
in 2000. This increase was primarily due to higher employee compensation and
legal expenses, partially offset by a decrease in depreciation expense.
"We are encouraged by our gross margin improvement during the second
quarter," stated Brad Holiday, Executive Vice President and Chief Financial
Officer. "Our gross margins have expanded as we leverage our manufacturing
costs and improve golf ball profitability. While we are pleased with our
profitability improvement, we are pursuing strategies to improve our financial
performance even further. In addition, our ability to ship new products early
in 2001 had the expected effect of increasing overall sales in the first half
of the year."
During the second quarter, the Company repurchased 1,022,200 of its shares
at an average cost of $19.07 per share completing the original $100 million
repurchase authorization granted by the Board in May 2000. The program
resulted in the repurchase of a total of 5,837,441 shares at an average price
of $17.13.
In accordance with the Company's dividend practice for 2001, the dividend
for the second quarter will be determined by the Board of Directors at its
meeting in August 2001.
BUSINESS OUTLOOK
In light of SEC Regulations, the Company elects to provide certain
forward-looking information in this press release. These statements are based
on current information and expectations, and actual results may differ
materially. The Company undertakes no obligation to update this information.
See further disclaimer below.
Full Year 2001
The Company estimates:
-- Expected net sales for the year of approximately $830 - $840 million
-- Expected gross margins for the year of approximately 50% of net sales
-- Expected pre-tax profit for the year of approximately 15% of net sales
-- Expected earnings per diluted share for the year of approximately
$1.00 - $1.05
"This guidance for the remainder of 2001 assumes that current industry
trends will continue," concluded Mr. Holiday. "Obviously, this guidance is
subject to change depending upon economic, competitive, and other market
conditions, including fluctuations in foreign currencies as compared to the
dollar."
*****
The Company will be holding a conference call at 2:00 p.m. PDT today,
which will be hosted by Ron Drapeau, CEO and President, and Brad Holiday,
Executive Vice President and Chief Financial Officer. The call will be
broadcast live over the Internet and can be accessed at
http://www.callawaygolf.com. To listen to the call, please go to the web site
at least 15 minutes before the call to register and for instructions on how to
access the broadcast. Those wishing to listen via telephone should call
(877) 356-4615 for US/Canada participants and (706) 643-0832 for
International/Local participants prior to the start of the call and ask to be
connected to the Callaway Golf Earnings Release call. A replay of the
conference call will be available approximately two hours after the call ends
through 5:00 p.m. PDT, on July 27, 2001 by calling (800) 642-1687 for
US/Canada participants and (706) 645-9291 for International/Local
participants. You will be asked to enter the Conference ID #1349208 for the
replay only. You may also access it via our home page at
http://www.callawaygolf.com.
*****
Disclaimer: Statements used in this press release that relate to future
plans, events, financial results or performance, including statements in the
Business Outlook section of this press release relating to the Company's
future prospects, and estimated revenues, margins, profitability and earnings,
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 market acceptance of current and future products, including the
Company's golf ball products and the Company's new golf club products
(not all of which conform to USGA rules), adverse weather conditions and
seasonality, adverse market and economic conditions, 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 (including business
interruptions or increased costs resulting from power outages or shortages),
and any actions taken by the USGA or other golf association that could have an
adverse impact upon demand for the Company's products (such as the USGA's
announcement that scores in rounds played with clubs that do not conform to
USGA rules such as the Company's ERC(R) II Forged Titanium Driver may not be
posted for USGA handicap purposes). For additional information concerning
these and other risks and uncertainties, see Part I, Item 2 of the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, as well as
other risks and uncertainties detailed from time to time in the Company's
periodic 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.
*****
Callaway Golf Company makes and sells Big Bertha(R) Metal Woods and Irons,
including Big Bertha ERC(R) II Forged Titanium Drivers, Big Bertha Hawk Eye(R)
VFT(TM) and Big Bertha Hawk Eye VFT Pro Series Titanium Drivers and Fairway
Woods, Big Bertha Steelhead Plus(TM) Stainless Steel Drivers and Fairway
Woods, Hawk Eye Tungsten Injected(TM) Titanium Irons, Steelhead(TM) X-14(R)
and Steelhead X-14 Pro Series Stainless Steel Irons. Callaway Golf Company
also makes and sells Odyssey(R) Putters, including White Hot(R), TriHot(TM),
and Dual Force(R) Putters. Callaway Golf Company makes and sells the Callaway
Golf(R) Rule 35(R) Firmfeel(TM) and Softfeel(TM) golf balls, and the CB1(TM)
Red and CB1 Blue golf balls. For more information about Callaway Golf
Company, please visit our Web sites at http://www.callawaygolf.com and
http://www.odysseygolf.com.
Callaway Golf Company
Consolidated Condensed Statement of Operations (Unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Net sales $253,655 100% $289,922 100% $515,021 100% $487,328 100%
Cost of
goods sold 121,719 48% 145,415 50% 246,177 48% 254,556 52%
Gross profit 131,936 52% 144,507 50% 268,844 52% 232,772 48%
Operating
expenses:
Selling 54,131 21% 47,990 17% 107,377 21% 90,740 19%
General and
administrative 20,586 8% 17,614 6% 40,436 8% 35,121 7%
Research and
development 8,444 4% 8,132 3% 17,378 3% 16,349 3%
Income from
operations 48,775 19% 70,771 24% 103,653 20% 90,562 19%
Other (expense)
income, net (3,557) 2,141 (2,627) 3,726
Income before
income taxes
and cumulative
effect of
accounting
change 45,218 18% 72,912 25% 101,026 20% 94,288 19%
Income tax
provision 18,243 28,723 39,976 37,001
Income before
cumulative
effect of
accounting
change 26,975 11% 44,189 15% 61,050 12% 57,287 12%
Cumulative
effect of
accounting
change (957)
Net income $26,975 11% $44,189 15% $61,050 12% $56,330 12%
Earnings per
common share:
Basic
Income before
cumulative
effect of
accounting
change $0.38 $0.63 $0.86 $0.80
Cumulative
effect of
accounting
change (0.01)
Net income $0.38 $0.63 $0.86 $0.79
Diluted
Income before
cumulative
effect of
accounting
change $0.36 $0.61 $0.83 $0.79
Cumulative
effect of
accounting
change (0.01)
Net income $0.36 $0.61 $0.83 $0.78
Common
equivalent
shares:
Basic 71,490 70,693 70,754 70,946
Diluted 74,777 72,686 73,619 72,584
Callaway Golf Company
Consolidated Condensed Balance Sheet
(in thousands)
June 30, December 31,
2001 2000
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $131,831 $102,596
Accounts receivable, net 141,936 58,836
Inventories, net 138,810 133,962
Deferred taxes 24,773 29,354
Other current assets 14,452 17,721
Total current assets 451,802 342,469
Property, plant and equipment, net 132,611 134,712
Intangible assets, net 124,441 112,824
Other assets 37,402 40,929
$746,256 $630,934
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $56,187 $44,173
Accrued employee compensation
and benefits 29,709 22,574
Accrued warranty expense 38,212 39,363
Income taxes payable 3,196
Total current liabilities 124,108 109,306
Long-term liabilities 21,520 9,884
Shareholders' equity 600,628 511,744
$746,256 $630,934
SOURCE Callaway Golf Company
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Related links:
http://www.callawaygolf.com
Company News On-Call:
http://www.prnewswire.com/comp/124825.html
CONTACT:
Ron Drapeau, Brad Holiday or Larry Dorman, of
Callaway Golf Company, +1-760-931-1771
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