CARLSBAD, Calif., Oct. 18 /PRNewswire/ -- Callaway Golf Company
(NYSE: ELY) today reported third quarter and nine months operating results for
the periods ended September 30, 2001, announcing record sales of
$710.9 million for the year to date despite a decline in sales in the quarter.
Excluding an after-tax, non-cash accounting charge, the Company's operating
results exceeded consensus estimates for the quarter.
Third quarter net sales declined 6% to $195.8 million from $208.1 million
during the same quarter in 2000. Net income during the quarter declined
67% to $6.5 million from $20.1 million the previous year. Third quarter 2001
earnings per diluted share decreased 69% to $0.09 from $0.29 in the same
period last year. Excluding a $7.8 million after-tax, non-cash energy supply
contract charge, Callaway Golf's net income decreased 28% to $14.3 million and
earnings per diluted share decreased 31% to $0.20, exceeding third quarter
consensus estimate of $0.19.
Net sales for the nine months ended September 30, 2001 increased 2% to
$710.9 million, compared to $695.4 million during the same period in 2000.
Net income during the period decreased 12% to $67.6 million from $76.4 million
last year, and earnings per diluted share decreased 13% to $0.92 per diluted
share from $1.06 per diluted share. Excluding the after-tax, non-cash charge
related to the Company's long-term energy supply contract, net income for the
first nine months increased 7% to $81.8 million, and earnings per diluted
share increased 5% to $1.12.
"We are pleased with our year-to-date results in light of industry and
economic challenges," said Ron Drapeau, Chairman, President and CEO of
Callaway Golf. "Recent data show that we have maintained our #1 U.S. market
share position in all golf club categories, and our golf ball products have
shown good increases in market share as well. We believe these achievements
are a testament to our brand strength and our commitment to providing
demonstrably superior and pleasingly different products. In particular, our
CB1(TM) golf ball line captured considerable U.S. market share in its price
segment (16%) after just four months. At the same time, our quarterly results
reflect the adverse conditions that have impacted the golf industry and the
accounting impact of our energy supply agreement."
During the second quarter of 2001, Callaway Golf entered into a long-term
energy supply contract as part of a comprehensive strategy to ensure the
uninterrupted supply of energy while capping electricity costs in the volatile
California energy market. Accounting rules mandate companies adjust the book
value of such contracts based on current market rates and record any resulting
gain or loss as either income or expense. During the quarter, Callaway Golf
recorded a non-cash expense of $7.8 million after-tax, or $0.11 per diluted
share, as a result of falling electricity rates. The Company may report
non-cash gains or losses in future quarters as California's energy prices rise
and fall relative to the underlying contract price.
"We are building on our position as the premier golf equipment company in
the world," continued Mr. Drapeau. "During the quarter, we introduced several
new products including the Hawk Eye(R) VFT(R)Tungsten Injected(TM) Titanium
Irons, which are our most forgiving irons yet. We also introduced two
revolutionary golf ball lines, our new premium HX(TM) golf balls and the
CTU 30(TM) balls, bringing to three the number of new Callaway Golf ball lines
introduced this year. In the coming weeks, we will have a broad array of
additional product introductions in multiple product categories to support
continued growth."
Mr. Drapeau added, "We are taking the necessary steps to maintain our
leadership role and to improve financial results, especially given the recent
economic conditions. We continue improving our sourcing and manufacturing
processes to reduce costs and expand profitability. We have conducted a
thorough review of our cost structure and are reducing expenses where
possible, as reflected in part in an improvement in G&A and R&D expenses as a
percentage of net sales in the most recent quarter. I am particularly
enthusiastic about the new products planned for 2002. While the near term
economic and industry outlook is uncertain due to world economic and political
conditions, we believe our brand strength, superior products, and other
initiatives will carry us through these challenging times and position us to
deliver solid results as conditions improve."
* Third quarter net sales of $196 million by product category and region
were as follows:
-- Metal woods sales decreased 16% to $81 million
-- Irons sales decreased 2% to $72 million
-- Golf ball sales increased 10% to $12 million
-- Putters, accessories, and other sales increased 13% to $31 million
-- U.S. sales decreased 5% to $103 million
-- International sales decreased 7% to $93 million
(in constant dollars, International sales were up 1%)
* Nine month net sales of $711 million by product category and region were
as follows:
-- Metal woods sales increased 8% to $360 million
-- Irons sales decreased 18% to $208 million
-- Golf ball sales increased 61% to $45 million
-- Putters, accessories, and other sales increased 22% to $98 million
-- U.S. sales increased 4% to $390 million
-- International sales were flat at $321 million
(in constant dollars, International sales were up 10%)
* Prior year amounts have been restated to reflect the Company's current
year presentation including the adoption of Staff Accounting Bulletin No. 101.
Third quarter gross margin as a percent of net sales matched last year
at 49%.
Selling and tour expenses for the third quarter were $45.3 million (23% of
net sales), compared to $41.1 million (20% of net sales) in 2000. This
increase was primarily due to demand creation initiatives, higher marketing
costs, and additional advertising associated with new product launches,
combined with lower overall sales during the quarter.
General and administrative expenses for the third quarter of 2001 were
$17.5 million (9% of net sales), compared to $20.7 million (10% of net sales)
in 2000. This decrease was primarily due to lower employee, depreciation and
bad debt expenses.
"We continue improving our financial position," stated Brad Holiday,
Executive Vice President and Chief Financial Officer. "A higher mix of metal
woods, improved golf ball gross margins, and expense controls have contributed
to the year-to-date improvements in gross margin and operating margin. Our
balance sheet remains solid and we ended the quarter with no debt and
$106 million in cash and marketable securities, after repurchasing $80 million
of Callaway Golf's stock."
During the third quarter, the Company repurchased 4.7 million of its
shares at an average cost of $17.07 per share under the $100 million
repurchase authorization granted by the Board and announced in August 2001.
In accordance with the Company's dividend practice for 2001, the dividend
for the third quarter will be determined by the Board of Directors at its
November 2001 meeting.
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 $800-$820 million
-- Expected gross margins for the year of approximately 50% of net sales
-- Expected earnings per diluted share for the year of approximately
$1.01 - $1.06 excluding charges associated with the aforementioned
energy supply contract.
"We are lowering our sales and earnings expectations for the remainder of
the year based on current trends and the many uncertainties facing all
industries, including ours," concluded Mr. Holiday. "Following the events of
September 11th, we postponed our new product introductions and retailer
partnership event that were originally scheduled for September. We are
reevaluating our 2002 expectations in light of market conditions and expect to
offer guidance after we collect feedback from our planned product
introductions."
The Company will be holding a conference call at 2:00 p.m. PDT today,
which will be hosted by Ron Drapeau, Chairman, 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. A replay of the conference call will be available
approximately one hour after the conclusion of the conference call. The
replay may be accessed through the Internet at http://www.callawaygolf.com or
by telephone by calling (888) 509-0082 for calls originating within the United
States or (416) 695-9731 for International calls. The replay will be
available through 5:00 p.m. PDT, on Thursday, October 25, 2001.
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 adverse market and economic conditions, 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, 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),
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), and the effect of terrorist activity or
armed conflict 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, see Part I, Item 2 of the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 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(R) and Big Bertha Hawk Eye VFT Pro Series Titanium Drivers and Fairway
Woods, Big Bertha Steelhead Plus(R) Stainless Steel Drivers and Fairway Woods,
Hawk Eye VFT 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) HX(TM) Red and HX Blue balls, Rule 35(R) Firmfeel(TM) and Softfeel(TM)
balls, the CTU 30(TM) Red and CTU 30 Blue balls, and the CB1(TM) Red and
CB1 Blue 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 Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Net sales $195,848 100% $208,081 100% $710,868 100% $695,409 100%
Cost of
goods sold 100,824 51% 106,050 51% 347,001 49% 360,606 52%
Gross profit 95,024 49% 102,031 49% 363,867 51% 334,803 48%
Operating expenses:
Selling 45,281 23% 41,066 20% 152,658 21% 131,806 19%
General and
administrative 17,473 9% 20,683 10% 57,909 8% 55,804 8%
Research and
development 8,025 4% 9,899 5% 25,402 4% 26,248 4%
Income from
operations 24,245 12% 30,383 15% 127,898 18% 120,945 17%
Other (expense)
income, net (12,708) 2,689 (15,335) 6,415
Income before
income taxes
and cumulative
effect of
accounting
change 11,537 6% 33,072 16% 112,563 16% 127,360 18%
Income tax
provision 5,018 13,017 44,994 50,018
Income before
cumulative
effect of
accounting
change 6,519 3% 20,055 10% 67,569 10% 77,342 11%
Cumulative
effect of
accounting
change (957)
Net income $6,519 3% $20,055 10% $67,569 10% $76,385 11%
Earnings per common share:
Basic
Income before
cumulative
effect of
accounting
change $0.09 $0.29 $0.96 $1.10
Cumulative
effect of
accounting
change (0.01)
Net income $0.09 $0.29 $0.96 $1.09
Diluted
Income before
cumulative
effect of
accounting
change $0.09 $0.29 $0.92 $1.07
Cumulative
effect of
accounting
change (0.01)
Net income $0.09 $0.29 $0.92 $1.06
Common equivalent shares:
Basic 69,744 69,237 70,365 70,372
Diluted 72,611 70,203 73,231 71,786
Callaway Golf Company
Consolidated Condensed Balance Sheet
(In thousands)
September 30, December 31,
2001 2000
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $42,807 $102,596
Marketable securities 63,685
Accounts receivable, net 97,032 58,836
Inventories, net 145,261 133,962
Deferred taxes 23,749 29,354
Other current assets 10,478 17,721
Total current assets 383,012 342,469
Property, plant and equipment, net 132,057 134,712
Intangible assets, net 123,395 112,824
Other assets 37,104 40,929
$675,568 $630,934
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $53,883 $44,173
Accrued employee compensation and benefits 33,368 22,574
Accrued warranty expense 36,179 39,363
Income taxes payable 3,196
Total current liabilities 123,430 109,306
Long-term liabilities 26,081 9,884
Shareholders' equity 526,057 511,744
$675,568 $630,934
SOURCE Callaway Golf Company
 back to top
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
|
