EXHIBIT 99.2
Contact: Ron Drapeau
Brad Holiday
Larry Dorman
(760) 931-1771
CALLAWAY GOLF PROVIDES GUIDANCE FOR FULL YEAR 2002,
AND FIRST QUARTER AND FULL YEAR 2003
CARLSBAD, Calif./ December 16, 2002/ Callaway Golf Company (NYSE:ELY)
today announced that it expects net sales and earnings for the year ending
December 31, 2002 to be higher than current Wall Street projections. Positive
early results from the launch of the new Great Big Bertha(R) II premium titanium
line of drivers, continued strong demand for the Odyssey(R) White Hot(R) 2-Ball
Putter, and higher sales in core products are driving the higher net sales. The
Company currently expects net sales for the full year to be approximately $790
million, and earnings for the full year to be between $0.96 and $1.00, including
about $0.16 per share as the result of a reduction in warranty reserve reflected
in the third quarter. Excluding the $17.0 million non-cash reduction of warranty
reserve, full year diluted earnings per share is expected to be between $0.80
and $0.84.
The Company's guidance for the full year 2002 includes a pre-tax charge of
$2.25 million associated with a recent customs and duty assessment in Korea.
Although this assessment occurred after the Company had reported earnings for
the third quarter, accounting rules will require the Company to reflect the
adjustment in its 10-Q for the third quarter when filed. The Company intends to
appeal the assessment. However, accounting rules do not permit the Company to
record any offsets for anticipated future recoveries at this time.
For the first quarter and full year 2003, respectively, the Company's
current guidance is that net sales are estimated to be approximately $270
million, a 5% increase compared to 2002, with annual net sales estimated to be
flat year over year. Fully diluted earning per share are estimated to be $0.54
for the quarter, and $0.88 for the full year, excluding the warranty adjustment
from 2002 results. In providing this guidance, the Company is taking into
account an expected improvement in product mix and some savings as a result of
the cost reduction actions implemented in 2002. Some of this extra margin will
be re-invested in carefully managed promotional spending and legal costs
associated with protecting the Company's intellectual property.
At this time the Company's guidance for 2003 does not include any revenues
or earnings associated with additional new club or ball product launches that
may or may not occur later in 2003. The Company traditionally does not
pre-announce product launches and, consistent with that practice, does not
intend to provide early disclosure, one way or the other, regarding any
currently unannounced product launches for 2003. As a result, the full year
guidance does not include any boost to fourth quarter business similar to what
occurred in the fourth quarter of 2002 with the limited launch of Great Big
Bertha II Drivers.
"As previously stated, the Company is addressing all available actions to
eliminate the losses in its golf ball business," said Ron Drapeau, Chairman,
President and CEO. "In the short term we have been able to reduce some operating
costs through our recent reduction in
headcount, and we have planned for some savings in 2003 through the better
management of advertising and selling expenses while maintaining our important
position as the #2 ball on the professional tours. We are also in the process of
evaluating a possible consolidation of club and ball manufacturing operations
that could result in a reduction in overhead expenses."
"Other options regarding our golf ball business are still under
evaluation," Mr. Drapeau continued. "I have read that some analysts have
suggested we look at options ranging from expanding our ball manufacturing
operations and making golf balls for others, to eliminating our ball
manufacturing and sourcing all of our requirements from a third party. All I can
say at this time is that these options, as well as others, are among those being
reviewed by management and the Board of Directors as we target for ourselves the
goal of achieving profitability by 2004."
At the current time, the Company does not see significant improvement in
many of the factors that have had a negative effect on sales and earnings in
2002. For example, the economies in the U.S. and Japan are not expected to
improve significantly next year, and consumer spending in those countries
remains at depressed levels. There has yet to be any observable evidence that
the number of rounds played is likely to increase or even stop declining in
2003. Moreover, the ruling bodies in golf continue to review matters such as a
limitation on club head size and the overall performance of golf balls, and
rulings rolling back either could confuse consumers and disrupt the market as
happened this year with the aborted decision on driver COR. Such factors are
beyond the Company's control, and a change for the worse in any of these areas
could limit the Company's ability to achieve its targets for the year.
As announced today, the Board of Directors and its Audit Committee
unanimously agreed to dismiss KPMG LLP as the Company's outside independent
auditors, and to engage Deloitte & Touche as auditors for 2002, pending the
satisfactory completion of their customary client acceptance procedures. At the
time of the change in auditors, the final decision regarding the proper
treatment of the reduction in warranty reserves of approximately $17 million had
not yet been made, and the Company's filing with the SEC of its Report on Form
10-Q had not been completed. The Audit Committee will ask Deloitte & Touche to
make resolution of this matter a high priority. Investors are reminded, however,
that this matter involves a non-cash adjustment that would either remain in the
current period or, if restated, would positively impact prior period earnings.
The Company will hold a conference call to discuss this guidance at 1:30pm
PST today.
*****
DISCLAIMER: STATEMENTS USED IN THIS PRESS RELEASE THAT RELATE TO FUTURE PLANS,
EVENTS, FINANCIAL RESULTS OR PERFORMANCE, INCLUDING STATEMENTS RELATING TO THE
COMPANY'S FUTURE PROSPECTS, AND ESTIMATED SALES AND EARNINGS, AND INCLUDING
STATEMENTS REGARDING THE APPOINTMENT OF NEW AUDITORS AND GOLF BALL BUSINESS
IMPROVEMENTS OR PROFITABILITY, 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 GOLF CLUB PRODUCTS, 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, ANY
ACTIONS TAKEN BY THE USGA OR OTHER GOLF ASSOCIATION THAT COULD HAVE AN ADVERSE
IMPACT UPON DEMAND FOR THE COMPANY'S PRODUCTS, 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
ANNUAL REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2002, 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 Great Big Bertha(R) II Titanium Drivers and Fairway Woods, Big Bertha
C4(TM) Compression Cured Carbon Composite Drivers, Big Bertha ERC(R) II Forged
Titanium Drivers, Big Bertha ERC Forged Titanium Fairway Woods, Big Bertha Hawk
Eye(R) VFT(R) and Big Bertha Hawk Eye VFT Pro Series Titanium Drivers and
Fairway Woods, Big Bertha Steelhead(TM) III Stainless Steel Drivers and Fairway
Woods, Hawk Eye VFT Tungsten Injected(TM) Titanium Irons, Big Bertha Stainless
Steel Irons, Steelhead X-14(R) and Steelhead X-14 Pro Series Stainless Steel
Irons, and Callaway Golf Forged Wedges. Callaway Golf Company also makes and
sells Odyssey(R) Putters, including White Hot(R), TriHot(R), and Dual Force(R)
Putters. Callaway Golf Company makes and sells the Callaway Golf(R) HX(R) Blue
and HX Red balls, the CTU 30(R) Blue and CTU 30 Red balls, the HX 2-Piece Blue
and HX 2-Piece Red balls, the CB1(R) Blue and CB1 Red balls, and the Warbird(TM)
golf balls. For more information about Callaway Golf Company, please visit our
Web sites at www.callawaygolf.com and www.odysseygolf.com.