Exhibit 99.1
Callaway Golf Exceeds Estimates with First Quarter Results; Estimates
for the Year Remain Unchanged
CARLSBAD, Calif.--(BUSINESS WIRE)--April 23, 2003--Callaway Golf
Company (NYSE:ELY) today announced its financial results for the first
quarter ended March 31, 2003, announcing a 42% year-over-year increase
in diluted earnings per share on a 6% increase in sales. The Company
reported net sales of $271.7 million, compared to $256.7 million
during the same quarter in 2002. Foreign currency exchange rates
favorably impacted net sales for the first quarter by approximately
$11.9 million. Net income during the first quarter increased to $42.5
million, versus $30.7 million for the same quarter last year, an
increase of 38%. Earnings per diluted share increased to $0.64,
compared to $0.45 for the same quarter last year. Net sales achieved
the target of $270 million set by the Company in its previous
guidance, and earnings per share exceeded the guidance of $0.54 per
share by $0.10.
"We are pleased with our first quarter results," said Ron Drapeau,
Chairman, President and CEO. "Despite problems in the key economies
around the world, the outbreak of war in Iraq, and severe bad weather
in much of the United States, our shipments were strong. We also
managed expenses under prior year levels and benefited from favorable
foreign currency exchange rates. We maintained our #1 market share
position in the U.S. in woods, irons and putters. Moreover, we have
been able to achieve some major successes on tour, with several weeks
where our brand recaptured the #1 position in drivers overall on the
world's major professional tours, and our Great Big Bertha II Pro
Series Driver has often earned the distinction as the #1 driver model
on the tours as a whole, and on the U.S. PGA Tour in particular.
Callaway Golf golf balls continued as the #2 brand of golf balls in
play on the major professional tours."
SALES BY PRODUCT AND REGION
First Quarter - 2003
-----------------------------------
Net Sales % Change
($ Millions) vs 2002
-----------------------------
Woods $92.9 (12%)
Irons $96.2 15%
Golf Balls $13.7 (39%)
Putters $44.9 75%
Accessories, Other $24.0 22%
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TOTAL $271.7 6%
============
United States $149.3 (1%)
International $122.4 16%
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TOTAL $271.7 6%
============
Brad Holiday, Executive Vice-President and Chief Financial Officer
stated, "We are particularly pleased to report gross margins in the
first quarter of 51%, compared with 50% for the first quarter last
year. In addition, operating expenses for the quarter were reduced to
26% of net sales, versus 31% for the same quarter last year. Operating
income increased 36%, and our balance sheet remains strong with a 21%
increase in cash and 17% reduction in inventory versus last year."
In accordance with the Company's dividend practice, the next
dividend will be determined by the Board of Directors at its next
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. The Company's earnings estimates exclude any special
charges or gains. See further disclaimer below.
"While we are still targeting our previous estimates of annual net
sales of approximately $792 million and earnings of about $0.88 per
share, we would be remiss if we did not tell you that this year is
anything but normal and that business will be anything but easy,"
reported Mr. Drapeau. "For one thing, we do not think that sales will
follow normal seasonal patterns where the second quarter tends to be
very large and the fourth quarter very small. With our products well
positioned at retail due to good sell-in during the first quarter,
sales in the second quarter will be largely driven by consumer
confidence. The war in Iraq will almost certainly continue to dampen
consumer confidence in the U.S., our largest market, Europe and
elsewhere in the second quarter. In addition, it currently appears
that concerns over SARS could seriously impact business not only in
Asia, but also in other countries, including Canada. These global
issues may mean that some of the normal second quarter business may be
impacted or delayed until the third or even the fourth quarters when
things hopefully return more to normal and consumer confidence
improves. We cannot predict how or if this shift in business will
materialize, and therefore are not providing quarterly guidance. In
this environment, we do not think that quarterly guidance is
meaningful, nor do we think that investors should attempt to measure
us based upon such volatile, short-term targets. Instead, we will
continue to provide guidance for the year, with the caveat that
quarterly results may likely vary in relative terms from previous
years."
"Over the longer term we continue to target net sales growth, on
average, in the low single digits overall, and growth in earnings per
share in the low double digits," continued Mr. Drapeau. "Consistent
with our strategic plan, 2003 continues to be a year where we will be
funding investments and programs aimed at achieving this longer range
growth expectation."
The Company will be holding a conference call at 2:00 p.m. PDT
today, which will be hosted by Ronald A. Drapeau, Chairman, CEO and
President, and Bradley J. Holiday, Executive Vice President and Chief
Financial Officer. 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 conclusion of the conference call. The replay may be accessed
through the Internet at www.callawaygolf.com or by telephone by
calling (800) 642-1687 toll free for calls originating within the
United States or (706) 645-9291 for International calls. The replay
pass code is 9689911 and the replay will be available through 5:00
p.m. PDT, on Wednesday, April 30, 2003.
Disclaimer: Statements used in this press release that relate to
future plans, events, financial results or performance, including
statements relating to estimated sales and earnings and other
statements in the Business Outlook section of the press release, 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, 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, the effect of SARS in
Asia and elsewhere around the world, 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 II, Item 7 of the Company's Annual Report on
Form 10-K for the year ended December 31, 2002, as well as other risks
and uncertainties detailed from time to time in the Company's 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 Steelhead(TM) III Stainless Steel Drivers
and Fairway Woods, Hawk Eye VFT Tungsten Injected(TM) Titanium Irons,
Big Bertha Stainless Steel Irons, Steelhead X-16(TM) and Steelhead
X-16 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), DFX(TM) 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.
Callaway Golf Company
Consolidated Condensed Statement of Operations
(in thousands, except per share data)
(unaudited)
Quarter Ended
March 31,
-----------------------
2003 2002
--------- ---------
Net sales $271,719 100% $256,708 100%
Cost of goods sold 133,882 49% 127,957 50%
--------- ---------
Gross profit 137,837 51% 128,751 50%
Operating expenses:
Selling 48,901 18% 57,299 22%
General and administrative 13,841 5% 13,420 5%
Research and development 6,672 2% 7,882 3%
--------- ---------
Total operating expenses 69,414 26% 78,601 31%
Income from operations 68,423 25% 50,150 20%
Other income (expense), net (1,184) (382)
--------- ---------
Income before income taxes 67,239 25% 49,768 19%
Income tax provision 24,762 19,074
--------- ---------
Net income $42,477 16% $30,694 12%
========= =========
Earnings per common share:
Basic $0.65 $0.46
Diluted $0.64 $0.45
Weighted-average shares outstanding:
Basic 65,736 67,345
Diluted 65,926 68,619
Callaway Golf Company
Consolidated Condensed Balance Sheet
(In thousands)
March 31, December 31,
2003 2002
------------ ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $81,202 $108,452
Accounts receivable, net 197,701 63,867
Inventories, net 122,631 151,760
Deferred taxes 34,962 34,519
Other current assets 9,325 10,429
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Total current assets 445,821 369,027
Property, plant and equipment, net 158,988 167,340
Intangible assets, net 121,192 121,317
Other assets 21,331 22,161
------------ ------------
$747,332 $679,845
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $68,882 $61,720
Accrued employee compensation and benefits 18,306 23,168
Accrued warranty expense 14,798 13,464
Note payable, current portion 2,391 3,160
Income taxes payable 33,150 7,649
------------ ------------
Total current liabilities 137,527 109,161
Long-term liabilities 27,011 27,297
Shareholders' equity 582,794 543,387
------------ ------------
$747,332 $679,845
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CONTACT: Callaway Golf Company
Ron Drapeau, Brad Holiday or Larry Dorman, 760/931-1771