Exhibit 99.1
Callaway Golf Announces Results for Second Quarter and First Six
Months of 2004
CARLSBAD, Calif.--(BUSINESS WIRE)--July 22, 2004--Callaway Golf
Company (NYSE:ELY) today announced its financial results for the
quarter ended June 30, 2004, reporting consolidated net sales of
$297.9 million, including $2.0 million in net sales from the Company's
newly acquired subsidiary, FrogTrader, Inc. Consolidated net income
was $13.7 million, and fully diluted earnings per share were $0.20 on
68.4 million shares. Reported net income and earnings per share were
reduced by $6.7 million and $0.10, respectively, due to charges
associated with the integration of the Top-Flite operations acquired
in late 2003. Excluding these charges, the Company's pro forma net
income was $20.4 million, and pro forma fully diluted earnings per
share were $0.30, compared with previous company guidance of between
$0.19 and $0.23 and "analyst consensus" estimates of $0.22 (both of
which also exclude integration charges). Reported net sales, net
income and fully diluted earnings per share for the same quarter in
2003 were $242.1 million, $34.1 million and $0.52 on 66.1 million
shares, respectively.
"Net income and earnings per share exceeded our earlier guidance
in large part due to the delay of certain expenses expected in the
second quarter," said Ron Drapeau, Chairman and CEO. "We also
benefited from the inclusion of revenues and earnings from FrogTrader,
Inc. Both of these items were planned for inclusion in the full year
estimates previously provided."
For the six months ended June 30, 2004, the Company reported
consolidated net sales of $661.7 million, consolidated net income of
$54.3 million, and fully diluted earnings per share of $0.79 on 68.4
million shares. Reported net income and earnings per share for the
six-month period were reduced by $9.9 million and $0.15, respectively,
due to charges associated with the integration of the Top-Flite
operations acquired in late 2003. Excluding these charges, the
Company's pro forma net income for the six-month period was $64.2
million, and pro forma fully diluted earnings per share were $0.94.
Reported net sales, net income and fully diluted earnings per share
for the same period in 2003 were $513.8 million, $76.6 million and
$1.16 on 66.0 million shares, respectively.
For more details, including pro forma reconciliations to assist in
year-over-year comparison, please see the attached "Supplemental
Financial Information."
Sales by product group were as follows:
2004 Sales By Product
($'s - millions)
Second Quarter Year-to-Date
---------------- ---------------
Net % Change Net % Change
Sales vs. 2003 Sales vs. 2003
-------- --------- -------- ---------
Woods $75.5 (2%) $199.3 17%
Irons 87.0 1% 183.5 (2%)
Putters 29.2 (37%) 66.1 (27%)
Golf Balls 74.5 378% 146.6 401%
Accessories, other 31.7 82% 66.2 79%
-------- --------
Total $297.9 23% $661.7 29%
======== ========
In accordance with the Company's usual dividend practice, the next
dividend will be determined by the Board of Directors at its August
meetings.
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. Except as specifically noted, the Company's earnings
estimates exclude any special charges or gains. See additional
disclaimers below.
The Company is not changing its guidance for the full year even
though its results for the second quarter exceeded expectations. As
noted above, the second quarter results were affected favorably by the
timing of certain expenses, revenues and earnings. The Company still
expects annual results for 2004 to be within the ranges provided in
its previous guidance of June 15, 2004 (see the attached "Supplemental
2004 Forecast Information"). Estimated net sales for the year are
expected to be between $975 and $990 million, with fully diluted
earnings per share between $0.15 and $0.25, including estimated
integration charges of approximately $0.25 per share. This annual
guidance includes expected total losses at Top-Flite of between $0.10
and $0.14 per share. Company gross profits including integration
charges are expected to be in the 41% range (the 43% range excluding
integration charges), again reflecting the impact of lower margin
Top-Flite sales and expenses associated with new Callaway Golf sales
programs planned for the second half of the year, including reduced
pricing on some products. Third quarter net sales are projected to be
about $150-$160 million with losses estimated at $0.37-$0.42 per
share.
For additional details concerning the Company's current forecasts,
please refer to the attachment "Supplemental 2004 Forecast
Information" included at the end of this press release. Whether the
Company hits, exceeds or misses these expectations will depend upon a
number of factors, including business conditions in general, the
competitive actions of other manufacturers, and the success of the
Company's planned sales programs and other efforts.
The Company will be holding a conference call at 2:00 p.m. PDT on
July 22, 2004, which will be hosted by Ronald A. Drapeau, Chairman and
CEO, and Bradley J. Holiday, Senior 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 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 8739068 and the replay will be available through 5:00 p.m. PDT
on July 29, 2004.
Disclaimers
Forward-Looking Statements: Statements used in this press release
that relate to future plans, events, financial results or performance,
including statements relating to the amount and timing of estimated
sales, gross margins and earnings and other statements in the Business
Outlook section of the press release, as well as the information
contained in the Supplemental 2004 Forecast Information, 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, 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 March 31, 2004, 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.
"Analyst Consensus" Estimates: Analyst consensus estimates
repeated in this press release are based upon the public reports of
Thomson First Call and are provided for informational purposes only.
The Company does not support, endorse or otherwise adopt the estimates
of analysts, either individually or as a group. The use of an analyst
consensus estimate in this release or otherwise does not suggest or
imply that the Company believes that such estimate provides a
reasonable basis for evaluating, measuring or predicting the Company's
performance.
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 includes certain financial measures not
prepared in accordance with GAAP. The non-GAAP financial measures
included in this press release exclude the 2004 after-tax charges
associated with the integration of the Top-Flite Golf business
acquired in late 2003. They also report the results of the Callaway
Golf and Top-Flite operations each on a stand-alone basis, although
such operations are not reportable business segments. 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 useful information to investors by
permitting additional relevant period-to-period comparisons of the
historical operations of the Callaway Golf business excluding the
operations of the recently acquired Top-Flite Golf business, as well
as information concerning operations notwithstanding the Top-Flite
integration charges. For certain non-GAAP financial measures, the
Company has provided Supplemental Financial Information as an
attachment to this press release which reconciles those non-GAAP
financial measures to the most directly comparable financial measures
prepared in accordance with GAAP. In other circumstances, the
reconciling information is presented in the text of this press
release.
Callaway Golf Company makes and sells Big Bertha(R) Metal Woods
and Irons, including ERC(R) Fusion(R) Drivers and Fairway Woods, Great
Big Bertha(R) II Titanium Drivers and Fairway Woods, Great Big Bertha
II 415 Titanium Drivers, Big Bertha Titanium Drivers and Big Bertha
Stainless Steel Fairway Woods, Hawk Eye(R) VFT(R) Tungsten
Injected(TM) Titanium Irons, Big Bertha Stainless Steel Irons,
Steelhead X-16(R) and Steelhead X-16 Pro Series Stainless Steel Irons,
Game Enjoyment System(TM) (GES(TM)), Callaway Golf Forged+ Wedges and
Callaway Golf Forged Wedges, and Callaway Golf Tour Blue(TM) Putters.
Callaway Golf Company also makes and sells Odyssey(R) Putters,
including White Hot(R), TriHot(R), DFX(R) and Dual Force(R) Putters.
Callaway Golf Company makes and sells the Callaway Golf(R) HX(R) Tour
balls, HX Blue and HX Red balls, Big Bertha(TM) Blue and Big Bertha
Red balls, and the Warbird(R) balls. Callaway Golf also owns and
operates The Top-Flite Golf Company, a wholly owned subsidiary that
includes the Top-Flite(R) and Ben Hogan(R) brands. For more
information about Callaway Golf Company, please visit our websites at
www.callawaygolf.com, www.topflite.com and www.odysseygolf.com.
Callaway Golf Company
Consolidated Condensed Statement of Operations
(In thousands, except per share data)
(Unaudited)
Quarter Ended
June 30,
---------------------------
2004 2003
--------- ---------
Net sales $297,908 100% $242,077 100%
Cost of goods sold 170,072 57% 115,583 48%
--------- ---------
Gross profit 127,836 43% 126,494 52%
Operating expenses:
Selling 74,496 25% 53,164 22%
General and administrative 21,834 7% 14,629 6%
Research and development 7,559 3% 6,242 3%
--------- ---------
Total operating expenses 103,889 35% 74,035 31%
Income from operations 23,947 8% 52,459 22%
Other income (expense), net (1,592) 1,472
--------- ---------
Income before income taxes 22,355 8% 53,931 22%
Income tax provision 8,640 19,788
--------- ---------
Net income $13,715 5% $34,143 14%
========= =========
Earnings per common share:
Basic $0.20 $0.52
Diluted $0.20 $0.52
Weighted-average shares outstanding:
Basic 67,788 65,804
Diluted 68,368 66,146
Six Months Ended
June 30,
---------------------------
2004 2003
--------- ---------
Net sales $661,694 100% $513,796 100%
Cost of goods sold 367,667 56% 249,465 49%
--------- ---------
Gross profit 294,027 44% 264,331 51%
Operating expenses:
Selling 145,691 22% 102,064 20%
General and administrative 44,695 7% 28,470 6%
Research and development 15,668 2% 12,914 3%
--------- ---------
Total operating expenses 206,054 31% 143,448 28%
Income from operations 87,973 13% 120,883 24%
Other income (expense), net (1,321) 288
--------- ---------
Income before income taxes 86,652 13% 121,171 24%
Income tax provision 32,392 44,550
--------- ---------
Net income $54,260 8% $76,621 15%
========= =========
Earnings per common share:
Basic $0.80 $1.16
Diluted $0.79 $1.16
Weighted-average shares outstanding:
Basic 67,536 65,770
Diluted 68,367 66,036
Callaway Golf Company
Consolidated Condensed Balance Sheet
(In thousands)
(Unaudited)
June 30 Dec. 31,
2004 2003
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $35,745 $47,340
Accounts receivable, net 261,065 100,664
Inventories, net 154,561 185,389
Deferred taxes 36,304 36,707
Other current assets 14,045 13,362
--------- ---------
Total current assets 501,720 383,462
Property, plant and equipment, net 145,271 164,763
Intangible assets, net 178,793 169,851
Deferred taxes 7,997 12,289
Other assets 16,826 18,201
--------- ---------
$850,607 $748,566
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $100,309 $79,787
Accrued employee compensation and benefits 30,567 25,544
Accrued warranty expense 13,468 12,627
Income taxes payable 8,859 11,962
Line of credit 20,000 -
Other current liabilities 53 240
--------- ---------
Total current liabilities 173,256 130,160
Long-term liabilities 28,811 29,023
Shareholders' equity 648,540 589,383
--------- ---------
$850,607 $748,566
========= =========
Callaway Golf Company
Supplemental 2004 Financial Information
(In thousands, except per share data)
(Unaudited)
Quarter Ended June 30,
--------------------------------------------------
2004 2003(a)
---------------------------------------- ---------
Callaway Top-Flite Integration
Golf Golf Charges Total Total
--------- --------- -------------------- ---------
Net sales $227,485 $70,423 $ - $297,908 $242,077
Gross profit 110,321 23,383 (5,868) 127,836 126,494
% of sales 48% 33% n/a 43% 52%
Operating expenses 75,259 23,810 4,820 103,889 74,035
--------- --------- ---------- --------- ---------
Income from
operations 35,062 (427) (10,688) 23,947 52,459
Other income
(expense), net (1,908) 316 - (1,592) 1,472
--------- --------- ---------- --------- ---------
Income before income
taxes 33,154 (111) (10,688) 22,355 53,931
Income tax provision 12,696 (38) (4,018) 8,640 19,788
--------- --------- ---------- --------- ---------
Net income $20,458 $(73) $(6,670) $13,715 $34,143
========= ========= ========== ========= =========
Diluted earnings per
share $0.30 $0.00 $(0.10) $0.20 $0.52
Weighted-average
shares outstanding 68,368 68,368 68,368 68,368 66,146
Six Months Ended June 30,
--------------------------------------------------
2004 2003(a)
---------------------------------------- ---------
Callaway Top-Flite Integration
Golf Golf Charges Total Total
--------- --------- -------------------- ---------
Net sales $524,769 $136,925 $ - $661,694 $513,796
Gross profit 256,382 46,983 (9,338) 294,027 264,331
% of sales 49% 34% n/a 44% 51%
Operating expenses 152,962 46,634 6,458 206,054 143,448
--------- --------- ---------- --------- ---------
Income from
operations 103,420 349 (15,796) 87,973 120,883
Other income
(expense), net (1,735) 414 - (1,321) 288
--------- --------- ---------- --------- ---------
Income before income
taxes 101,685 763 (15,796) 86,652 121,171
Income tax provision 38,012 285 (5,905) 32,392 44,550
--------- --------- ---------- --------- ---------
Net income $63,673 $478 $(9,891) $54,260 $76,621
========= ========= ========== ========= =========
Diluted earnings per
share $0.93 $0.01 $(0.15) $0.79 $1.16
Weighted-average
shares outstanding 68,367 68,367 68,367 68,367 66,036
(a) During the latter part of 2003, the Callaway Golf Company
completed the acquisition of substantially all of the golf-related
assets of the Top-Flite Golf Company. Therefore, the results reported
for the periods ended June 30, 2003 are representative of the
Callaway Golf and Odyssey brand operations and do not include
Top-Flite Golf operating results and the related integration charges.
Callaway Golf Company
Supplemental 2004 Forecast Information
(In millions, except per share data)
(Unaudited)
Callaway Top- On-Going
Golf Flite Operations Integration Total(a)
--------------------------------------------------
Net sales $772.5 $210.0 $982.5 $0.0 $975-$990
Gross profit 348.8 71.5 420.3 (15.2) 405.1
% of sales 45% 34% 43% N/A 41%
Operating expenses 281.6 85.2 366.8 12.9 379.7
--------------------------------------------------
Income from
operations 67.2 (13.7) 53.5 (28.1) 25.4
Other income
(expense), net (2.4) - (2.4) - (2.4)
--------------------------------------------------
Income before income
taxes 64.8 (13.7) 51.1 (28.1) 23.0
Net income $39.4 ($8.3) $31.1 ($17.1) $14.0
==================================================
Diluted earnings per
share $0.57 ($0.12) $0.45 ($0.25)$0.15 - $0.25
Weighted average
shares outstanding 68.5 68.5 68.5 68.5 68.5
(a) The Company's estimated results are based upon an estimated range
for each line item shown in this chart. For purposes of illustration
only, however, the Company has provided what is generally the mid-
point of the estimated ranges, except with respect to Total Net Sales
and Total Diluted Earnings Per Share. The Company's actual results
for a line item may differ from the mid-point and still be within the
Company's estimated range.
ESTIMATES ARE BASED UPON CURRENT INFORMATION AND EXPECTATIONS; ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THESE ESTIMATES AS A RESULT OF
CERTAIN RISKS AND UNCERTAINTIES AS DESCRIBED IN THE ACCOMPANYING
PRESS RELEASE AND DISCLAIMER.
CONTACT: Callaway Golf Company
Ron Drapeau, Brad Holiday or Larry Dorman
760-931-1771