Global Edition

Callaway Golf Company Announces Third Quarter Results

3.21pm 24th October 2014 - Corporate

Chip Brewer Callaway President and CEO
Chip Brewer Callaway President and CEO

Callaway Golf Company (NYSE:ELY) today announced its first nine months and third quarter 2014 financial results, reflecting its continued improvements in market share, tour success, and operating efficiencies, as well as its anticipated return to profitability for the full year, which would be the first time since 2008.

Despite softer than expected market conditions, Callaway reported for the first nine months of 2014 a 5% increase in net sales driven by growth in woods (+6%), irons (+9%), golf balls (+5%) and accessories and other (+3%). In addition, the Company’s improvements in gross margins (+280 basis points) and effective cost management (operating expenses were flat despite incremental investments in tour and marketing) allowed the Company to offset an almost $10 million increase in other expense, resulting primarily from adverse changes in foreign currency contract values. The 2014 results also benefitted from a $10 million decrease in pre-tax charges related to the cost-reduction initiatives that were completed in 2013. As a result, during the first nine months of 2014, income from operations doubled to $70 million and fully diluted earnings per share increased 83% to $0.66.

For the third quarter of 2014, sales were $169 million, a decrease of 5% compared to last year due to continued industry softness and the timing of new product launches compared to the same period last year. This decline in net sales, however, was more than offset by a 540 basis point improvement in gross margins, an $8 million improvement in operating expenses, and a $5 million improvement in other income due to positive changes in foreign currency contract values. As a result, income from operations improved to a loss of $3 million compared to a loss of $17 million for the third quarter last year and loss per share improved to a loss of $0.01 compared to a loss of $0.32 for the same period last year.

“Overall, we are pleased with our results for the third quarter and first nine months,” commented Chip Brewer, President and Chief Executive Officer. “While challenging market conditions have made sales growth in the first nine months of this year more difficult than we would have liked, we are encouraged by our market share gains and are confident that we are outperforming the industry. We are also benefitting from the many actions we have taken these past two years to improve our operating efficiencies, as we have been able to achieve significant improvements in profitability despite the effect of the headwinds on top-line performance.”

“We believe we are well-positioned for the balance of 2014 and for 2015,” continued Mr. Brewer. “Our brand continues to build momentum, our organization is strengthening, and we have an incredible product pipeline, including the Big Bertha Alpha Drivers, the Big Bertha Irons and Hybrids and our new Japan line of Big Bertha Beta Irons and Hybrids that are launching in the fourth quarter. As a result, we expect our recovery to continue with steady improvement in profitability.”

Outlook for 2014

Given an improving industry outlook for the fourth quarter, coupled with the Company’s planned new product launches, the Company is increasing its full year earnings guidance and updating its other guidance. The revised full year guidance is as follows:

Full Year

Net sales for the full year 2014 are currently estimated to be approximately $890 million, an increase of 6% compared to $843 million in 2013. The Company’s prior guidance was $880 million to $900 million. The Company believes this growth rate will exceed the overall market and be driven by brand momentum and market share gains.

Preliminary Outlook for 2015

The Company believes that it will continue to grow market share in 2015 and that industry conditions will improve. The Company, however, is anticipating continued headwinds from adverse changes in foreign currency exchange rates and retailer conservatism during the first half of 2015, as well as a reduction in closeout sales in 2015 compared to 2014. The Company believes that these factors will be offset by full year sales growth of 5%-6% in the Company’s core channel business in 2015. The Company further cautioned that the strategic change in product launch timing will adversely impact its first quarter 2015 sales comparisons to 2014, although it will benefit the Company in the long-term. Considering all of these positive and negative factors, the Company is currently estimating that its net sales will grow 1%-2% on a consolidated basis in 2015. The Company also expects steady improvement in its profitability in 2015.

Conference Call and Webcast

The Company will be holding a conference call at 2:00 p.m. PDT today to discuss the Company’s financial results, outlook and business. The call will be broadcast live over the Internet and can be accessed at 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 three hours after the call ends, and will remain available through 9:00 p.m. PDT on Thursday, October 30, 2014. The replay may be accessed through the Internet at

Callaway Golf


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