Global Edition

 

Callaway releases preliminary first quarter 2009 results

12.25am 20th April 2009 - Corporate

Callaway Golf Company (NYSE:ELY) announce its preliminary financial results for the first quarter of 2009.

Net sales are estimated to be $272 million, a decrease of 26% as compared to net sales of $366 million for the first quarter of 2008. Changes in foreign currency exchange rates adversely affected net sales by approximately $22 million. On a currency neutral basis (i.e. translating the Company’s first quarter 2009 results at first quarter 2008 exchange rates), estimated net sales would be $294 million, a decrease of 20% compared to the first quarter of 2008.

• U.S. net sales are estimated to be $141 million, a decrease of 23% compared to $184 million for the same period last year.
• International net sales are estimated to be $131 million, a decrease of 28% compared to $182 million last year. On a currency neutral basis, 2009 international net sales are estimated to be $153 million, a decrease of 16% compared to the same period last year.

Gross profit is estimated to be $116 million, or 43% of net sales, compared to gross profit of $176 million or 48% of net sales for the first quarter of 2008. On a currency neutral basis, gross profit for the first quarter of 2009 is estimated to be $136 million, or 46% of net sales.

Operating expenses for the quarter are estimated to be $103 million, compared to $111 million for the first quarter of 2008. On a currency neutral basis, operating expenses are estimated to be $107 million for the first quarter of 2009.

Earnings per diluted share are estimated to range from $0.10 to $0.12 (on 63.3 million shares). For the first quarter of 2008, the Company reported fully diluted earnings per share of $0.61 (on 64.8 million shares). Both periods include after-tax charges of approximately $0.01 per share related to the Company’s gross margin improvement initiatives.

“Global economic conditions have proven to be more severe than initially anticipated,” commented George Fellows, President and CEO of Callaway Golf. “In addition to causing consumers to defer golf equipment purchasing decisions, these conditions have also caused retailers to be very conservative on the levels of inventory they are willing to carry, both of which have adversely affected the Company’s sales during the first quarter.

“These conditions have resulted in a more aggressive pricing environment in the United States and some international markets and a continued shift by consumers to lower price point products, which have also adversely affected the Company’s gross margins. Further strengthening of the dollar has also had a larger than anticipated negative impact on the Company’s financial results for the first quarter.”

“Despite these economic headwinds,” continued Mr. Fellows, “the strength of our 2009 products, together with several retail initiatives we put in place early in the year, has enabled us to gain market share around the world in almost all product categories. In addition, the successful implementation of our gross margin initiatives over the past two years has allowed us to mitigate the adverse effect these macroeconomic conditions are having upon our gross margins. Fortunately, there has been more positive economic news of late, which could stimulate increased consumer activity as the golf season begins to open up and continue as the year progresses.”

Business Update
Based on Callaway Golf’s preliminary first quarter results and management’s current view regarding the remainder of the year, the Company no longer expects that its 2009 currency neutral earnings will be roughly the same as in 2008. In the current environment it is extremely difficult to forecast the remainder of the year, but based upon recent trends, industry-wide sales for 2009 are estimated to decrease approximately 15% to 20% compared with 2008, and that Callaway Golf’s annual sales for 2009 are estimated to decrease less than that as the Company continues to outperform the industry and gain market share in most product categories.

It is further estimated that annual gross profit as a percentage of net sales will be in the range of 40% to 42%, and operating expenses will range from $375 to $390 million. Further discussion about expectations for the year will be provided at the Company’s upcoming conference call.

“We believe these unprecedented macroeconomic conditions will continue to adversely affect consumers and our business in the short-term, but we remain optimistic about the golf industry for the long-term and believe it will recover as the global economy recovers,” commented Mr. Fellows.

“During this time, however, we will continue to proactively grow our market share, aggressively manage our costs, and position ourselves to take advantage of opportunities as the economy and golf industry begin to recover. We are continuing to invest in additional gross margin initiatives, and have just completed a reduction of our global workforce by approximately 10%. These actions, combined with the cost reductions taken at the beginning of the year, will allow the Company to weather these short-term challenges and still be able to invest in initiatives that will drive sustained and meaningful long-term growth.”

Callaway Golf www.callawaygolf.com

       

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