Callaway Golf Company (NYSE:ELY) today announced its financial results for the six months ended 30th June 2003, announcing net income of $76.6 million and diluted earnings per share of $1.16, both records for the company. The company estimates diluted earnings per share for the year of approximately $0.95 on a lower revenue estimate of $780 million.
For the quarter ended 30th June 2003, the company reported net sales of $242.1 million, compared to $252.5 million during the same quarter in 2002. Foreign currency exchange rates favourably impacted net sales for the second quarter of 2003 by approximately $7.5 million.
Net income during the second quarter was $34.1 million, versus $37.1 million for the same quarter last year. Earnings per diluted share were $0.52, compared to $0.55 for the same quarter last year. The year-over-year decline in net sales and earnings for the quarter was consistent with the company’s previous guidance.
For the six months ended 30th June 2003, the company reported net sales of $513.8 million, an increase of 1% compared to $509.2 million during the same period in 2002. Foreign currency exchange rates favourably impacted net sales for the period by approximately $19.4 million. Net income during the first six months was $76.6 million, an increase of 13% compared to $67.8 million for the same period last year. Earnings per diluted share were $1.16, an increase of 17% compared to $0.99 for the same period last year.
“We are pleased with our results in the first half of 2003,” said Ron Drapeau, chairman, president and CEO. “As we expected, there was some shifting of business from the second quarter, resulting in a slight decline on a quarter-to-quarter basis. But we achieved record six-month earnings, growing net sales by 1% while reducing operating expenses by 9%. In the process of achieving these results, we maintained our #1 market share position in the U.S. in woods, irons and putters.”
Brad Holiday, executive vice-president and chief financial officer, stated, “We are pleased to report gross margins in the first six months of 51%, essentially flat compared with 52% for the first six months last year. In addition, operating expenses for the same period were reduced to 28% of net sales, versus 31% for the same period last year. Our balance sheet remains strong with a 49% increase in cash and an 18% reduction in inventories versus the same time last year.”
In accordance with the Company’s dividend practice, the board of directors will determine the next dividend in August.
“With the performance achieved in the first half of the year, and with modest incremental contributions from some limited product launches planned for the last part of 2003, we now expect that annual fully diluted earnings per share will exceed our previous guidance,” reported Mr. Drapeau.
“We are now targeting annual net sales at approximately $780 million with our earnings forecast increasing to approximately $0.95 per share. However, achieving these targets will not be easy,” he continued. “The golf equipment marketplace, particularly in the US, remains depressed and our competitors are taking many aggressive actions to gain business. It is also important that the overall economy, particularly in the US, continue to show some signs of improvement.”
“We continue to think that quarterly guidance is not appropriate or productive, and decline to provide guidance beyond the annual targets,” stated Mr. Drapeau. “However, those familiar with the seasonality in our industry know to expect a significant drop in sales and earnings in the back half of the year, including a loss in the fourth quarter.”
“This guidance does not include any adjustments associated with the expected acquisition of the Top-Flite Golf assets,” continued Mr. Drapeau. “At this time it is premature for us to publish such information. I will not be providing financial guidance for the rest of this year or for next year until we have more clarity around the certainty and timing of the transaction.”