Callaway Golf Reports First Quarter Sales and Earnings
PR Newswire - April 22, 1998 17:27
CARLSBAD, Calif., April 22 /PRNewswire/ -- Callaway Golf Company
(NYSE: ELY) today reported net sales of $176.9 million for the first quarter
ended March 31, 1998, an increase of five percent over net sales of $169.1
million reported in the first quarter of 1997, according to Ely Callaway,
Founder and Chairman, and Donald H. Dye, President and Chief Executive
Officer. Net income decreased 54 percent to $11.2 million in the first
quarter of 1998 from the first quarter of 1997, and diluted earnings per share
decreased 53 percent to $0.16 in 1998 from $0.34 in the first quarter of 1997.
Net sales of $176.9 million were comprised of: $72.9 million of Biggest
Big Bertha(TM) Titanium Drivers and Great Big Bertha(R) Titanium Drivers and
Fairway Woods; $26.9 million of Big Bertha(R) War Bird(R) Stainless Steel
Metal Woods; $44.9 million of Big Bertha(R) X-12(TM) Irons; $11.9 million of
Great Big Bertha(R) Tungsten*Titanium(TM) Irons; $10.1 million in Odyssey Golf
product sales, and $10.2 million of other sales.
The 54 percent decrease in net income was attributable in part to (1) a
4.2 percent increase in cost of goods sold as a percentage of sales due to an
increase in warranty expense; the increase in irons as a percentage of sales
and credits and discounts given on remaining Big Bertha(R) Iron inventory at
retail; (2) selling expense increased by $9.2 million over the first quarter
of 1997, attributable in part to $3.1 million of Odyssey Golf expenses, a $1.6
million increase in tour related expenses, an increase of $1.2 million in CGV,
Inc. (the operator of Callaway Golf Performance Centers at Walt Disney World
in Orlando and the Callaway Golf Center in Las Vegas) expenses and a $2.5
million increase in advertising expenses including a $1.1 million increase in
Japan; (3) general and administrative expenses increased $4.2 million, of
which $2.3 million are Odyssey expenses and a $1.7 million increase in
Callaway Golf Ball Company expenses; and (4) research and development expenses
increased $2.7 million, including a $1.2 million increase related to golf ball
research and a $1.1 million increase related to Callaway Golf's Casting
Technology Center.
"We are pleased that we were able to report record sales for the first
quarter of 1998, despite the adverse factors affecting our business," said
Donald H. Dye, President and Chief Executive Officer of Callaway Golf.
"Recent reports show that we are the clear leader in unit and dollar sales in
woods, irons and putters. In spite of only being available for three months,
the new Big Bertha(R) X-12(TM) Irons are the #1 selling irons in golf shops
today. Even though we have shipped more than 80,000 sets, demand greatly
exceeds our production capacity," he continued. "We were able to achieve
these results even though, as expected and previously reported in our February
27 press release, our sales and earnings for the quarter were adversely
affected by the unusual 'El Nino' weather conditions in the United States and
economic problems in Asia. Our sales to California and Florida, the markets
most negatively affected by 'El Nino', were down 40.8% ($7.8 million) and
23.5% ($3.0 million), respectively. Callaway Golf's sales to the rest of the
United States were up 6.7% ($5.1 million)."
"We have noticed that some of our major competitors have publicly stated
that the sales of their drivers at retail have increased during the March
quarter. We believe this is true even though the sales of our metal woods are
down. We believe also that the primary reason behind those sales increases is
that the wholesale prices on these competitors' drivers have been
substantially reduced as close-outs. There have been no reductions of
wholesale prices on any of Callaway Golf's Big Bertha(R) Metal Woods. We are
continuing to monitor our metal wood sales in the domestic market, but it
should be noted that this is the first March quarter since 1990 that we have
not had a new metal wood introduction and our metal wood sales may only be
reflecting the normal seasonality of the golf industry," Mr. Dye reported.
"We don't yet see an end to the economic problems in Asia, and expect that
our sales in that part of the world, which accounted for less than 17% of our
sales in 1997, will continue to be affected negatively for the foreseeable
future. In the non-Japanese Asian markets our sales for the first quarter of
1998, when compared to the same period in 1997, were down $7.8 million or
65.6%. Up to this point, we have not seen problems with orders for Japan, and
in fact our Big Bertha(R) X-12(TM) Irons are reported to be the best selling
irons in Japan. However, we are aware of concerns about the Japanese economy
and other factors which could materialize later in the year and negatively
affect our business there, as well," Mr. Dye concluded. Sales to Japan
accounted for approximately 10% of the Company's sales in 1997.
Additionally, the Board of Directors approved a dividend for the first
quarter of 1998 of $.07 per share, payable May 26, 1998 for shareholders of
record as of May 5, 1998.
Callaway Golf makes and sells Big Bertha(R) metal woods and irons,
including Big Bertha(R) War Bird(R) Stainless Steel Metal Woods, Great Big
Bertha(R) Titanium Metal Woods, Biggest Big Bertha(TM) Titanium Drivers, Big
Bertha(R) X-12(TM) Irons and Great Big Bertha(R) Tungsten*Titanium(TM) Irons.
Big Bertha(R) Drivers are the number one drivers in use on the PGA, Senior
PGA, Ladies PGA, Nike and European PGA Tours. Big Bertha Irons are the number
one irons in use on these five combined major tours. Callaway Golf's wholly-
owned subsidiary, Odyssey Golf, Inc., makes and sells Odyssey(R) putters and
wedges with Stronomic(R) and Lyconite(TM) inserts. Odyssey(R) putters are the
number one putters in use on the Senior PGA, Ladies PGA and Nike Tours.
Statements used in this press release that relate to future plans, events,
financial results or performance are forward-looking statements as defined
under the Private Securities Litigation Reform Act of 1995. Actual results
may differ materially from those anticipated as a result of certain risks and
uncertainties, including but not limited to market acceptance of current and
future products, competitive pressures, and investment risks, costs and
potential disruption of business as a result of the proposed reorganization of
international operations, as well as other risks and uncertainties detailed
from time to time in the Company's periodic reports on Forms 10-K, 10-Q and 8-
K filed 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.
For more information about Callaway Golf Company, please visit the
company's website on the internet at www.callawaygolf.com
Callaway Golf Company
Consolidated Condensed Income Statement
(In thousands, except per share data)
First Quarter Ended
March 31,
(unaudited)
1998 1997
Net sales $176,908 100% $169,073 100%
Cost of goods sold 93,203 53% 82,071 49%
Gross profit 83,705 47% 87,002 51%
Operating expenses:
Selling 35,792 20% 26,579 16%
General and
administrative 20,504 12% 16,254 10%
Research and
development 8,665 5% 5,953 4%
Income from operations 18,744 11% 38,216 23%
Other income, net (337) 1,383
Income before
income taxes 18,407 10% 39,599 23%
Provision for
income taxes 7,247 15,133
Net income $11,160 6% $24,466 14%
Earnings per common share:
Basic $0.16 $0.36
Diluted $0.16 $0.34
Common equivalent shares:
Basic 69,184 68,016
Diluted 71,173 71,763
Callaway Golf Company
Consolidated Condensed Balance Sheet
(In thousands)
March 31, December 31,
1998 1997
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $14,430 $26,204
Accounts receivable, net 147,352 124,470
Inventories, net 142,036 97,094
Deferred taxes 24,714 23,810
Other current assets 11,438 10,208
Total current assets 339,970 281,786
Property, plant and equipment, net 147,803 142,503
Other assets 145,093 137,425
$632,866 $561,714
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $48,883 $30,063
Revolving line of credit 30,000 --
Accrued employee compensation
and benefits 15,569 14,262
Accrued warranty expense 30,158 28,059
Income taxes payable 4,129 -
Total current liabilities 128,379 72,384
Long-term liabilities 8,405 7,905
Shareholders' equity 495,722 481,425
$632,866 $561,714
SOURCE Callaway Golf Company
/CONTACT: Krista Mallory of Callaway Golf Company, 760-931-1771/
(ELY) |
