Callaway Golf Announces Second Quarter Results.Business & Sports Editors/Golf Writers & Columnists CARLSBAD, Calif.--(BW SportsWire)--July 18, 2002 Callaway Golf Company Callaway Golf Company is an American golf company based in Carlsbad, California. They manufacture woods, irons, wedges, putters and golf balls and license its name for apparel, footwear, timepieces and accessories. (NYSE NYSE See: New York Stock Exchange :ELY) today reported operating results for the second quarter and six months ended June 30, 2002. For the quarter ended June 30, 2002 compared with the same quarter in 2001, Callaway Golf announced a 37% increase in net income (to $37.1 million from $27.0 million) and a 53% increase in earnings per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share (to $0.55 from $0.36) on net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of $252.2 million ($251.1 million in constant dollars) compared to $253.7 million last year. Excluding the effects of a non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. taken last year in connection with a since-terminated long term electricity supply agreement, net income and earnings per diluted share increased 12% and 25%, respectively, over the same quarter last year. For the six months ended June 30, 2002 compared to the same period in 2001, the Company announced an 11% increase in net income (to $67.8 million from $61.1 million) and a 19% increase in earnings per diluted share (to $0.99 from $0.83) on net sales of $508.6 million ($513.2 million in constant dollars) compared to $515.0 million last year. Excluding the effect of the non-cash charge taken in 2001 as noted above, net income and earnings per diluted share increased 1% and 9%, respectively, over the same period last year. "While we are very pleased with achieving our predicted range for net sales, we take even greater pleasure in our ability to exceed the range of estimates for net income and earnings per share," said Ron Drapeau, Chairman, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "The golf industry is in a business cycle where near-term revenue growth is challenging due to a wide range of factors, including poor economic conditions in key countries, a decline in rounds played in the U.S., and irrational ir·ra·tion·al adj. Not rational; marked by a lack of accord with reason or sound judgment. irrational adjective Unreasonable, illogical pricing actions by some of our competitors. We take great satisfaction in the fact that we are running our business in ways which defend our #1 market shares in the U.S. in woods, irons and putters while increasing the dollars we bring to the bottom line. Moreover, this increase in profitability is largely a reflection of fundamental changes in the ways we run our business to manage costs while still achieving superior results. These achievements are a testament to the determination of all our employees worldwide to be the best at everything we do."
Sales by Product and Region
Second Quarter - 2002 Year-to-Date - 2002
--------------------- -------------------
% Change vs. 2001 % Change vs. 2001
----------------- -----------------
Net Sales As Constant+ Net Sales As Constant+
($M) Reported Dollars ($ M) Reported Dollars
----- -------- ------- ----- -------- -------
Woods $96.5 (23%) (24%) $202.0 (28%) (27%)
Irons $78.4 10% 9% $161.8 19% 20%
Golf Balls $23.7 13% 13% $46.3 42% 44%
Putters,
Accessories,
Other $53.6 51% 50% $98.5 45% 47%
------ ------
TOTAL $252.2 (1%) (1%) $508.6 (1%) 0%
United States $143.6 3% 3% $294.5 2% 2%
International $108.6 (5%) (6%) $214.1 (6%) (4%)
------- -------
TOTAL $252.2 (1%) (1%) $508.6 (1%) 0%
+As measured by applying 2001 exchange rates to 2002 sales.
Brad Holiday, Executive Vice-President and Chief Financial Officer, stated, "Operationally, the second quarter was a solid one. Our gross margin increased to 55% from 52% last year despite this year's planned product mix shift toward stainless steel stainless steel: see steel. stainless steel Any of a family of alloy steels usually containing 10–30% chromium. The presence of chromium, together with low carbon content, gives remarkable resistance to corrosion and heat. woods and irons, which generally have lower margins than titanium titanium (tītā`nēəm, tĭ–) [from Titan], metallic chemical element; symbol Ti; at. no. 22; at. wt. 47.88; m.p. 1,675°C;; b.p. 3,260°C;; sp. gr. 4.54 at 20°C;; valence +2, +3, or +4. woods. The gross margin improvement is attributable to our continuing effort to reduce our club manufacturing costs and higher golf ball gross margins. Expense management initiatives and a required change in goodwill amortization reduced our operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. 6% and contributed to the second quarter operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: improvement." During the second quarter, the Company repurchased 1.8 million of its shares at an average cost of $17.59 per share. The repurchases completed the $100 million repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. authorization announced in August 2001 and continued under an additional $50 million repurchase authorization approved by the Board in May 2002. In accordance with the Company's dividend practice, the next dividend will be determined by the Board of Directors at its August 2002 meeting. 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. See further disclaimer below. "We remain confident that this year we will exceed 2001 results, estimating sales of $810-$820 million and fully diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $1.02-$1.07, absent any unexpected events," Mr. Holiday added. "The increased competitive environment in the golf industry and the economic uncertainty in some of our markets are challenging. However we feel confident that the products and initiatives we currently have in place or planned for the remainder of the year, along with our cost controls and strong margins, will help offset these challenges." The Company will be holding a conference call at 2:00 p.m. PDT PDT abbr. Pacific Daylight Time PDT Pacific Daylight Time PDT n abbr (US) (= Pacific Daylight Time) → hora de verano del Pacífico PDT today, which will be hosted by Ron Drapeau, Chairman, CEO and President, and Brad Holiday, 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 web site 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 one hour after the conclusion of the conference call. The replay may be accessed through the Internet at www.callawaygolf.com or by telephone by calling (800) 642-1687 toll free for calls originating within the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. or (706) 645-9291 for International calls. The replay pass code is 4733663 and the replay will be available until 5:00 p.m. PDT, on Thursday, July 25, 2002. Disclaimer: Statements used in this press release that relate to future plans, events, financial results or performance, including statements concerning future operating expenses and statements in the Business Outlook section of this press release relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Company's future prospects, and estimated sales and earnings, are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. as defined under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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, including the Company's golf ball products and the Company's golf club 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 The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. of materials or resources needed to manufacture the Company's golf club or ball products (including business interruptions or increased costs resulting from power outages This is a list of famous wide-scale power outages. 1965
USGA Uhren & Schmuck Gassner (Germany) USGA US Global Nanospace Inc. (stock symbol) USGA Undergraduate Student Government Association 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 Annual Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended March 31, 2002, 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 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 here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . The Company undertakes no obligation to republish re·pub·lish tr.v. re·pub·lished, re·pub·lish·ing, re·pub·lish·es 1. To publish again. 2. Law To revive (a libel or a canceled will). revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Callaway Golf Company makes and sells Big Bertha Big Bertha Either of two different sets of long-range artillery produced by the Krupp works (see Thyssen Krupp Stahl) in Germany during World War I. The first were 420-mm (16.5-in.) howitzers used by German forces advancing through Belgium in 1914. (R) Metal Woods and Irons, including Big Bertha C4(TM) Compression Cured Carbon Composite Drivers, Big Bertha ERC (database) ERC - An extended entity-relationship model. (R) II Forged Titanium Drivers, Big Bertha ERC Forged Titanium Fairway Woods, Big Bertha Hawk Eye(R) VFT VFT Venus Fly Trap (dionaea muscipula) VFT Vogel-Fulcher-Tamman (polymer science equation) VFT Variable Frequency Transformer VFT Virtual Flight Test VFT Visual Function Test (R) and Big Bertha Hawk Eye VFT Pro Series Titanium Drivers and Fairway Woods, Big Bertha Steelhead See RRAS. (TM) III Stainless Steel Drivers and Fairway Woods, Hawk Eye VFT Tungsten tungsten (tŭng`stən) [Swed.,=heavy stone], metallic chemical element; symbol W; at. no. 74; at. wt. 183.85; m.p. about 3,410°C;; b.p. 5,660°C;; sp. gr. 19.3 at 20°C;; valence +2, +3, +4, +5, or +6. Injected in·ject·ed adj. 1. Of or relating to a substance introduced into the body. 2. Of or relating to a blood vessel that is visibly distended with blood. injected 1. introduced by injection. 2. congested. (TM) Titanium Irons, Big Bertha Stainless Steel Irons, Steelhead X-14(R) and Steelhead X-14 Pro Series Stainless Steel Irons, and Callaway Golf Forged Wedges. Callaway Golf Company also makes and sells Odyssey Odyssey (ŏd`ĭsē): see Homer. Odyssey Homer’s long, narrative poem centered on Odysseus. [Gk. Lit.: Odyssey] See : Epic Odyssey (R) Putters, including White Hot(R), TriHot(R), and Dual Force(R) Putters. Callaway Golf Company makes and sells the Callaway Golf(R) HX(R) Blue and HX Red balls, the CTU CTU Colorado Technical University CTU Czech Technical University in Prague CTU Counter Terrorist Unit CTU Clinical Trials Unit CTU Catholic Theological Union CTU Chicago Teachers Union CTU Computer Training Unit CTU Control Unit 30(TM) Blue and CTU 30 Red balls, the HX 2-Piece Blue and HX 2-Piece Red balls, and the CB1(TM) Blue and CB1 Red balls. For more information about Callaway Golf Company, please visit our Web sites at www.callawaygolf.com and www.odysseygolf.com.
Callaway Golf Company
Consolidated Condensed Statement of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
Net
sales $252,182 100% $253,655 100% $508,562 100% $515,021 100%
Cost of
goods
sold 114,684 45% 121,719 48% 242,641 48% 246,177 48%
------- ------- ------- -------
Gross
profit 137,498 55% 131,936 52% 265,921 52% 268,844 52%
Operating
expenses:
Selling 54,897 22% 54,131 21% 112,166 22% 107,377 21%
General
and
admin-
istra-
tive 14,988 6% 20,586 8% 28,408 6% 40,436 8%
Research
and
develop-
ment 8,444 3% 8,444 3% 16,327 3% 17,378 3%
------- ------- ------- -------
Total
operating
expenses 78,329 31% 83,161 33% 156,901 31% 165,191 32%
Income
from
opera-
tions 59,169 23% 48,775 19% 109,020 21% 103,653 20%
Other
income
(expense),
net 1,614 (3,557) 1,531 (2,627)
------- ------- ------- -------
Income
before
income
taxes 60,783 24% 45,218 18% 110,551 22% 101,026 20%
Income
tax
pro-
vision 23,641 18,243 42,715 39,976
------- ------- ------- -------
Net
income $37,142 15% $26,975 11% $67,836 13% $61,050 12%
======= ======= ======= =======
Earnings
per
common
share:
Basic $0.56 $0.38 $1.01 $0.86
Diluted $0.55 $0.36 $0.99 $0.83
Weighted-
average
shares
outstand-
ing:
Basic 66,922 71,490 67,132 70,754
Diluted 67,910 74,777 68,264 73,619
Callaway Golf Company
Consolidated Condensed Balance Sheet
(In thousands)
June 30, Dec. 31,
2002 2001
-------- --------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 92,070 $ 84,263
Marketable securities -- 6,422
Accounts receivable, net 174,837 48,653
Inventories, net 145,614 167,760
Deferred taxes 30,565 27,266
Other current assets 8,253 20,327
-------- --------
Total current assets 451,339 354,691
Property, plant and equipment, net 131,395 133,250
Intangible assets, net 121,283 121,313
Other assets 39,126 38,348
-------- --------
$743,143 $647,602
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 67,068 $ 38,261
Accrued employee compensation and
benefits 30,296 25,301
Accrued warranty expense 33,791 34,864
Note payable, current portion 2,760 2,374
Income taxes payable 23,683 1,074
-------- --------
Total current liabilities 157,598 101,874
Long-term liabilities 28,351 31,379
Shareholders' equity 557,194 514,349
-------- --------
$743,143 $647,602
======== ========
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