Callaway Golf Company reported that net sales for the third quarter increased 71.7% to $220.6 million, compared to $128.5 million in the third quarter of 2004. The company narrowed the net loss for the period to a net loss of $4.8 million, seven cents per share, compared to a net loss of $35.9 million, or 53 cents per share, in the third quarter of 2004.
The net loss per share for the third quarter of 2005 includes after-tax charges of eight cents per share associated with the integration of the Top-Flite operations acquired in late 2003 and the recently announced restructuring initiatives. The net loss per share for the third quarter of 2004 includes after-tax charges of seven cents per share associated with the integration of the Top-Flite operations. Excluding these charges, the Company's pro forma fully diluted earnings per share for the third quarter of 2005 would have been a penny, as compared to a pro forma net loss per share of 46 cents per share in the third quarter of 2004.
For the nine-month YTD period, net sales were $843.6 million, as compared to $790.2 million in the first nine months of 2004. Fully diluted earnings per share were 46 cents, as compared to fully diluted earnings per share of 27 cents for the first nine months of 2004.
Fully diluted earnings per share for the first nine months of 2005 includes after-tax charges of 14 cents per share associated with the integration of the Top-Flite operations and the recently announced restructuring initiatives. Fully diluted earnings per share for the first nine months of 2004 includes after-tax charges of 20 cents per share associated with the integration of the Top-Flite operations. Excluding these charges, the Company's pro forma fully diluted earnings per share for the first nine months of 2005 would have been 60 cents, as compared to pro forma fully diluted earnings per share of 47 cents for the first nine months of 2004.
The year-to-date gains in earnings were tempered by increases in selling costs that were partially offset by savings in other operating areas. These increased selling costs reflect increased advertising and promotional expense and increased tour expense. The planned increase in selling expense for 2005 was intended to reinvigorate the Company's business following disappointing results in 2004, and the Company believes its investment in these activities has contributed to the increase in sales in 2005.
“We are pleased with our third quarter top line results, but know we can do better in profitability,” commented George Fellows, President and CEO. “As announced on September 29th, we have taken actions to lower costs while improving our internal processes. These actions are expected to generate savings in 2006 of between $50 and $60 million across the board. While a portion of these savings will be reinvested in growth initiatives, a majority will positively impact profitability. Our next step is to re-examine gross margins in an effort to further reduce costs while maintaining our high quality standards. We believe these actions along with improved and focused marketing will allow us to maximize shareholder value.”
Callaway Golf Company
Statements of Operations
(In thousands, except per share data)
(Unaudited)
Quarter Ended
September 30,
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2005 2004
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Net sales $220,611 100% $128,457 100%
Cost of sales 133,713 61% 102,386 80%
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Gross profit 86,898 39% 26,071 20%
Operating expenses:
Selling expenses 69,744 32% 58,300 45%
General and administrative expenses 19,531 9% 23,219 18%
Research and development expenses 7,116 3% 7,855 6%
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Total operating expenses 96,391 44% 89,374 70%
Loss from operations (9,493) -4% (63,303) -49%
Other income, net 735 1,091
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Loss before income taxes (8,758) -4% (62,212) -48%
Income tax benefit (3,954) (26,317)
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Net loss $(4,804) -2% $(35,895) -28%
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Earnings (loss) per common share:
Basic ($0.07) ($0.53)
Diluted ($0.07) ($0.53)
