Callaway Golf Company estimates net sales for the third quarter will be approximately $236 million, an increase of 22%. Management also estimates that based on these sales levels, earnings per diluted share will range between break-even and two cents, including a gain of approximately three cents per diluted share related to the sale of a building.

These results are based on approximately 67.6 million diluted shares outstanding and include after-tax charges of approximately four cents per diluted share related to the gross margin improvement initiatives announced in November 2006. Excluding charges for these gross margin initiatives, pro forma earnings per diluted share are estimated to range from four cents to six cents.

For the third quarter of 2006, the Company reported net sales of $194 million and a loss per share of $0.18 (on 67.0 million shares), including non-cash FAS 123R charges. Those results include after-tax charges of approximately $0.02 per share associated with the restructuring initiatives announced in September 2005 and the Top-Flite integration. Excluding these charges, pro forma loss per share was $0.16.

Business Update

“We are very pleased with our preliminary third quarter results as our business continues to exceed our expectations,” commented George Fellows, President and CEO of Callaway Golf. “Consumer and retail demand for our products has remained strong, resulting in record sales for the first nine months of 2007. We also continue to realize significant benefits from our November 2006 gross margin improvement initiatives and inventory reduction initiatives. For the first nine months of 2007, our estimated gross margins as a percent of sales has increased 5 percentage points compared to 2006 and our estimated inventory at the end of September decreased $28 million compared to last year, in line with our recent forecasts.”

Details of Third Quarter Preliminary Results

Sales

The estimated increase in sales for the third quarter is attributable to strong sales across the woods, irons, golf balls, and accessories categories, with a slight decline in putters.

Gross Margins

The Company estimates its gross margins as a percentage of net sales at approximately 40% for the third quarter. Excluding charges related to gross margin improvement initiatives, the Company estimates its pro forma gross margins as a percentage of net sales at approximately 42%. In the third quarter of 2006, the Company's gross margins were 35% and excluding integration and restructuring charges were 36%. The improvement in pro forma gross margins can be attributed to a positive contribution from this year's implementation of gross margin improvement initiatives as well as an increased mix of sales of higher margin products, which was driven by the continued success of the Company's Fusion Drivers and X-20 Irons.

Operating Expenses

The Company estimates that its operating expenses for the quarter will be approximately $93 million (40% of net sales), an increase of approximately $8 million when compared to last year's third quarter of $85 million (44% of net sales). The dollar increase is due to higher selling expense associated with the higher sales, increases in marketing expense, an increase in international expense due to the weaker dollar, and increased expense for annual employee incentive compensation associated with the improved year over year operating results, partially offset by the gain recognized on the sale of a building.

Business Outlook

The Company is raising the full year forecast with sales estimated to range from $1.095 to $1.105 billion and pro-forma fully diluted earnings per share of $0.85 to $0.89 (on an estimated 68.3 million shares). This compares to a previous forecast of sales ranging from $1.070 to $1.080 billion and pro-forma fully diluted earnings per share of $0.78 to $0.84 (on an estimated 70 million shares). Pro forma earnings exclude charges related to gross margin initiatives, currently estimated at $0.08 per share for 2007, but include employee equity-based compensation charges under FAS 123R.

“We are raising our annual forecast for the third time this year due to the continued sales and margin momentum through the first nine months,” commented Brad Holiday, Chief Financial Officer. “Our forecast for the balance of the year takes into consideration limited new product introductions during the fourth quarter compared to approximately $30 million in 2006. We have also taken into consideration the fact that product margins are typically lower during the last quarter as we move our end of life product through the retail channels. Additionally, our strong earnings have generated a significant improvement in our cash flow this year, a portion of which we have used to purchase $75 million of our outstanding stock during the third quarter.”