Callaway Golf Company announced that it filed its Form 10-Q for the quarter ended September 30, 2002 with the Securities and Exchange Commission on Thursday. As previously announced, the results for the third quarter were positively impacted by a reduction in the Company’s warranty reserves taken during the quarter of approximately $17 million (pre-tax). The filing included the effects of subsequent events described below that were determined after the close of the third quarter but prior to the date of the filing, as required by SEC and applicable accounting rules.
The Company expects net sales and earnings for the year ended December 31, 2002 to be at the high end, if not slightly above, the range provided on December 16, 2002, which was net sales of approximately $790 million and earnings per share between $0.96 and $1.00, including $0.16 per share as the result of the one-time reduction in warranty reserve.
The Company previously reported that it was reviewing the appropriate period in which to reflect the reduction in its warranty reserve. The Company has now completed its review and has reaffirmed its initial determination that the adjustment associated with the warranty reserve reduction resulted from a change in estimate and should be appropriately recognized in earnings in the third quarter of 2002.
The Company’s independent auditors have completed their review of this matter and have concurred with the Company’s accounting treatment. The Company’s filing on Form 10-Q includes a preferability letter issued by its independent auditors with respect to this accounting. The Company has also made adjustments to its previously-reported earnings for additional inventory obsolescence reserves, a previously announced charge due to a customs and duty assessment in Korea and other items that were determined subsequent to the announcement of its third quarter earnings. These adjustments would normally have been reflected in the fourth quarter but for the delayed filing of the third quarter Form 10-Q.
The Company’s reaffirmed guidance for the full year 2002 is based on currently known information about the Company’s operations. This guidance is subject to the completion of the full year 2002 audit, which is in progress, and the Company’s ongoing review of its business and operations, including its golf ball business. These reviews could, among other things, result in additional adjustments for the fourth quarter. Full year 2002 results are expected to be announced in February.
