Callaway Golf Co. said its Board of Directors has elected to reduce the second quarter dividend to one cent per share, payable on July 15, 2009 to shareholders of record as of June 26, 2009. This represents a six cents reduction to the dividend declared and paid on April 29, 2009, in the amount of 7 cents per share. This action will allow the company to retain an additional $15.2 million in cash on an annualized basis, which represents $11.4 million over the balance of 2009.
The golf company also announced its intention to offer shares of Convertible Preferred Stock with an aggregate liquidation preference of $110 million in a private offering to qualified institutional buyers.
“Over the long term, we believe that Callaways ability to preserve its cash position and follow a prudent policy of balance sheet management is in the best interest of our shareholders,” said George Fellows, President and CEO of Callaway Golf Company. “By enhancing liquidity in this environment, we will be better positioned to manage our business and to take advantage of growth opportunities as the economy recovers. The actions we announced today are definitive steps consistent with this strategy.”
“Callaway continues to maintain or grow market share even in this difficult environment which is a testament to our global brand equity and the quality of our products,” Fellows added. “Based on current trends and market conditions, we remain confident in our annual guidance provided at our first quarter earnings call on April 30th. The macroeconomic and foreign currency headwinds that negatively impacted the first quarter continue to impact our second quarter. As a result of these factors, along with charges relating to a 10% reduction in our workforce, our second quarter earnings are, consistent with our expectations, estimated to be similar to those achieved in the first quarter. Earnings for the second half of the year are estimated to be higher than last year due to less foreign currency headwinds, the benefits associated with our cost reduction initiatives and improving economic conditions. Our international expansion will continue, and when the economy turns, we believe that our geographical reach will provide a sustained competitive advantage. Preserving financial flexibility allows Callaway to plan for the second half of 2009 and position us favorably as we move into what we anticipate will be a better 2010.”
Regarding its private label offering, proceeds will be used to pay down a portion of the companys indebtedness outstanding under its existing revolving line of credit, which the company “believes will enable it to retain the credit facilitys currently favorable terms and avoid the need for an amendment.”
The company expects to grant the initial purchaser of the preferred stock a 30-day option to purchase up to an additional $15 million of the preferred stock, solely to cover over-allotments.
The preferred stock will be convertible into shares of the companys common stock. The dividend rate, conversion price and other terms of the preferred stock will be determined by negotiations between the company and the initial purchaser.
