Callaway Golf Shows 1% Gain in Q2 Sales

Callaway Golf Company announced its financial results for the second quarter and first half of the year ended June 30, 2010, which were consistent with the Company's June 14th guidance. 

For the second quarter, the Company reported:

•Net sales of $304 million, an increase of 1% compared to $302 million for the second quarter of 2009.  Changes in foreign currency rates favorably affected net sales by $6 million in the second quarter of 2010 compared to the same period in 2009. 

•Gross profit of $124 million (41% of net sales), compared to gross profit of $110 million (36% of net sales) for the second quarter of 2009.

•Operating expenses for the quarter of $99 million (32% of net sales) compared to $100 million (33% of net sales) for the same period in 2009. 

•Operating profit of $25 million (8% of net sales) compared to $10 million (3% of net sales) for the same period in 2009.

•Earnings per diluted share of $0.14 (on 84.3 million weighted average shares outstanding), compared to $0.10 (on 66.8 million weighted average shares outstanding) in 2009.  Fully diluted earnings per share for the second quarter include after-tax charges for the Company's Global Operations Strategy initiatives of $0.01 per share in 2010 and $0.02 per share in 2009. 

For the first six months, the company reported:

•Net sales of $606 million, an increase of 6% compared to last year's net sales of $574 million. Changes in foreign currency rates favorably affected net sales by $21 million for the first six months of 2010 compared to the same period in 2009.

•Gross profit of $261 million (43% of net sales) compared to $226 million (39% of net sales) for 2009.

•Operating expenses of $207 million (34% of net sales) compared to $202 million (35% of net sales) for 2009. 

•Operating profit of $53 million (9% of net sales) compared to $24 million (4% of net sales) for 2009.

•Earnings per diluted share of $0.38 (on 84.1 million weighted average shares outstanding) compared to earnings per diluted share of $0.21 (on 65.1 million weighted average shares outstanding) for 2009.  Fully diluted earnings per share for the period include after-tax charges for the Company's Global Operations Strategy initiatives of $0.02 per share in 2010 and $0.03 per share in 2009. 

“Global economic conditions and the golf industry have recovered more slowly than our original expectations coming into 2010,” commented George Fellows, President and CEO.   “Consumer spending remains constrained by high unemployment, modest income growth, lower housing wealth and tight credit. These constraints, together with unfavorable weather conditions in many key markets for a significant portion of 2010, have resulted in an overall decline in sales in the golf industry for the year. Despite this industry decline, our first half results have improved over last year, driven in large part by our improved gross margins, more favorable foreign currency rates, and significant growth in our putters and accessories businesses.”

“While the golf industry will recover, given recent increased uncertainty regarding retailer and consumer spending in the back half of the year, it does not appear that the industry will fully recover during 2010,” continued Mr. Fellows. “We are therefore focused on the controllable portions of our business, including tight management of discretionary spending, investment in emerging markets and other key growth initiatives to drive long-term shareholder value, and improvements in our operations such as the restructuring of our global operations announced yesterday. These actions, together with the strength of our brands, will allow us to maximize results in the current environment and prepare us to take advantage of a better market once global conditions improve.”