Callaway Golf Company was able to narrow its loss for the fourth quarter and swing to a profit for the year as higher gross margins, lower SG&A costs, and sharply higher sales in Asia combined to soften the impact of weaker golf ball sales and lower sales in the U.S. ELY saw net sales improve 7.0% to $154.5 million from $144.4 million in the fourth quarter of 2004. The shift in sales from the domestic market cut into currency-neutral sales, with FX rates impacting the revenue line by approximately $3.0 million. The net loss for the quarter was $18.7 million, or 27 cents per share, compared to a net loss of $28.5 million, or 42 cents per share, in the prior year period. Excluding charges, the pro forma net loss per share would have been 22 cents in Q4 2005 versus 37 cents per share in the year-ago quarter. Gross margins were up 440 basis points to 31.1% of sales for the period.
Wood sales were $43.4 million for the quarter, up a whopping 73.7% from $25.0 million in Q4 last year. ELY attributed the jump to sales of the FT-3 Fusion and Big Bertha 454 drivers and the launch of the FT-3 fairway woods. The company said Golf Datatech reported Callaways share of the Woods category through November fell 150 basis points to 18.6% of U.S. sales.
Sales of Irons declined 6.8% to $36.6 million in Q4 2005 from $39.3 million in the year-ago period, due primarily to lower sales of Fusion irons introduced in the year-ago period, as well as lower sales of Big Bertha 2004 irons and X-16 models. The declines were offset a bit by strong sales of X-18 and X Tour models. ELY said market share in the Irons category rose five full points to 27.3% of the U.S. market, nearly twice the share of its nearest competitor.
Sales of Putters rose 12.6% to $21.1 million in the fourth quarter from $18.8 million in Q4 2004. The increase reflected the launch of the new Odyssey Dual Force II model in Q4, while lower sales of older White Hot and DFX models offset the gains a bit.
Golf Ball sales fell 20.8% to $34.5 million in Q4, compared to $43.6 million in the prior year period, due to lower Top-Flite sales that were just partially offset by increased sales of the Callaway X-56 and HX models introduced in 2005. Management said the Top-Flite business “suffered somewhat” from integration issues, but they said they expected it to “fall back into line” in 2006.
The company said Callaway branded golf balls had a 10.5% market share in the U.S. though November, but Top-Flite share declined 230 basis points to 4.6% of U.S. ball sales. ELY said the two brands combined held the number two spot in share for the YTD period with 15.1% of the market, down 70 basis points from the prior year period, according to Golf Datatech.
On a regional basis, fourth quarter sales in the U.S. declined 9.8% to $77.4 million from $85.9 million in the fourth quarter 2004. Europe sales dipped 2.5% to $22.0 million from %22.6 million in the year-ago period. Sales in Japan jumped 85.7% to $22.5 million, compared to $12.1 million in the prior year period. And the Rest of Asia region saw sales increase 65.8% to $14.3 million from $8.6 million in Q4 2004. The balance of the International business improved 19.7% to $18.2 million for the period.
| Callaway Golf Company | |||
| Full-Year Results | |||
| (in $ millions) | 2005 | 2004 | Change |
| Total Sales | $998.1 | $934.6 | 6.8% |
| U.S. Sales | $563.0 | $546.2 | 3.1% |
| Intl Sales | $435.1 | $388.3 | 12.0% |
| Woods | $341.3 | $238.6 | 43.1% |
| Irons | $316.5 | $259.1 | 22.2% |
| Putters | $109.3 | $100.5 | 8.8% |
| Golf Balls | $214.7 | $231.3 | -7.2% |
| Access., Other | $116.3 | $105.1 | 10.6% |
| GM % | 41.5% | 38.4% | +310 bps |
| Net Income | $13.3 | ($10.1) | vs. loss |
| Diluted EPS | 19¢ | (15¢) | vs. loss |
| Inventories* | $241.6 | $181.2 | +33.3% |
| Accts Rec.* | $98.1 | $105.2 | -6.7% |
| *at year-end | |||
