Callaway Golf Company reported that consolidated net sales for the first quarter ended March 31 fell 17.6% to $299.9 million, compared to $363.8 million in the year-ago period. Net income plunged 54.7% to $18.4 million, or 27 cents per diluted share, compared to net income of $40.5 million, or 59 cents per diluted share, in Q1 last year.

Sales in the Woods category fell 47%, while the Irons category grew 12% for the period. Putter sales were down 15% for the quarter and Golf Ball sales decreased 18%. The declines fell across regions as U.S. sales declined 15%, Europe fell 27%, and Japan decreased 22% for the quarter. Rest of Asia sales were down 8%.

The reported net income and earnings per share figures include after tax charges of $2.3 million and three cents, respectively, associated with the integration of the Top-Flite operations acquired in late 2003.

On a pro forma basis, which excludes these charges, the Company would have had net income of $20.7 million, or 30 cents per diluted share.


“Our first quarter results are in line with the preliminary estimates we provided in early April,” said William C. Baker, Chairman and CEO. “Staggered product launches and closely monitoring retail inventory have allowed us to achieve our reported sales and profit levels without overloading the retail channel.”

In accordance with the Company's dividend practice, the next dividend will be determined by the Board of Directors at its May meeting.


“Sales in the first quarter were solid and retail inventories are at the appropriate levels,” said Bradley J. Holiday, Senior Executive Vice President and Chief Financial Officer. “We will continue to ship our current products into the market based upon demand generated by the opening of the true golf season in most of our markets, and have additional new product launches planned for later in the year, including the launch of the Callaway Golf X-Tour Irons and increased shipments of the Ben Hogan drivers and fairway woods during the second quarter.” 

                        Callaway Golf Company
                       Statements of Operations
                (In thousands, except per share data)
                             (Unaudited)

                                              Quarter Ended
                                                 March 31,
                                         ------------------------
                                           2005           2004
                                         ------------------------

Net sales                                $299,857  100% $363,786  100%
Cost of sales                             167,251   56%  197,595   54%
                                         ---------      ---------
Gross profit                              132,606   44%  166,191   46%
Operating expenses:
   Selling expenses                        75,745   25%   71,195   20%
   General and administrative expenses     19,085    6%   22,861    6%
   Research and development expenses        6,240    2%    8,109    2%
                                         ---------      ---------
Total operating expenses                  101,070   34%  102,165   28%
Income from operations                     31,536   11%   64,026   18%
Other (expense) income, net                (1,181)           271
                                         ---------      ---------
Income before income taxes                 30,355   10%   64,297   18%
Provision for income taxes                 11,995         23,752
                                         ---------      ---------
Net income                               $ 18,360    6% $ 40,545   11%
                                         =========      =========

Earnings per common share:
   Basic                                 $   0.27       $   0.60
   Diluted                               $   0.27       $   0.59