Callaway Golf Company reported that net sales for the first quaretr of 2010 were $303 million, an increase of 11% as compared to net sales of $272 million for the first quarter of 2009.
The company said changes in foreign currency exchange rates favorably affected net sales by $15 million. On a currency neutral basis (i.e. translating the company’s first quarter 2010 results at first quarter 2009 exchange rates), net sales would be $288 million, an increase of 6% compared to the first quarter of 2009.
U.S. net sales were $151 million, an increase of 7% compared to $141 million for the same period last year, while International net sales were $152 million, an increase of 16% compared to $131 million last year.
On a currency neutral basis, 2010 international net sales were $137 million, an increase of 5% compared to the same period last year.
Gross profit for the quarter was $137 million (45% of net sales), compared to gross profit of $116 million (43% of net sales) for the first quarter of 2009.
Operating expenses for the quarter were $109 million (36% of sales), compared to $103 million (38% of sales) for the first quarter of 2009.
Earnings per diluted share of 24 cents (on 83.9 million shares). For the first quarter of 2009, the company reported fully diluted earnings per share of 11 cents (on 63.3 million shares). Both periods include after-tax charges of approximately $0.01 per share related to the Company’s global operations strategy.
“It will take more than 2010 for the golf industry and our business to recover fully, but the first quarter was a good step for us toward that recovery,” commented George Fellows, President and Chief Executive Officer. “Our sales increased despite the poor weather conditions which delayed the opening of the golf season in many of our key regions, and our gross margins increased.
“Our operating expenses as a percentage of net sales improved to 36% compared to 38% in 2009 despite the restoration in 2010 of employee incentive compensation and benefits that had been reversed or temporarily suspended in 2009 and despite continued investment in growth initiatives such as our entry into India and our uPlay business. Furthermore, we continued to invest in our global operations strategy and international expansion as well as carefully manage our working capital, which resulted in a 12% reduction in inventories on 11% higher sales compared to the same period last year. Although the second quarter will be a better indicator of how much the golf industry and our business will recover this year, at this point we remain cautiously optimistic that 2010 will be a significant improvement over 2009.”
Business Outlook
Based on Callaway Golf’s first quarter results and management’s current view regarding the remainder of the year, the Company expects its 2010 financial results will be consistent with guidance provided on its last conference call in January. Annual sales for 2010 are estimated to be in the range of $990 million to $1.05 billion.
Annual pro forma gross margins are estimated to be in the range of 42% to 44%, and operating expenses are estimated to be in the range of $375 to $405 million. The company also estimates full year pro forma earnings per share of 25 cents and 35 cents, which excludes after tax charges of approximately $0.10 per share for the charges associated with the Company’s global operations strategy.
