Callaway Golf Co. said it expects second quarter diluted earnings per share to range from 56 to 58 cents a share, an increase of approximately 8% compared to 53 cents earned in the second quarter of 2007. These results include after-tax charges of 5 cents a share in 2008 and 2 cents a share in 2007 associated with the gross margin initiatives announced in November 2006. Sales are expected to fall 3.7% to $366 million from $380 million in 2007.


Diluted earnings per share for the first half of 2008 are estimated to range from $1.17 to $1.19, an increase of approximately 17% versus $1.01 in the first half of 2007. These results include after-tax charges associated with the gross margin improvement initiatives of $0.06 and $0.03 per share for 2008 and 2007, respectively. Net sales for the period are estimated at $732 million, an increase of 2% over 2007 sales of $715 million.


Business Update


“In spite of a very challenging economic environment in the U.S. through the first half of 2008, we are very pleased to deliver results consistent with the guidance we communicated earlier this year,” commented George Fellows, President and CEO of Callaway Golf. “Our international business has been strong throughout the first half of the year and remains a key driver of our top and bottom line growth offsetting a softer than expected U.S. business. Furthermore, our efforts surrounding our gross margin initiatives are on track. During the quarter we consolidated our golf ball production operations into other existing locations and closed our Gloversville, NY golf ball facility as part of our longer term strategy targeted at our 2009 and 2010 gross margin initiatives commitments. This action resulted in the majority of our one-time charge of $0.05 per share during the quarter. Additionally, the strong spending controls we initiated earlier this year in anticipation of challenging economic conditions have contributed to these positive earnings results.”


Business Outlook


The Company reiterates its full year guidance of $1.145 to $1.165 billion in revenue and pro forma fully diluted earnings per share of $1.08 to $1.18 per share, excluding estimated charges of approximately $0.08 per share for the Company’s gross margin initiatives, again noting that it expects full year earnings will be at the lower end of the estimated range. Additional details will be provided at the upcoming July 30th earnings conference call.