Callaway Golf Company announced that it is implementing several company-wide initiatives expected to improve business processes and reduce overall expenses by approximately $70 million over a two year period. $50 million to $60 million of the savings are expected in 2006. Callaway expects the cost of implementing these initiatives to result in charges totaling approximately $12 million, with approximately $6 million to be taken in the third quarter of 2005. The savings are expected to fund improved profitability and investment in future growth.

The actions are intended to streamline and improve the company's operations, resulting in a leaner organization that is more efficient, effective and competitive. Examples of the many actions being taken throughout the company include the integration of the Callaway Golf, Odyssey, Top-Flite, and Ben Hogan selling functions and the complete consolidation of all golf ball manufacturing at the Top-Flite locations in Massachusetts and New York – both of which will reduce overall headcount and eliminate redundant infrastructure and overhead while improving functionality. With these operating improvements, there will be reductions in staffing throughout the organization, including international subsidiaries.

George Fellows, president and CEO of Callaway Golf Company, stated, “We are committed to improving the company's profitability and enhancing its ability to compete and grow as the technological leader in the industry. These actions and the associated savings represent a significant step forward in that effort. We expect near term gains in efficiency and profitability from these actions, along with future benefits as we reinvest a portion of the savings to drive growth and profitability over the longer term.”

“This is the first of several steps aimed at creating more value,” Mr. Fellows continued. “We are also evaluating all the factors that have contributed to declines in gross margins in recent years, and our management team is confident that there is room for meaningful improvement in that area as well. In particular, we are identifying steps in our supply and assembly operations that will further improve performance and reduce costs.”

Preliminary results suggest that third quarter net sales and earnings will be significantly improved compared to the third quarter of 2004, with estimated net sales for the third quarter ending September 30, 2005 of approximately $215 million versus $129 million last year, and a corresponding loss per share ranging from 6 cents to 12 cents, compared to a loss of 53 cents last year. These estimated results include charges for these current initiatives of approximately 5 cents per share as well as continuing integration of the Top-Flite and Callaway Golf operations of approximately 2 cents per share, compared to 7 cents for Top-Flite and Callaway Golf integration charges included in 2004. Excluding these charges, earnings for the quarter are estimated to range from earnings of a penny to a loss of 5 cents, compared to a loss of 46 cents last year.