Callaway Golf Company reported net sales of $144.4 million for the fourth quarter ended December 31, versus net sales of $146.6 million in the year-ago period. ELY posted a net loss of a net loss of $28.5 million, or 42 cents per fully diluted share, compared to a net loss of $33.4 million, or 50 cents per share, in Q4 last year.
Top-Flite integration charges totaled $3.2 million, or 5 cents per share, in Q4 2004, down significatly from integration charges of $16.2 million, or 24 cents per share, in the year-ago period.
On a pro forma basis, which excludes the integration charges, ELY would have reported a net quarterly loss of $25.3 million, or 37 cents per fully diluted share, for Q4 2004, compared with “analyst consensus” estimates (which also excluded integration charges) of a net loss of 31 cents per fully diluted share.
For the year ended December 31, 2004, the Company reported net sales of $934.6 million, a net loss of $10.1 million, or $0.15 per fully diluted share, on 67.7 million shares. Net income and earnings per share for the year were reduced by $17.5 million and $0.26, respectively, due to charges associated with the integration of the Top-Flite operations. On a pro forma basis, which excludes these charges, the Company would have reported net income for the year of $7.4 million, and fully diluted earnings per share of $0.11, compared with “analyst consensus” estimates (which also excluded integration charges) of fully diluted earnings per share of $0.19. Reported net sales, net income and fully diluted earnings per share for the same period in 2003 (which included sixteen weeks of Top-Flite results and integration charges of $16.2 million or $0.24 per share) were $814.0 million, $45.5 million and $0.68 on 66.5 million shares, respectively.
“Our fourth quarter results reflect the pricing initiatives taken mid-year, to reduce inventory levels at retail prior to the start of 2005,” said William C. Baker, Chairman and CEO. “Reports from the field indicate that our efforts have met with success, and we enter 2005 in far better position than six months ago. In addition to correcting specific channel inventory issues, we continue to pull together as a team and evaluate every aspect of the business. Fortunately, our brands are strong, and we are excited about our new product introductions for 2005.”
BUSINESS OUTLOOK
“We have a wide range of new products across our brands for 2005,” reported Brad Holiday, Senior Executive Vice President and Chief Financial Officer. “In addition to the Callaway Golf® Heavenwood® Hybrids, Big Bertha® Fusion® Irons, and the Odyssey® White Steel(TM) putters launched in late 2004, we have recently launched our new Big Bertha Titanium 454 Driver, X-18 and X-18(TM) Pro Series Irons, and the HX® Hot Golf Ball. These products are selling into golf shops at a good pace, and will be supported by marketing plans developed in conjunction with our new advertising agency, Young & Rubicam.”
“At the same time, Top-Flite and Ben Hogan are launching their first families of new products developed since joining forces with Callaway Golf in late 2003,” continued Mr. Holiday. “Those new products for 2005 include several new Top-Flite® golf ball models, as well as the Ben Hogan® Big Ben® C.S3(TM) Drivers, Big Ben C455(TM) Fairway Woods, BH-5(TM) and BH-5 Offset Irons, Ben Hogan Sure Out® Wedges, Ben Hogan by Bettinardi The Hawk(TM) Putters, and the Hogan Tour Deep(TM) Golf Ball. We are also rolling out a new branding icon and market position for the Top-Flite brand in the marketplace. Most of these new Top-Flite and Ben Hogan products have already started shipping to retailers.”
Callaway Golf Company
Consolidated Condensed Statements of Operations
(In thousands, except per share data)
(Unaudited)
Quarter Ended
December 31,
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2004 2003
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Net sales $144,413 100% $146,602 100%
Cost of goods sold 105,689 73% 112,538 77%
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Gross profit 38,724 27% 34,064 23%
Operating expenses:
Selling 59,098 41% 58,256 40%
General and administrative 21,964 15% 22,294 15%
Research and development 7,034 5% 8,881 6%
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Total operating expenses 88,096 61% 89,431 61%
Loss from operations (49,372) -34% (55,367) -38%
Other income, net 1,219 684
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Loss before income taxes (48,153) -33% (54,683) -37%
Income tax benefit (19,685) (21,252)
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Net loss $(28,468) -20% $(33,431) -23%
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Loss per common share:
Basic ($0.42) ($0.50)
Diluted ($0.42) ($0.50)
Year Ended
December 31,
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2004 2003
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Net sales $934,564 100% $814,032 100%
Cost of goods sold 575,742 62% 445,417 55%
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Gross profit 358,822 38% 368,615 45%
Operating expenses:
Selling 263,089 28% 207,783 26%
General and administrative 89,878 10% 65,448 8%
Research and development 30,557 3% 29,529 4%
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Total operating expenses 383,524 41% 302,760 37%
Income (loss) from operations (24,702) -3% 65,855 8%
Other income, net 989 2,028
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Income (loss) before income taxes (23,713) -3% 67,883 8%
Income tax provision (13,610) 22,360
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Net income (loss) $(10,103) -1% $45,523 6%
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Earnings (loss) per common share:
Basic ($0.15) $0.69
Diluted ($0.15) $0.68
