Callaway Golf Company third quarter net sales were $193.8 million, a decrease of 12.1% as compared to $220.6 million for the same period in 2005. The company's loss per share was 18 cents on 67.0 million shares, as compared to a loss of seven cents on 68.8 million shares in 2005.

As mentioned in the October 16th pre-release, this decline in sales is primarily due to the planned timing of new product introductions which adversely affected the quarter by approximately $30 million as compared to the third quarter of 2005.

The loss per share includes three cents of after-tax charges for employee equity-based compensation associated with FAS 123R, one penny for the integration of Top-Flite, and one penny for restructuring charges. The third quarter of 2005 includes after-tax charges of two cents for the integration of Top-Flite and six cents for restructuring charges. Excluding these charges, the Company's pro forma loss per share for the third quarter of 2006 would have been 13 cents, as compared to pro forma earnings per share of one penny for the third quarter of 2005.

Gross profit for the third quarter of 2006 was $67.7 million, or 35% of net sales, compared to $86.9 million ,or 39% of net sales, for the third quarter of 2005. The decline in gross profit is primarily the result of a lower mix of higher margin woods and irons products due to the timing of new product introductions, as well as lower Top-Flite ball margins due to price reductions related to the initiatives to clear older Top-Flite golf ball inventory in preparation for the re-launch of that brand in 2007. Additional details can be found in the Company's October 16, 2006 earnings pre-release.

Operating Expenses for the third quarter of 2006 were $84.6 million, a decrease of $11.8 million compared to $96.4 million in 2005. The decrease is primarily due to the restructuring initiatives announced in September 2005.

Highlights for the first nine months include:

Net sales of $838.0 million, as compared to $843.6 million for the same period in 2005.

Fully diluted earnings per share of $0.49 on 68.8 million shares, as compared to fully diluted earnings per share of $0.46 on 69.0 million shares in 2005.

Fully diluted earnings per share includes after-tax charges of $0.07 for employee equity-based compensation associated with FAS 123R, $0.04 for the integration of Top-Flite, and $0.01 for restructuring. The third quarter of 2005 includes after-tax charges of $0.08 for integration of Top-Flite, $0.06 for restructuring, and $0.01 for employee equity-based compensation. Excluding these charges, the Company's pro forma fully diluted earnings per share for both 2006 and 2005 would have been $0.61.

Gross profit for 2006 was $339.3 million (or 40% of net sales) compared to $366.2 million (or 43% of net sales) for 2005. The decline in gross profit is primarily the result of a lower mix of higher margin irons due to the timing of new product introductions, as well as lower Top-Flite ball margins due to the initiatives to clear older Top-Flite golf ball inventory.

Operating Expenses for 2006 were $281.1 million, a decrease of $35.3 million compared to $316.4 million in 2005. A majority of the decrease is due to the restructuring initiatives announced in September 2005. Total savings since September 2005 have totaled approximately $44 million, net of reinvestment, compared to original estimates of $25 to $30 million.

“We continue to make progress on many fronts this year, despite the disappointing performance in our Top-Flite brand,” commented George Fellows, President and CEO. “Sales of our core brands of Callaway and Odyssey have grown significantly this year and we have materially reduced our operating expenses as a result of last September's cost cutting initiatives. More importantly, these factors should combine to increase our full year pro forma earnings per share by more than 20% in 2006. In addition, we have strengthened the management team, made several internal process improvements, and today on our earnings call, will share a series of initiatives focused on improving gross margins by an estimated $50 to $60 million over the next two years. Ultimately, these actions along with future initiatives should continue the progress we've made-to-date towards our three year plan and position Callaway to create additional value for shareholders.”

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


                                              Quarter Ended

                                              September 30,
                                         ------------------------
                                           2006           2005
                                         ---------      ---------

Net sales                                $193,763  100% $220,611  100%
Cost of sales                             126,058   65%  133,713   61%
                                         ---------      ---------
Gross profit                               67,705   35%   86,898   39%
Operating expenses:
 Selling expense                           56,949   29%   69,744   32%
 General and administrative expense        20,901   11%   19,531    9%
 Research and development expense           6,788    4%    7,116    3%
                                         ---------      ---------
Total operating expenses                   84,638   44%   96,391   44%
                                         ---------      ---------
Loss from operations                      (16,933)  -9%   (9,493)  -4%
Other income (expense), net                (1,058)           735
                                         ---------      ---------
Income (loss) before income taxes         (17,991)  -9%   (8,758)  -4%
Income tax provision (benefit)             (6,075)        (3,954)
                                         ---------      ---------
Net income (loss)                        $(11,916)  -6%  $(4,804)  -2%
                                         =========      =========

Earnings (loss) per common share:
 Basic                                     ($0.18)        ($0.07)
 Diluted                                   ($0.18)        ($0.07)
Weighted-average shares outstanding:
 Basic                                     67,000         68,849
 Diluted                                   67,000         68,849