Callaway Golf Company bucked the general market trend of lowering expectations for the fourth quarter and full year as it announced that it expects fiscal 2007 net earnings will increase approximately 10%. However, though the company will beat the plan it initially suggested for the fourth quarter, the top- and bottom-line results for the period will still be down from the year-ago.

For the fourth quarter, net sales are projected to decrease 2.9% to approximately $174.8 million from $180.0 million in the year-ago quarter. The company’s quarterly net loss is expected to widen to a loss of 22 cents to 24 cents per diluted share, compared to a loss of 15 cents in the year-ago quarter. These results are ahead of what ELY originally forecast at the end of the third quarter, but are still off the year-ago marks.


For the full year, however, Callaway posted strong results with net sales expected to reach a record $1.125 billion, growing from $1.018 billion for 2006. The company attributed the sales increase to gains in sales of woods, accessories and irons, as well as gains in putters.


Gross margins as a percentage of net sales for 2007 are estimated to be approximately 44%. Excluding pre-tax charges of $9 million related to gross margin initiatives, it is estimated that pro forma gross margins for 2007 will be approximately 45%. For the full year 2006, reported gross margins were 39%. Excluding pre-tax charges of $4 million related to the Top-Flite integration and $2 million for gross margin initiatives, pro-forma gross margins for 2006 were 40%.


The company estimates that its operating expenses for 2007 will be approximately $402 million compared to $361 million in 2006. Excluding pre-tax charges of $3 million related to the September 2005 restructuring initiatives and Top-Flite integration, 2006 pro forma operating expenses were $358 million.


Earnings per diluted share for the full year are expected to be in the range of 79 cents to 81 cents, up from 34 cents last year. The diluted EPS estimate includes non-cash employee equity-based compensation charges associated with FAS-123R and after-tax charges of approximately 8 cents per diluted share related to the gross margin improvement initiatives announced in November 2006. Excluding charges for these gross margin initiatives, pro forma earnings per diluted share are estimated at 87 cents to 89 cents.