Callaway chairman and CEO Ron Drapeau pointed to a number of leading economic indicators that show positive signs in the global economic landscape that usually impacts golf companies much more than the balance of the sporting goods market. Drapeau pointed to stats that showed YTD rounds played were still down 3.4% through August, but was hopeful for improvement.
The numbers reported in the chart below reflect total Callaway Golf Company business including two weeks of Top-Flite Golf Company sales since the completion of ELYs acquisition of the company on September 15.
Excluding the Top-Flite numbers, Callaway saw sales decline 8% in third quarter to $148 million, or off 10% in constant currency. Sales of Woods, Irons and Putters remained the same as reported, with ELY reporting that market share data show the company maintaining its number one position in dollar sales with a 27% share through August. In Putters, Odyssey has a 51% share in dollar sales through August.
The Golf Ball picture is a bit different, with ELY showing ball sales without Top-Flite declining 16% in Q3 to $10 million. Ball sales to the international market were 45% of total ball sales YTD through September.
Callaway saw Europe sales decline 3% in Q3 to $30 million, or down 7% in constant currencies. Japan was off 3% for the quarter, or off 4% in CC. The balance of Asia was up 9% for Q3, gaining 8% in constant dollars.
Callaways international distributors and subsidiaries will take over responsibility for the Top-Flite, Strata and Ben Hogan brands worldwide.
The company ended the quarter with $73 million after paying for the Top-Flite acquisition and has less than $5 million in long-term debt. A preliminary independent appraisal indicated that ELY paid $15 million less than fair market value for T-F, a figure that will appear as negative goodwill in Q4. Top-Flite will lose between five cents and a dime in Q4 on sales of about $35 million.
Full year sales are estimated around $205 million.
Inventories actually declined 11% year-on-year to $114 million when excluding Top-Flite and A/R increased 6% to $109 million on the same basis.
Drapeau said that T-F will be the “center” of the company's golf ball operation, with the exception of the Carlsbad casting operation. The future of the Ben Hogan operation in Fort Worth is still up in the air as Drapeau declined to make any commitments.
He did day that they will keep “much of the former Top-Flite organization” in place, but did hint at further integration of operations as they move into 2005.
ELY sees slightly higher EPS of 97 cents for the year on sales of approximately $770 million. Combined ELY/T-F EPS are seen in the 87 cents to 92 cents range on sales of approximately $810 million.
