Unassociated Document

Contacts: Brad Holiday

Eric Struik

Tim Buckman

(760) 931-1771

CALLAWAY GOLF COMPANY RELEASES

FIRST QUARTER 2010 RESULTS

CARLSBAD, CA /April 29, 2010/ Callaway Golf Company (NYSE:ELY) today announced its financial results for the first quarter of 2010.

Net sales of $303 million, an increase of 11% as compared to net sales of $272 million for the first quarter of 2009. Changes in foreign currency exchange rates favorably affected net sales by $15 million. On a currency neutral basis (i.e. translating the Company’s first quarter 2010 results at first quarter 2009 exchange rates), net sales would be $288 million, an increase of 6% compared to the first quarter of 2009.

U.S. net sales of $151 million, an increase of 7% compared to $141 million for the same period last year.

International net sales of $152 million, an increase of 16% compared to $131 million last year. On a currency neutral basis, 2010 international net sales were $137 million, an increase of 5% compared to the same period last year.

Gross profit of $137 million (45% of net sales), compared to gross profit of $116 million (43% of net sales) for the first quarter of 2009.

Operating expenses for the quarter of $109 million (36% of sales), compared to $103 million (38% of sales) for the first quarter of 2009.

Earnings per diluted share of $0.24 (on 83.9 million shares). For the first quarter of 2009, the Company reported fully diluted earnings per share of $0.11 (on 63.3 million shares). Both periods include after-tax charges of approximately $0.01 per share related to the Company’s global operations strategy.

“It will take more than 2010 for the golf industry and our business to recover fully, but the first quarter was a good step for us toward that recovery,” commented George Fellows, President and Chief Executive Officer. “Our sales increased despite the poor weather conditions which delayed the opening of the golf season in many of our key regions, and our gross margins increased. Our operating expenses as a percentage of net sales improved to 36% compared to 38% in 2009 despite the restoration in 2010 of employee incentive compensation and benefits that had been reversed or temporarily suspended in 2009 and despite continued investment in growth initiatives such as our entry into India and our uPlay business. Furthermore, we continued to invest in our global operations strategy and international expansion as well as carefully manage our working capital, which resulted in a 12% reduction in inventories on 11% higher sales compared to the same period last year. Although the second quarter will be a better indicator of how much the golf industry and our business will recover this year, at this point we remain cautiously optimistic that 2010 will be a significant improvement over 2009.”

Business Outlook

Based on Callaway Golf’s first quarter results and management’s current view regarding the remainder of the year, the Company expects its 2010 financial results will be consistent with guidance provided on its last conference call in January. Annual sales for 2010 are estimated to be in the range of $990 million to $1.05 billion. Annual pro forma gross margins are estimated to be in the range of 42% to 44%, and operating expenses are estimated to be in the range of $375 to $405 million. The Company also estimates full year pro forma earnings per share of $0.25 - $0.35, which excludes after tax charges of approximately $0.10 per share for the charges associated with the Company’s global operations strategy.

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Conference Call and Webcast

The Company will be holding a conference call at 2:00 p.m. PDT today. The call will be broadcast live over the Internet and can be accessed at www.callawaygolf.com. To listen to the call, please go to the website at least 15 minutes before the call to register and for instructions on how to access the broadcast. A replay of the conference call will be available approximately two hours after the call ends, and will remain available through 9:00 p.m. PDT on Thursday, May 6, 2010. The replay may be accessed through the Internet at www.callawaygolf.com or by telephone by calling 1-800-642-1687 toll free for calls originating within the United States or 706-645-9291 for International calls. The replay pass code is 69435314.

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Disclaimer: Statements used in this press release that relate to future plans, events, financial results, performance or prospects, including statements relating to an economic or golf industry recovery, and estimated sales, gross margins, operating expenses, earnings, and charges for the Company’s global operations strategy in 2010 are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These estimates and statements are based upon current information and expectations. Accurately estimating the Company’s reported future financial performance is based upon various unknowns, including future changes in foreign currency exchange rates, consumer acceptance and demand for the Company’s products, the level of promotional activity in the marketplace, as well as future consumer discretionary purchasing activity, which can be significantly adversely affected by unfavorable economic or market conditions. Actual results may differ materially from those estimated or anticipated as a result of these unknowns or other risks and uncertainties, including continued compliance with the terms of the Company’s credit facility; delays, difficulties or increased costs in the supply of components needed to manufacture the Company’s products, in manufacturing the Company’s products, or in connection with the implementation of the Company’s planned gross margin initiatives or the implementation of future initiatives; adverse weather conditions and seasonality; any rule changes or other actions taken by the USGA or other golf association that could have an adverse impact upon demand or supply of the Company’s products; a decrease in participation levels in golf; and the effect of terrorist activity, armed conflict, natural disasters or pandemic diseases on the economy generally, on the level of demand for the Company's products or on the Company's ability to manage its supply and delivery logistics in such an environment. For additional information concerning these and other risks and uncertainties that could affect these statements and the Company’s business, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 as well as other risks and uncertainties detailed from time to time in the Company’s reports on Forms 10-Q and 8-K subsequently filed from time to time with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Currency Neutral Basis: This press release includes information regarding certain aspects of the Company’s financial results for the first quarter of 2010 that is presented on a “currency neutral basis.” This information estimates the impact of the effect of foreign currency translation on the Company’s 2010 results as compared to the same period in 2009. This impact is derived by taking the Company’s 2010 local currency results and translating them into U.S. dollars based upon 2009 foreign currency exchange rates for the periods presented and does not include any other effect of changes in foreign currency rates on the Company’s results.

Regulation G: The financial results reported in this press release have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). In addition to the GAAP results, the Company has also provided additional information concerning its results, which include certain financial measures not prepared in accordance with GAAP. The non-GAAP financial measures included in this press release present certain of the Company’s financial results on a “currency neutral basis.” These non-GAAP financial measures should not be considered a substitute for any measure derived in accordance with GAAP. These non-GAAP financial measures may also be inconsistent with the manner in which similar measures are derived or used by other companies. Management believes that the presentation of such non-GAAP financial measures, when considered in conjunction with the most directly comparable GAAP financial measures, provides additional useful information for investors as to the underlying performance of the Company’s business without regard to these items. The Company has provided reconciling information in the text of this press release.

* * * * *

About Callaway Golf

Through an unwavering commitment to innovation, Callaway Golf Company (NYSE: ELY) creates products and services designed to make every golfer a better golfer. Callaway Golf Company manufactures and sells golf clubs and golf balls, and sells golf accessories, under the Callaway Golf®, Odyssey®, Top-Flite®, Ben Hogan® and uPro™ brands in more than 110 countries worldwide. For more information please visit www.callawaygolf.com or Shop.CallawayGolf.com

Callaway Golf Company

Consolidated Condensed Balance Sheets

(In thousands)

(Unaudited)

	March 31,		December 31,
	2010		2009

ASSETS
Current assets:
Cash and cash equivalents	$	41,852	$	78,314
Accounts receivable, net		277,423		139,776
Inventories		230,769		219,178
Deferred taxes, net		22,578		21,276
Income taxes receivable		1,176		19,730
Other current assets		38,972		34,713
Total current assets		612,770		512,987

Property, plant and equipment, net		137,948		143,436
Intangible assets, net		172,351		174,017
Other assets		47,148		45,490
Total assets	$	970,217	$	875,930

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	145,352	$	118,294
Accrued employee compensation and benefits		31,291		22,219
Accrued warranty expense		9,361		9,449
Income tax liability		11,382		1,492
Credit facilities		31,000		-
Total current liabilities		228,386		151,454

Long-term liabilities		14,420		14,594
Shareholders' equity		727,411		709,882
Total liabilities and shareholders' equity	$	970,217	$	875,930

Callaway Golf Company

Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Quarter Ended
	March 31,
	2010		2009

Net sales	$	302,875	$	271,864
Cost of sales		165,580		155,683
Gross profit		137,295		116,181
Operating expenses:
Selling		74,628		74,650
General and administrative		24,976		19,987
Research and development		9,318		8,103
Total operating expenses		108,922		102,740
Income from operations		28,373		13,441
Other income (expense), net		1,571		(2,381	)
Other income before income taxes		29,944		11,060
Income tax provision		9,641		4,248
Net income		20,303		6,812
Dividends on convertible preferred stock		2,625		-
Net income allocable to common shareholders	$	17,678	$	6,812

Earnings per common share:
Basic	$	0.28	$	0.11
Diluted	$	0.24	$	0.11
Weighted-average common shares outstanding:
Basic		63,653		62,914
Diluted		83,926		63,320

Callaway Golf Company

Consolidated Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

	Quarter Ended
	March 31,
	2010			2009
Cash flows from operating activities:
Net income	$	20,303		$	6,812
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,949			9,944
Deferred taxes, net		(1,746	)		(1,604	)
Non-cash share-based compensation		2,519			1,667
Gain on disposal of long-lived assets		(14	)		(150	)
Changes in assets and liabilities		(90,098	)		(82,356	)
Net cash used in operating activities		(59,087	)		(65,687	)

Cash flows from investing activities:
Capital expenditures		(4,149	)		(10,046	)
Proceeds from sales of property and equipment		14			-
Other investing activities		(1,950	)		(89	)
Net cash used in investing activities		(6,085	)		(10,135	)

Cash flows from financing activities:
Issuance of common stock		1,301			1,500
Dividends paid, net		(3,266	)		-
Proceeds from credit facilities, net		31,000			57,081
Other financing activities		(167	)		(491	)
Net cash provided by financing activities		28,868			58,090

Effect of exchange rate changes on cash and cash equivalents		(158	)		(1,060	)
Net decrease in cash and cash equivalents		(36,462	)		(18,792	)
Cash and cash equivalents at beginning of period		78,314			38,337
Cash and cash equivalents at end of period	$	41,852		$	19,545

Callaway Golf Company

Consolidated Net Sales and Operating Segment Information

(In thousands)

(Unaudited)

	Net Sales by Product Category
	Quarter Ended
	March 31,				Growth/(Decline)
	2010		2009		Dollars			Percent
Net sales:
Woods	$	94,490	$	79,882	$	14,608			18	%
Irons		57,435		65,187		(7,752	)		-12	%
Putters		38,147		27,691		10,456			38	%
Golf balls		51,135		47,348		3,787			8	%
Accessories and other		61,668		51,756		9,912			19	%
	$	302,875	$	271,864	$	31,011			11	%

	Net Sales by Region
	Quarter Ended
	March 31,				Growth/(Decline)
	2010		2009		Dollars			Percent
Net sales:
United States	$	151,058	$	141,280	$	9,778			7	%
Europe		42,259		43,003		(744	)		-2	%
Japan		53,383		47,396		5,987			13	%
Rest of Asia		24,587		16,552		8,035			49	%
Other foreign countries		31,588		23,633		7,955			34	%
	$	302,875	$	271,864	$	31,011			11	%

	Operating Segment Information
	Quarter Ended
	March 31,						Growth/(Decline)
	2010			2009			Dollars			Percent
Net sales:
Golf clubs	$	251,740		$	224,516		$	27,224			12	%
Golf balls		51,135			47,348			3,787			8	%
	$	302,875		$	271,864		$	31,011			11	%

Income (loss) before income taxes:
Golf clubs	$	43,614		$	28,281		$	15,333			54	%
Golf balls		1,896			(1,698	)		3,594			212	%
Reconciling items (1)		(15,566	)		(15,523	)		(43	)		0	%
	$	29,944		$	11,060		$	18,884			171	%

(1) Represents corporate general and administrative expenses and other income (expense) not utilized by management in determining segment profitability.

Callaway Golf Company

Supplemental Financial Information

(In thousands, except per share data)

(Unaudited)

	Quarter Ended March 31,									Quarter Ended March 31,
	2010									2009
	Pro Forma Callaway Golf			Global Operations Strategy			Total as Reported			Pro Forma Callaway Golf			Global Operations Strategy			Total as Reported
Net sales	$	302,875		$	-		$	302,875		$	271,864		$	-		$	271,864
Gross profit		138,295			(1,000	)		137,295			117,737			(1,556	)	$	116,181
% of sales		46	%		n/a			45	%		43	%		n/a			43	%
Operating expenses		108,869			53			108,922			102,740			-		$	102,740
Income (loss) from operations		29,426			(1,053	)		28,373			14,997			(1,556	)	$	13,441
Other income (loss), net		1,571			-			1,571			(2,381	)		-		$	(2,381	)
Income (loss) before income taxes		30,997			(1,053	)		29,944			12,616			(1,556	)	$	11,060
Income tax provision (benefit)		10,065			(424	)		9,641			4,847			(599	)	$	4,248
Net income (loss)		20,932			(629	)		20,303		$	7,769		$	(957	)	$	6,812

Dividends on convertible preferred stock		2,625			-			2,625			-
Net income (loss) allocable to common shareholders	$	18,307		$	(629	)	$	17,678		$	7,769		$	(957	)	$	6,812

Diluted earnings (loss) per share:	$	0.25		$	(0.01	)	$	0.24		$	0.12		$	(0.01	)	$	0.11
Weighted-average shares outstanding:		83,926			83,926			83,926			63,320			63,320			63,320

	2010 Trailing Twelve Months Adjusted EBITDA														2009 Trailing Twelve Months Adjusted EBITDA
	Quarter Ended														Quarter Ended
Adjusted EBITDA:	June 30,		September 30,			December 31,			March 31,						June 30,		September 30,			December 31,			March 31,
	2009		2009			2009			2010			Total			2008		2008			2008			2009			Total
Net income (loss)	$	6,912	$	(13,429	)	$	(15,555	)	$	20,303		$	(1,769	)	$	37,107	$	(7,443	)	$	(3,154	)	$	6,812		$	33,322
Interest expense (income), net		551		(46	)		(435	)		(118	)		(48	)		994		497			272			(123	)		1,640
Income tax provision (benefit)		3,859		(11,308	)		(11,142	)		9,641			(8,950	)		20,583		(6,676	)		(4,766	)		4,248			13,389
Depreciation and amortization expense		10,172		10,128			10,504			9,949			40,753			10,490		9,463			9,216			9,944			39,113
Change in energy derivative valuation acct.		-		-			-			-			-			-		-			(19,922	)		-			(19,922	)
Adjusted EBITDA	$	21,494	$	(14,655	)	$	(16,628	)	$	39,775		$	29,986		$	69,174	$	(4,159	)	$	(18,354	)	$	20,881		$	67,542