-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LROMenSGPXWFu5mf0YqAt6KCelXEdZv2Hvly5AxbcRo7OgdNWSQZQeAwdkAvepJ5 fcVWRwBrHC1n6Zx8WqXXaw== 0001157523-07-004545.txt : 20070503 0001157523-07-004545.hdr.sgml : 20070503 20070503162413 ACCESSION NUMBER: 0001157523-07-004545 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070503 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070503 DATE AS OF CHANGE: 20070503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALLAWAY GOLF CO /CA CENTRAL INDEX KEY: 0000837465 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 953797580 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10962 FILM NUMBER: 07815865 BUSINESS ADDRESS: STREET 1: 2180 RUTHERFORD RD CITY: CARLSBAD STATE: CA ZIP: 92008-8815 BUSINESS PHONE: 7609311771 MAIL ADDRESS: STREET 1: 2180 RUTHERFORD ROAD CITY: CARLSBAD STATE: CA ZIP: 92008 8-K 1 a5394171.txt CALLAWAY GOLF COMPANY 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 May 3, 2007 Date of Report (Date of earliest event reported) CALLAWAY GOLF COMPANY (Exact name of registrant as specified in its charter) DELAWARE 1-10962 95-3797580 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 2180 RUTHERFORD ROAD, CARLSBAD, CALIFORNIA 92008-7328 (Address of principal executive offices) (Zip Code) (760) 931-1771 Registrant's telephone number, including area code NOT APPLICABLE (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02 Results of Operations and Financial Condition.* On May 3, 2007, Callaway Golf Company issued a press release captioned "Callaway Golf Announces First Quarter 2007 Results." A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by this reference. Item 9.01 Financial Statements and Exhibits.* (d) Exhibits. --------- The following exhibit is being furnished herewith: Exhibit 99.1 Press Release, dated May 3, 2007, captioned "Callaway Golf Announces First Quarter 2007 Results." * The information furnished under Item 2.02 and Item 9.01 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any registration statement or other filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CALLAWAY GOLF COMPANY Date: May 3, 2007 By: /s/ Bradley J. Holiday -------------------------------- Name: Bradley J. Holiday Title: Senior Executive Vice President and Chief Financial Officer Exhibit Index ------------- Exhibit Number Description -------------- ----------- 99.1 Press release, dated May 3, 2007, captioned "Callaway Golf Announces First Quarter 2007 Results." EX-99.1 2 a5394171-ex991.txt EXHIBIT 99.1 EXHIBIT 99.1 Callaway Golf Announces First Quarter 2007 Results CARLSBAD, Calif.--(BUSINESS WIRE)--May 3, 2007--Callaway Golf Company (NYSE:ELY) today announced its financial results for the first quarter ended March 31, 2007, reporting significant improvements in sales and earnings over the same period a year ago. Highlights for the quarter include: -- Net sales of $334.6 million, an 11% increase as compared to $302.4 million for the same period in 2006. -- Fully diluted earnings per share of $0.48 on 68.3 million shares as compared to $0.33 on 70.1 million shares in 2006. This represents a 45% increase in diluted earnings per share. -- Fully diluted earnings per share for the first quarter of 2007 include $0.01 of after-tax charges for gross margin improvement initiatives announced in November, 2006. Also, the first quarter of 2006 includes $0.01 of after-tax charges for the integration of Top-Flite operations. Excluding these charges, the Company's pro forma fully diluted earnings per share for the first quarter of 2007 would have increased 44% to $0.49, as compared to pro forma fully diluted earnings per share of $0.34 for the first quarter of 2006. "We are pleased with our results for the first quarter and the initial consumer acceptance of our new products this year," commented George Fellows, President and CEO. "Our efforts to improve our product development process and supply chain along with gross margin improvement initiatives are beginning to deliver positive operating results." "While cautiously optimistic given our first quarter results," continued Mr. Fellows, "it is important to remember that it is very early in the year. In fact, the second quarter is the real start of the golf season in many regions, and when consumer purchases hit their peak. Accordingly, our focus is to support our retailers during the peak season and deliver products to them and our consumers as quickly as possible. Having said this, we are raising our full year estimates to reflect the positive results of the first quarter, balanced with the fact that a majority of the year still remains." Business Outlook The Company estimates that its full year 2007 net sales will be in the range of $1.045 to $1.065 billion compared to the previous estimate of $1.035 to $1.055 billion and that its 2007 full year pro forma fully diluted earnings per share will be in the range of $0.72 to $0.82 on an estimated 70 million shares compared to $0.66 to $0.76 on 68 million shares. Pro forma earnings exclude charges related to the Company's gross margin improvement initiatives, currently estimated at $0.08 per share for 2007, but include charges related to employee equity-based compensation under FAS 123R. For more details, including pro forma reconciliations to assist in year-over-year comparison, please see the attached "Supplemental Financial Information." 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 conclusion, and will remain available through 9:00 p.m. PDT on Thursday, May 10, 2007. The replay may be accessed through the Internet at www.callawaygolf.com or by telephone by calling 1-800-475-6701 toll free for calls originating within the United States or 320-365-3844 for International calls. The replay pass code is 871645. Disclaimer: Statements used in this press release that relate to future plans, events, financial results, performance or prospects, including statements relating to estimated sales and earnings for 2007, 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. Investors should understand that it is very difficult to forecast sales of the Company's products as a substantial portion of the Company's sales each year is derived from the sale of new products. Accurately estimating the Company's sales (and therefore earnings) each year is therefore based upon various unknowns including consumer acceptance of the Company's new products as well as future consumer discretionary purchasing behavior. Actual results may differ materially from those estimated or anticipated as a result of these unknowns or as a result of certain risks and uncertainties, including but not limited to, delays, difficulties or increased costs associated with the implementation of the Company's planned gross margin initiatives, the re-launch of the Top-Flite brand or the implementation of future initiatives; market acceptance of current and future products; adverse market and economic conditions; 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 Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2006, as well as other risks and uncertainties detailed from time to time in the Company's reports on Forms 10-K, 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. 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 includes certain financial measures not prepared in accordance with GAAP. The non-GAAP financial measures included in this press release exclude charges associated with the integration of the Callaway Golf Company and Top-Flite Golf Company operations and charges related to the gross margin initiatives. 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 concerning the Company's operations without these charges. The Company has provided reconciling information in the text of this press release and in the supplemental financial information attached to this release. About Callaway Golf Through an unwavering commitment to innovation, Callaway Golf Company creates products and services designed to make every golfer a better golfer. Callaway Golf Company, which celebrates its 25th Anniversary in 2007, manufactures and sells golf clubs and golf balls, and sells golf accessories, under the Callaway Golf(R), Odyssey(R), Top-Flite(R), and Ben Hogan(R) brands in more than 110 countries worldwide. For more information please visit www.callawaygolf.com. Callaway Golf Company Consolidated Condensed Balance Sheets (In thousands) (Unaudited) March 31, December 31, 2007 2006 ----------- ------------ ASSETS Current assets: Cash and cash equivalents $34,594 $46,362 Accounts receivable, net 278,810 118,133 Inventories, net 270,646 265,110 Deferred taxes 34,601 32,813 Income taxes receivable - 9,094 Other current assets 21,762 21,688 ----------- ------------ Total current assets 640,413 493,200 Property, plant and equipment, net 130,985 131,224 Intangible assets, net 174,475 175,159 Deferred taxes 33,006 18,821 Other assets 27,707 27,543 ----------- ------------ $1,006,586 $845,947 =========== ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $130,865 $111,360 Accrued employee compensation and benefits 27,012 18,731 Accrued warranty expense 14,156 13,364 Bank line of credit 155,000 80,000 Other current liabilities 5,098 - ----------- ------------ Total current liabilities 332,131 223,455 Long-term liabilities 65,493 43,388 Minority interest 1,768 1,987 Shareholders' equity 607,194 577,117 ----------- ------------ $1,006,586 $845,947 =========== ============ Callaway Golf Company Statements of Operations (In thousands, except per share data) (Unaudited) Quarter Ended March 31, ------------------------ 2007 2006 --------- --------- Net sales $334,607 100% $302,445 100% Cost of sales 173,886 52% 170,933 57% --------- --------- Gross profit 160,721 48% 131,512 43% Operating expenses: Selling 75,291 23% 68,128 23% General and administrative 21,558 6% 20,224 7% Research and development 8,016 2% 6,804 2% --------- --------- Total operating expenses 104,865 31% 95,156 31% Income from operations 55,856 17% 36,356 12% Other income (expense), net (1,338) 302 --------- --------- Income before income taxes 54,518 16% 36,658 12% Income tax provision 21,682 13,797 --------- --------- Net income $32,836 10% $22,861 8% ========= ========= Earnings per common share: Basic $0.49 $0.33 Diluted $0.48 $0.33 Weighted-average shares outstanding: Basic 67,272 69,166 Diluted 68,318 70,143 Callaway Golf Company Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited) Quarter Ended March 31, ------------------- 2007 2006 --------- --------- Cash flows from operating activities: Net income $32,836 $22,861 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,009 7,290 Non-cash compensation 3,127 4,401 Loss on disposal of assets 3 138 Deferred taxes (264) (227) Changes in assets and liabilities (122,057) (129,560) --------- --------- Net cash used in operating activities (77,346) (95,097) --------- --------- Cash flows from investing activities: Capital expenditures (7,987) (6,844) Proceeds from sale of capital assets - 120 --------- --------- Net cash used in investing activities (7,987) (6,724) --------- --------- Cash flows from financing activities: Issuance of Common Stock 12,833 5,761 Acquisition of Treasury Stock (15,155) (14,788) Net proceeds from line of credit 75,000 85,000 Other financing activities 677 406 --------- --------- Net cash provided by financing activities 73,355 76,379 --------- --------- Effect of exchange rate changes on cash and cash equivalents 210 375 Net decrease in cash and cash equivalents (11,768) (25,067) Cash and cash equivalents at beginning of period 46,362 49,481 --------- --------- Cash and cash equivalents at end of period $34,594 $24,414 ========= ========= Callaway Golf Company Consolidated Net Sales and Operating Segment Information (In thousands) (Unaudited) Net Sales by Product Category ------------------------------------ Quarter Ended March 31, Growth/(Decline) ------------------- ---------------- 2007 2006 Dollars Percent --------- --------- -------- ------- Net sales: Woods $103,023 $97,120 $5,903 6% Irons 100,037 86,560 13,477 16% Putters 29,074 24,878 4,196 17% Golf balls 53,546 55,730 (2,184) -4% Accessories and other 48,927 38,157 10,770 28% --------- --------- -------- $334,607 $302,445 $32,162 11% ========= ========= ======== Net Sales by Region ------------------------------------ Quarter Ended March 31, Growth/(Decline) ------------------- ---------------- 2007 2006 Dollars Percent --------- --------- -------- ------- Net sales: United States $183,804 $181,283 $2,521 1% Europe 56,023 50,085 5,938 12% Japan 37,940 26,114 11,826 45% Rest of Asia 22,821 16,988 5,833 34% Other foreign countries 34,019 27,975 6,044 22% --------- --------- -------- $334,607 $302,445 $32,162 11% ========= ========= ======== Operating Segment Information ------------------------------------ Quarter Ended March 31, Growth/(Decline) ------------------- ---------------- 2007 2006 Dollars Percent --------- --------- -------- ------- Net sales: Golf clubs $281,061 $246,715 $34,346 14% Golf balls 53,546 55,730 (2,184) -4% --------- --------- -------- $334,607 $302,445 $32,162 11% ========= ========= ======== Income before provision for income taxes: Golf clubs $65,656 $45,067 $20,589 46% Golf balls 5,415 6,356 (941) -15% Reconciling items (1) (16,553) (14,765) (1,788) -12% --------- --------- -------- $54,518 $36,658 $17,860 49% ========= ========= ======== (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, -------------------------------- 2007 -------------------------------- Pro Forma Gross Margin Callaway Improvement Total as Golf Initiatives Reported --------- ------------ --------- Net sales $334,607 $- $334,607 Gross profit 162,126 (1,405) 160,721 % of sales 48% n/a 48% Operating expenses 104,865 - 104,865 --------- ------------ --------- Income from operations 57,261 (1,405) 55,856 Other income (expense), net (1,338) - (1,338) --------- ------------ --------- Loss before income taxes 55,923 (1,405) 54,518 Income tax provision 22,236 (554) 21,682 --------- ------------ --------- Net Income $33,687 $(851) $32,836 ========= ============ ========= Diluted earnings (loss) per share: $0.49 $(0.01) $0.48 Weighted-average shares outstanding: 68,318 68,318 68,318 Quarter Ended March 31, ------------------------------- 2006 ------------------------------- Pro Forma Callaway Integration Total as Golf Charges Reported ---------- ----------- --------- Net sales $302,445 $- $302,445 Gross profit 132,181 (669) 131,512 % of sales 44% n/a 43% Operating expenses 94,805 351 95,156 --------- ----------- --------- Income from operations 37,376 (1,020) 36,356 Other income (expense), net 302 - 302 --------- ----------- --------- Loss before income taxes 37,678 (1,020) 36,658 Income tax provision 14,192 (395) 13,797 --------- ----------- --------- Net Income $23,486 $(625) $22,861 ========= =========== ========= Diluted earnings (loss) per share: $0.34 $(0.01) $0.33 Weighted-average shares outstanding: 70,143 70,143 70,143 CONTACT: Callaway Golf Company Brad Holiday Patrick Burke Michele Szynal 760-931-1771 -----END PRIVACY-ENHANCED MESSAGE-----