CARLSBAD, Calif.--(BUSINESS WIRE)--July 29, 2009--Callaway Golf Company (NYSE:ELY) today announced its financial results for the second quarter and first half of the year ended June 30, 2009. For the second quarter, the Company reported net sales of $302 million, a decrease of 17% compared to $366 million for the second quarter of 2008. On a currency neutral basis, net sales would have been $321 million, a decrease of 12% compared to the second quarter of 2008. The Company also reported gross profit for the second quarter of 2009 of $110 million (36% of net sales), compared to gross profit of $171 million (47% of net sales) in the second quarter of 2008, and reported operating expenses of $100 million (33% of net sales) compared to $111 million (30% of net sales) for the same period in 2008. Fully diluted earnings per share were $0.10 (on 66.8 million shares outstanding), compared to $0.58 (on 63.9 million shares outstanding) in 2008. Fully diluted earnings per share for the second quarter include after-tax charges for gross margin improvement initiatives of $0.02 per share in 2009 and $0.05 per share in 2008.

For the first six months, the Company reported net sales of $574 million, a decrease of 22% compared to last year’s record six month sales of $732 million. On a currency neutral basis, net sales would have been $616 million, a decrease of 16% compared to $732 million in the first half of 2008. Also for the first six months, gross profit was $226 million (39% of net sales) compared to $347 million (47% of net sales) for 2008 and operating expenses were $202 million (35% of net sales) compared to $221 million (30% of net sales) for 2008. Fully diluted earnings per share for 2009 were $0.21 (on 65.1 million shares outstanding) compared to record first half diluted earnings per share of $1.19 (on 64.4 million shares outstanding) for 2008. Fully diluted earnings per share for the period include after-tax charges for gross margin improvement initiatives of $0.03 per share in 2009 and $0.06 per share in 2008.

“Although market conditions remained challenging during the first half of the year, we are pleased we were able to increase our market share, manage our inventories, and reduce our operating costs, while at the same time continuing to invest in our business,” commented George Fellows, President and CEO. “As we have said before, the economy and golf industry will recover and there have been some positive signs of late. We therefore are taking a balanced approach between managing our expenses and liquidity for the current environment and taking action and making investments that are in the best long-term interests of our shareholders. We are the leader in the golf industry and we intend to remain so in the current environment and when the global economy fully recovers. It would be short-sighted to over emphasize the short-term to the detriment of our long-term growth and shareholder value.”

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 Wednesday, August 5, 2009. 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 18992228.

Disclaimer: Statements used in this press release that relate to future plans, events, financial results, performance or prospects, including statements relating to liquidity, economic recovery, and leadership position, 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 rates and consumer acceptance and demand for the Company’s products, 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 Current Report on Form 8-K filed on June 8, 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 second quarter of 2009 that is presented on a “currency neutral basis.” This information estimates the impact of the effect of foreign currency translation on the Company’s 2009 results as compared to the same period in 2008. This impact is derived by taking the Company’s second quarter 2009 local currency results and translating them into U.S. dollars based upon second quarter 2008 foreign currency exchange rates 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 changes in foreign currency exchange rates. The Company has provided reconciling information in the text of this press release.

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)


		June 30,		December 31,
			2009		2008

ASSETS
Current assets:
	Cash and cash equivalents	$	50,471	$	38,337
	Accounts receivable, net		263,239		120,067
	Inventories		227,878		257,191
	Deferred taxes, net		31,792		27,046
	Income taxes receivable		-		15,549
	Other current assets		25,581		31,813
	Total current assets		598,961		490,003

Property, plant and equipment, net			144,541		142,145
Intangible assets, net			175,485		176,689
Deferred taxes, net			8,441		6,299
Other assets			40,928		40,202
	Total assets	$	968,356	$	855,338

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Accounts payable and accrued expenses	$	170,036	$	126,167
	Accrued employee compensation and benefits		22,080		25,630
	Accrued warranty expense		12,422		11,614
	Income taxes payable		6,773		-
	Credit facilities		-		90,000
	Total current liabilities		211,311		253,411

Long-term liabilities			22,186		21,559
Preferred stock - at redemption value			34,674
Shareholders' equity			700,185		580,368
	Total liabilities and shareholders' equity	$	968,356	$	855,338


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


			Quarter Ended
			June 30,
				2009			2008

Net sales			$	302,219		$	366,029
Cost of sales				192,371			194,949
Gross profit				109,848			171,080
Operating expenses:
	Selling			72,394			80,461
	General and administrative			19,358			22,791
	Research and development			7,837			7,538
		Total operating expenses		99,589			110,790
Income from operations				10,259			60,290
Other income (expense), net				512			(2,600	)
Income before income taxes				10,771			57,690
Income tax provision				3,859			20,583
Net income				6,912			37,107
Dividends accrued on convertible Preferred Stock				438			-
Net income available to common shareholders			$	6,474		$	37,107

Earnings per common share:
	Basic		$	0.10		$	0.59
	Diluted		$	0.10		$	0.58
Weighted-average common shares outstanding:
	Basic			63,121			63,180
	Diluted			66,807			63,941



Preferred stock - at redemption value			Six Months Ended
			June 30,
				2009			2008

Net sales			$	574,083		$	732,481
Cost of sales				348,054			385,867
Gross profit				226,029			346,614
Operating expenses:
	Selling			147,044			160,622
	General and administrative			39,345			45,279
	Research and development			15,940			15,462
Total operating expenses				202,329			221,363
Income from operations				23,700			125,251
Other expense, net				(1,869	)		(1,905	)
Income before income taxes				21,831			123,346
Income tax provision				8,107			46,573
Net income				13,724			76,773
Dividends accrued on convertible Preferred Stock				438			-
Net income available to common shareholders			$	13,286		$	76,773

Earnings per common share:
	Basic		$	0.21		$	1.21
	Diluted		$	0.21		$	1.19
Weighted-average common shares outstanding:
	Basic			63,060			63,538
	Diluted			65,105			64,392


Callaway Golf Company
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)


			Six Months Ended
			June 30,
				2009			2008
Cash flows from operating activities:
	Net income		$	13,724		$	76,773
	Adjustments to reconcile net income to net cash used in operating activities:
		Depreciation and amortization		20,116			19,284
		Deferred taxes, net		(5,509	)		4,130
		Non-cash share-based compensation		3,684			2,960
		Gain on disposal of long-lived assets		(375	)		(438	)
		Changes in assets and liabilities		(40,708	)		(150,755	)
	Net cash used in operating activities			(9,068	)		(48,046	)

Cash flows from investing activities:
	Capital expenditures			(19,448	)		(24,213	)
	Other investing activities			(31	)		15
	Net cash used in investing activities			(19,479	)		(24,198	)

Cash flows from financing activities:
	Issuance of Preferred Stock			140,000			-
	Equity issuance costs			(5,871	)		-
	Issuance of Common Stock			1,498			2,767
	Dividends paid, net			(4,430	)		(4,526	)
	Acquisition of treasury stock			-			(20,076	)
	Proceeds from (payments on) credit facilities, net			(90,000	)		98,441
	Other financing activities			54			(34	)
	Net cash provided by financing activities			41,251			76,572

Effect of exchange rate changes on cash and cash equivalents				(570	)		771
Net increase in cash and cash equivalents				12,134			5,099
Cash and cash equivalents at beginning of period				38,337			49,875
Cash and cash equivalents at end of period			$	50,471		$	54,974


Callaway Golf Company
Consolidated Net Sales and Operating Segment Information
(In thousands)
(Unaudited)


Net Sales by Product Category
		Quarter Ended													Six Months Ended
		June 30,						Growth/(Decline)							June 30,						Growth/(Decline)
			2009			2008		Dollars			Percent					2009			2008		Dollars			Percent
Net sales:													Net sales:
	Woods	$	75,956		$	85,992		$	(10,036	)	-12	%		Woods	$	155,838		$	202,544		$	(46,706	)	-23	%
	Irons		72,222			100,047			(27,825	)	-28	%		Irons		137,409			196,543			(59,134	)	-30	%
	Putters		26,421			32,934			(6,513	)	-20	%		Putters		54,112			67,488			(13,376	)	-20	%
	Golf balls		58,245			74,235			(15,990	)	-22	%		Golf balls		105,593			132,668			(27,075	)	-20	%
	Accessories and other		69,375			72,821			(3,446	)	-5	%		Accessories and other		121,131			133,238			(12,107	)	-9	%
		$	302,219		$	366,029		$	(63,810	)	-17	%			$	574,083		$	732,481		$	(158,398	)	-22	%




Net Sales by Region
		Quarter Ended													Six Months Ended
		June 30,						Growth/(Decline)							June 30,						Growth/(Decline)
			2009			2008		Dollars			Percent					2009			2008		Dollars			Percent
Net sales:													Net sales:
	United States	$	163,739		$	176,077		$	(12,338	)	-7	%		United States	$	305,020		$	360,456		$	(55,436	)	-15	%
	Europe		42,477			71,824			(29,347	)	-41	%		Europe		85,480			137,914			(52,434	)	-38	%
	Japan		37,061			46,559			(9,498	)	-20	%		Japan		84,456			99,899			(15,443	)	-15	%
	Rest of Asia		21,300			22,072			(772	)	-3	%		Rest of Asia		37,852			48,533			(10,681	)	-22	%
	Other foreign countries		37,642			49,497			(11,855	)	-24	%		Other foreign countries		61,275			85,679			(24,404	)	-28	%
		$	302,219		$	366,029		$	(63,810	)	-17	%			$	574,083		$	732,481		$	(158,398	)	-22	%




Operating Segment Information
		Quarter Ended													Six Months Ended
		June 30,						Growth/(Decline)							June 30,						Growth/(Decline)
			2009			2008		Dollars			Percent					2009			2008		Dollars			Percent
Net sales:													Net sales:
	Golf clubs	$	243,974		$	291,794		$	(47,820	)	-16	%		Golf clubs	$	468,490		$	599,813		$	(131,323	)	-22	%
	Golf balls		58,245			74,235			(15,990	)	-22	%		Golf balls		105,593			132,668			(27,075	)	-20	%
		$	302,219		$	366,029		$	(63,810	)	-17	%			$	574,083		$	732,481		$	(158,398	)	-22	%

Income (loss) before provision for income taxes:
	Golf clubs	$	25,367		$	67,167		$	(41,800	)	-62	%		Golf clubs	$	53,648		$	143,366		$	(89,718	)	-63	%
	Golf balls		(965	)		8,257			(9,222	)	-112	%		Golf balls		(2,663	)		12,702			(15,365	)	-121	%
	Reconciling items ⁽¹⁾		(13,631	)		(17,734	)		4,103		23	%		Reconciling items ⁽¹⁾		(29,154	)		(32,722	)		3,568		11	%
		$	10,771		$	57,690		$	(46,919	)	-81	%			$	21,831		$	123,346		$	(101,515	)	-82	%

⁽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 June 30,									Quarter Ended June 30,
	2009									2008

	Pro Forma Callaway Golf			Gross Margin Improvement Initiatives			Total as Reported			Pro Forma Callaway Golf			Gross Margin Improvement Initiatives			Total as Reported
Net sales	$	302,219		$	-		$	302,219		$	366,029		$	-		$	366,029
Gross profit		111,662			(1,814	)		109,848			175,773			(4,693	)		171,080
% of sales		37	%		n/a			36	%		48	%		n/a			47	%
Operating expenses		99,589			-			99,589			110,670			120			110,790
Income (loss) from operations		12,073			(1,814	)		10,259			65,103			(4,813	)		60,290
Other income (loss), net		512			-			512			(2,600	)		-			(2,600	)
Income (loss) before income taxes		12,585			(1,814	)		10,771			62,503			(4,813	)		57,690
Income tax provision (benefit)		4,557			(698	)		3,859			22,436			(1,853	)		20,583
Net income (loss)		8,028			(1,116	)		6,912			40,067			(2,960	)		37,107
Dividends accrued on convertible preferred stock		438			-			438			-			-			-
Net income available to common shareholders	$	7,590		$	(1,116	)	$	6,474		$	40,067		$	(2,960	)	$	37,107

Diluted earnings (loss) per share:	$	0.12		$	(0.02	)	$	0.10		$	0.63		$	(0.05	)	$	0.58
Weighted-average shares
outstanding:		66,807			66,807			66,807			63,941			63,941			63,941




	Six Months Ended June 30,									Six Months Ended June 30,
	2009									2008

	Pro Forma Callaway Golf			Gross Margin Improvement Initiatives			Total as Reported			Pro Forma Callaway Golf			Gross Margin Improvement Initiatives			Total as Reported
Net sales	$	574,083		$	-		$	574,083		$	732,481		$	-		$	732,481
Gross profit		229,399			(3,370	)		226,029			352,402			(5,788	)		346,614
% of sales		40	%		n/a			39	%		48	%		n/a			47	%
Operating expenses		202,329			-			202,329			221,243			120			221,363
Income (loss) from operations		27,070			(3,370	)		23,700			131,159			(5,908	)		125,251
Other expense, net		(1,869	)		-			(1,869	)		(1,905	)		-			(1,905	)
Income (expense) before income taxes		25,201			(3,370	)		21,831			129,254			(5,908	)		123,346
Income tax provision (benefit)		9,404			(1,297	)		8,107			48,848			(2,275	)		46,573
Net income (loss)		15,797			(2,073	)		13,724			80,406			(3,633	)		76,773
Dividends accrued on convertible preferred stock		438			-			438			-			-			-
Net income available to common shareholders	$	15,359		$	(2,073	)	$	13,286		$	80,406		$	(3,633	)	$	76,773

Diluted earnings (loss) per share:	$	0.24		$	(0.03	)	$	0.21		$	1.25		$	(0.06	)	$	1.19
Weighted-average shares
outstanding:		65,105			65,105			65,105			64,392			64,392			64,392


Adjusted EBITDA:
	2009 Trailing Twelve Months Adjusted EBITDA														2008 Trailing Twelve Months Adjusted EBITDA
	Quarter Ended														Quarter Ended
	September 30,			December 31,			March 31,			June 30,					September 30,		December 31,			March 31,		June 30,
		2008			2008			2009			2009	Total				2007		2007			2008		2008	Total
Net income (loss)	$	(7,443	)	$	(3,154	)	$	6,812		$	6,912	$	3,127		$	1,269	$	(16,157	)	$	39,666	$	37,107	$	61,885
Interest expense (income), net		497			272			(123	)		551		1,197			29		(216	)		591		994		1,398
Income tax provision (benefit)		(6,676	)		(4,766	)		4,248			3,859		(3,335	)		830		(12,415	)		25,990		20,583		34,988
Depreciation and amortization expense		9,463			9,216			9,944			10,172		38,795			9,864		7,862			8,794		10,490		37,010
Change in energy derivative valuation acct.		-			(19,922	)		-			-		(19,922	)		-		-			-		-		-
Adjusted EBITDA	$	(4,159	)	$	(18,354	)	$	20,881		$	21,494	$	19,862		$	11,992	$	(20,926	)	$	75,041	$	69,174	$	135,281

CONTACT:
Callaway Golf Company
Brad Holiday
Eric Struik
Michele Szynal
760-931-1771

2180 RUTHERFORD ROAD, CARLSBAD, CALIFORNIA	92008-7328
(Address of principal executive offices)	(Zip Code)

(c)	Exhibits.

	The following exhibit is being furnished herewith:

	Exhibit 99.1	Press Release, dated July 29, 2009, captioned “Callaway Golf Company Announces Second Quarter and First Half 2009 Results.”

		CALLAWAY GOLF COMPANY


Date:	July 29, 2009	By:	/s/ Bradley J. Holiday
		Name:	Bradley J. Holiday
		Title:	Senior Executive Vice President
			and Chief Financial Officer

	Exhibit Number		Description

	99.1		Press Release, dated July 29, 2009, captioned “Callaway Golf Company Announces Second Quarter and First Half 2009 Results.”