Callaway Golf Company Announces Fourth Quarter And Full Year 2012 Results And Provides 2013 Guidance

Wed Jan 30, 2013 4:15pm EST

* Reuters is not responsible for the content in this press release.

For best results when printing this announcement, please click on the link
below:

http://pdf.reuters.com/pdfnews/pdfnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20130130:nPnLA51184

- 2012 Fourth Quarter net sales of $118 million and pro forma loss per share of
$0.49 are consistent with the Company's guidance last quarter. GAAP loss per
share of $1.03.
CARLSBAD, Calif.,  Jan. 30, 2013  /PRNewswire/ -- Callaway Golf Company
(NYSE:ELY) today announced its fourth quarter and full year 2012 financial
results.   

GAAP RESULTS.   

For the fourth quarter of 2012, the Company reported the following results:

 Dollars in millions except per share amounts  2012     % of Sales  2011     % of Sales  Improvement / (Decline)  
 Net Sales                                     $118     -           $154     -           ($36)                    
 Gross Profit                                  $8       7%          $38      24%         ($30)                    
 Operating Expenses                            $80      67%         $87      57%         $7                       
 Operating Loss                                ($71)    (61%)       ($50)    (32%)       ($21)                    
 Loss per share                                ($1.03)  -           ($1.01)  -           (0.02)                   


For the full year 2012, the Company reported the following results:

 Dollars in millions except per share amounts  2012     % of Sales  2011     % of Sales  Improvement / (Decline)  
 Net Sales                                     $832     -           $887     -           ($55)                    
 Gross Profit                                  $247     30%         $311     35%         ($64)                    
 Operating Expenses                            $364     44%         $392     44%         $28                      
 Operating Loss                                ($117)   (14%)       ($81)    (9%)        ($36)                    
 Loss per share                                ($1.98)  -           ($2.82)  -           $0.84                    


NON-GAAP PRO FORMA FINANCIAL RESULTS.

In addition to the Company's results prepared in accordance with GAAP, the
Company has also provided additional information concerning its results on a
non-GAAP pro forma basis. The manner in which the non-GAAP information is
derived is discussed in more detail toward the end of this release and the
Company has provided in the tables to this release a reconciliation of this
non-GAAP information to the most directly comparable GAAP information.

For the fourth quarter of 2012, the Company reported the following non-GAAP pro
forma results:

 Dollars in millions except per share amounts  2012     % of Sales  2011     % of Sales  Improvement / (Decline)  
 Net Sales                                     $118     -           $154     -           ($36)                    
 Gross Profit                                  $16      14%         $41      27%         ($25)                    
 Operating Expenses                            $74      62%         $79      51%         $5                       
 Operating Loss                                ($57)    (49%)       ($38)    (25%)       ($19)                    
 Loss per share                                ($0.49)  -           ($0.41)  -           ($0.08)                  


For the full year 2012, the Company reported the following non-GAAP pro forma
results:

 Dollars in millions except per share amounts  2012     % of Sales  2011     % of Sales  Improvement / (Decline)  
 Net Sales                                     $832     -           $887     -           ($55)                    
 Gross Profit                                  $283     34%         $333     38%         ($50)                    
 Operating Expenses                            $353     42%         $373     42%         $20                      
 Operating Loss                                ($70)    (8%)        ($40)    (4%)        ($30)                    
 Loss per share                                ($0.78)  -           ($0.63)  -           ($0.15)                  


"Our pro forma financial results for the fourth quarter and full year reflect
both the previously reported challenges our business faced during 2012 as well
as the actions we took during the year to prepare our business for a turnaround
in 2013," commented  Chip Brewer, President and Chief Executive Officer.  "While
our 2012 financial results were disappointing, as I look back on the year, I am
very pleased with the pace and direction of change we implemented. During 2012,
we made several key additions to the senior management team, sold the Top-Flite
and Ben Hogan brands, licensed our footwear and apparel businesses, began
transitioning our GPS business to a third party model, strengthened our presence
on tour worldwide, restructured our Americas and European sales organizations,
improved our manufacturing and supply chains, re-energized our global product
development team, overhauled our approach to global marketing, refinanced a
majority of our outstanding convertible preferred stock with less expensive
3.75% convertible debt and implemented major reductions in force and other cost
reductions which should result in annualized savings of  $60 million. These
changes are also driving cultural and behavioral changes at Callaway which,
along with our renewed focus on our core golf clubs and golf ball businesses,
should serve as the keystone to our turnaround."

"Looking forward, I am encouraged on several fronts," continued Mr. Brewer.  "On
a macro basis, we continue to anticipate a slow but steady market recovery in
the U.S. as well as growth opportunities in  Asia. During the second half of
2012, we saw stabilization of our overall market share and lower retail
inventory as a result of improved sell-through performance in most of our key
markets.   Additionally, we are encouraged with the early response we've
received on our 2013 product line and marketing message.   Our expectation is to
re-gain hard goods market share in each of our major markets (Americas,  East
Asia,  Southeast Asia Pacific  and  Europe). Despite this optimism, we remain
mindful that there is much work to be done, we continue to anticipate an
extremely competitive market place, and we know that our success ultimately will
be determined by the consumer as measured by both sell-through and customer
loyalty generated from our product performance and brand appeal.  All things
considered, I remain confident in our turnaround plans and optimistic on our
long-term outlook.  All of us at Callaway are excited for the start of the 2013
season."

Business Outlook

The Company provided guidance for the full year and first half of 2013 as
follows:

Net Sales  

The Company estimates that net sales for the full year 2013 will be
approximately  $850 million  compared to  $832 million  in 2012.  Net sales
related to the Company's continuing brands and business were  $772 million  in
2012, with net sales relating to the brands and businesses that were sold or
transitioned to a third party model of approximately  $60 million.    

The Company estimates that net sales for the first half of 2013 will be
approximately  $555 million  compared to  $566 million  in 2012.  The Company's
estimated net sales for the first half of 2013 would represent an increase of 7%
over the first half 2012 net sales of  $519 million  related to the Company's
continuing brands and business.  

Earnings

The Company estimates that 2013 full year non-GAAP pro-forma net income will be
breakeven with a non-GAAP pro forma loss per share of  $0.04  due to the impact
of dividends paid on the Company's outstanding convertible preferred stock.  In
2012, the Company's non-GAAP pro forma loss was  $43.9 million  with a non-GAAP
pro forma loss per share of  $0.78.

The Company estimates that first half 2013 non-GAAP pro forma net income will be
approximately  $28 million  (an increase of 33% compared to  $21 million  for
the same period last year) and that non-GAAP pro forma earnings per share will
be approximately  $0.33  per share as compared to  $0.25  per share for the
first half of 2012.    

The non-GAAP pro forma estimates of net income and earnings per share exclude
for 2013 carryover charges related to the Company's prior cost-reduction
initiatives and exclude for 2012 gains and charges relating to the sale of the
Top Flite/Ben Hogan brands and the cost-reduction initiatives. The pro forma
estimates for both 2013 and 2012 are based upon an assumed tax rate of 38.5%.
The schedules to this release include a reconciliation of the non-GAAP
information to the most directly comparable GAAP information.

Conference Call and Webcast                         

The Company will be holding a conference call at  2:00 p.m. PST  today to
discuss the Company's financial results, business and outlook for 2013.  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
three hours after the call ends, and will remain available through  9:00 p.m.
PST  on  Wednesday, February 6, 2013.  The replay may be accessed through the
Internet at  www.callawaygolf.com  or by telephone by calling 1-855-859-2056
toll free for calls originating within  the United States  or 404-537-3406 for
International calls.  The replay pass code is 90593160.   

Non-GAAP Pro Forma Information:  The GAAP results contained in this press
release and the financial statement schedules attached to this press release
have been prepared in accordance with accounting principles generally accepted
in  the United States  ("GAAP").  To supplement the GAAP results, the Company
has provided certain non-GAAP pro forma financial information.  The non-GAAP
financial information included in the press release and attached schedules
present certain of the Company's financial results excluding charges for (i) the
Company's global operations strategy, (ii) non-cash impairment charges, (iii)
non-cash tax adjustments relating to or as a result of the establishment of a
deferred tax valuation allowance, (iv) restructuring charges, (v) the gain on
the sale of three buildings, (vi) the gain recognized in connection with the
sale of the Top-Flite and Ben Hogan brands, and (vii) the cost-reduction
initiatives. In addition, the Company also provided additional non-GAAP
information about its results, excluding interest, taxes, depreciation and
amortization expenses as well as impairment charges ("Adjusted EBITDA"). For
comparative purposes, the Company applied an annualized statutory tax rate of
38.5% to derive the non-GAAP earnings/loss per share and Adjusted EBITDA.  The
non-GAAP information should not be considered in isolation or as a substitute
for any measure derived in accordance with GAAP.  The non-GAAP information may
also be inconsistent with the manner in which similar measures are derived or
used by other companies.  Management uses such non-GAAP information for
financial and operational decision-making purposes and as a means to evaluate
period over period comparisons and in forecasting the Company's business going
forward.  Management believes that the presentation of such non-GAAP
information, when considered in conjunction with the most directly comparable
GAAP information, provides additional useful comparative information for
investors in their assessment of the underlying performance of the Company's
business without regard to these items.  The Company has provided reconciling
information in the attached schedules.

Forward-Looking Statements:  Statements used in this press release that relate
to future plans, events, financial results, performance or prospects, including
statements relating to the estimated sales, income and per share results for
2013, the estimated savings or charges (or timing thereof) related to the
cost-reduction initiatives, future market recovery, growth opportunities, or
market share gains, success of the 2013 product line, the Company's
recovery/turnaround, and long-term outlook are forward-looking statements as
defined under the Private Securities Litigation Reform Act of 1995.  These
statements are based upon current information and expectations.  Accurately
estimating the forward-looking statements is based upon various risks and
unknowns including delays, difficulties, or increased costs in implementing the
cost-reduction initiatives, consumer acceptance of 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, as well as
future changes in foreign currency exchange rates. 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 or in
manufacturing the Company's products; 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, the golf industry, and the
Company's business, see the Company's Annual Report on Form 10-K for the year
ended  December 31, 2011  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
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.

About Callaway Golf

Through an unwavering commitment to innovation, Callaway Golf Company (NYSE:ELY)
creates products 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 and Odyssey brands worldwide. For more
information please visit  www.callawaygolf.com  or  shop.callawaygolf.com.

 Contacts:  Brad Holiday    
            Patrick Burke   
            (760) 931-1771  
                            
                            
                            


(Logo:  http://photos.prnewswire.com/prnh/20091203/CGLOGO)

                                                                                                               
 Callaway Golf Company                                                                                         
 Consolidated Condensed Balance Sheets                                                                         
 (In thousands)                                                                                                
 (Unaudited)                                                                                                   
                                                                                                        
                                                                                                        
                                                                  December 31,        December 31,      
                                                                  2012                2011              
                                                                                                        
 ASSETS                                                                                                  
 Current assets:                                                                                         
                      Cash and cash equivalents                   $         52,003    $         43,023  
                      Accounts receivable, net                    89,272              115,673           
                      Inventories                                 212,563             233,070           
                      Deferred taxes, net                         4,170               4,029             
                      Income taxes receivable                     1,810               3,654             
                      Assets held for sale                        2,396               -                 
                      Other current assets                        23,811              19,880            
                      Total current assets                        386,025             419,329           
                                                                                                        
 Property, plant and equipment, net                                89,093              117,147           
 Intangible assets, net                                            118,223             151,138           
 Other assets                                                      43,324              39,498            
                      Total assets                                $       636,665     $       727,112   
                                                                                                        
 LIABILITIES AND SHAREHOLDERS' EQUITY                                                                    
 Current liabilities:                                                                                    
                      Accounts payable and accrued expenses       $       129,021     $       129,193   
                      Accrued employee compensation and benefits  20,171              23,785            
                      Accrued warranty expense                    7,539               8,140             
                      Income tax liabilities                      4,357               6,666             
                      Total current liabilities                   161,088             167,784           
                                                                                                        
 Long-term liabilities                                             155,126             46,514            
 Shareholders' equity                                              320,451             512,814           
                      Total liabilities and shareholders' equity  $       636,665     $       727,112   
                                                                                                        


                                                                                                     
                                                                                                     
 Callaway Golf Company                                                                               
 Statements of Operations                                                                            
 (In thousands, except per share data)                                                               
 (Unaudited)                                                                                         
                                                                                                  
                                                               Quarter Ended                        
                                                               December 31,                         
                                                               2012                 2011          
                                                                                                  
 Net sales                                                     $  117,881           $  153,872    
 Cost of sales                                                 109,766              116,299       
 Gross profit                                                  8,115                37,573        
 Operating expenses:                                                                              
                  Selling                                     54,753               53,637        
                  General and administrative                  17,634               25,570        
                  Research and development                    7,161                8,113         
                                   Total operating expenses  79,548               87,320        
 Loss from operations                                          (71,433)             (49,747)      
 Other income (expense), net                                   2,435                (796)         
 Loss before income taxes                                      (68,998)             (50,543)      
 Income tax provision                                          3,008                12,442        
 Net loss                                                      (72,006)             (62,985)      
 Dividends on convertible preferred stock                      783                  2,625         
 Net loss allocable to common shareholders                     $   (72,789)         $   (65,610)  
                                                                                                
 Loss per common share:                                                                           
                  Basic                                       ($1.03)              ($1.01)       
                  Diluted                                     ($1.03)              ($1.01)       
 Weighted-average common shares outstanding:                                                      
                  Basic                                       70,996               64,887        
                  Diluted                                     70,996               64,887        
                                                                                                
                                                             Year Ended                           
                                                             December 31,                         
                                                             2012                 2011          
                                                                                                
 Net sales                                                     $  832,008           $  886,528    
 Cost of sales                                                 585,069              575,226       
 Gross profit                                                  246,939              311,302       
 Operating expenses:                                                                              
                  Selling                                     267,575              265,325       
                  General and administrative                  66,552               92,756        
                  Research and development                    29,542               34,309        
                                   Total operating expenses  363,669              392,390       
 Loss from operations                                          (116,730)            (81,088)      
 Other expense, net                                            (1,811)              (9,173)       
 Loss before income taxes                                      (118,541)            (90,261)      
 Income tax provision                                          5,662                81,559        
 Net loss                                                      (124,203)            (171,820)     
 Dividends on convertible preferred stock                      8,447                10,500        
 Net loss allocable to common shareholders                     $ (132,650)          $ (182,320)   
                                                                                                
 Loss per common share:                                                                           
                  Basic                                       ($1.98)              ($2.82)       
                  Diluted                                     ($1.98)              ($2.82)       
 Weighted-average common shares outstanding:                                                      
                  Basic                                       67,061               64,601        
                  Diluted                                     67,061               64,601        


                                                                                                                                                            
                                                                                                                                                            
                                                                                                                                                            
 Callaway Golf Company                                                                                                                                      
 Consolidated Condensed Statements of Cash Flows                                                                                                            
 (In thousands)                                                                                                                                             
 (Unaudited)                                                                                                                                                
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                   Year Ended                         
                                                                                                                   December 31,                       
                                                                                                                   2012                2011         
 Cash flows from operating activities:                                                                                                                
                     Net loss                                                                                       $ (124,203)         $ (171,820)  
                     Adjustments to reconcile net loss to net cash (used in) provided by operating activities:                                       
                                                                    Depreciation and amortization                  34,411              38,636       
                                                                    Impairment charges                             21,933              6,533        
                                                                    Deferred taxes, net                            (1,925)             55,930       
                                                                    Non-cash share-based compensation              3,142               9,570        
                                                                    Gain on disposal of long-lived assets          (1,261)             (7,491)      
                                                                    Gain on sale of intangible assets              (6,602)             -            
                                                                    Debt discount amortization                     235                 -            
                                                                    Changes in assets and liabilities              45,462              78,740       
                     Net cash (used in) provided by operating activities                                            (28,808)            10,098       
                                                                                                                                                    
 Cash flows from investing activities:                                                                                                                
                     Capital expenditures                                                                           (18,403)            (28,931)     
                     Net proceeds from sale of intangible assets                                                    26,861              -            
                     Proceeds from sale of property, plant and equipment                                            355                 19,371       
                     Other investing activities                                                                     (3,268)             -            
                     Net cash provided by (used in) investing activities                                            5,545               (9,560)      
                                                                                                                                                    
 Cash flows from financing activities:                                                                                                                
                     Proceeds from issuance of convertible notes                                                    46,819              -            
                     Debt issuance cost                                                                             (3,534)             -            
                     Issuance of common stock                                                                       -                   2,195        
                     Dividends paid                                                                                 (11,019)            (13,093)     
                     Issuance of treasury stock                                                                     19                  -            
                     Credit facility origination fees                                                               -                   (2,467)      
                     Other financing activities                                                                     (159)               80           
                     Net cash provided by (used in) financing activities                                            32,126              (13,285)     
                                                                                                                                                    
 Effect of exchange rate changes on cash                                                                             117                 727          
 Net increase (decrease) in cash and cash equivalents                                                                8,980               (12,020)     
 Cash and cash equivalents at beginning of period                                                                    43,023              55,043       
 Cash and cash equivalents at end of period                                                                          $    52,003         $    43,023  
                                                                                                                                                    


                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                   
 Callaway Golf Company                                                                                                                                                                                                             
 Consolidated Net Sales and Operating Segment Information                                                                                                                                                                          
 (In thousands)                                                                                                                                                                                                                    
 (Unaudited)                                                                                                                                                                                                                       
                                                                                                                                                                                                               
                                                                                                                                                                                                               
                                                 Net Sales by Product Category                                                           Net Sales by Product Category                                                       
                                                 Quarter Ended                                                                           Year Ended                                                                          
                                                 December 31,                           Growth/(Decline)                              December 31,                              Growth/(Decline)                       
                                                 2012               2011              Dollars              Percent                2012                 2011(2)            Dollars             Percent          
 Net sales:                                                                                                                                                                                                     
                     Woods                       $   20,163         $   25,383        $   (5,220)          -21%                   $  200,588           $ 211,191          $ (10,603)          -5%              
                     Irons                       23,624             38,129            (14,505)             -38%                   170,794              206,817            (36,023)            -17%             
                     Putters                     14,626             21,131            (6,505)              -31%                   93,325               88,160             5,165               6%               
                     Golf balls                  20,572             28,273            (7,701)              -27%                   139,576              160,359            (20,783)            -13%             
                     Accessories and other  (1)  38,896             40,956            (2,060)              -5%                    227,725              220,001            7,724               4%               
                                                 $ 117,881          $ 153,872         $ (35,991)           -23%                   $  832,008           $ 886,528          $ (54,520)          -6%              
                                                                                                                                                                                                               
                                                                                                                                                                                                               
                                                 Net Sales by Region                                                               Net Sales by Region                                                                       
                                                 Quarter Ended                                                                     Year Ended                                                                                
                                                 December 31,                           Growth/(Decline)                              December 31,                              Growth/(Decline)                       
                                                 2012               2011              Dollars              Percent                2012                 2011               Dollars             Percent          
 Net sales:                                                                                                                                                                                                     
                     United States               $   40,840         $   61,682        $ (20,842)           -34%                   $  390,030           $ 419,448          $ (29,418)          -7%              
                     Europe                      14,830             19,129            (4,299)              -22%                   120,160              133,572            (13,412)            -10%             
                     Japan                       36,443             41,644            (5,201)              -12%                   157,315              149,768            7,547               5%               
                     Rest of Asia                14,276             14,152            124                  1%                     75,035               82,746             (7,711)             -9%              
                     Other foreign countries     11,492             17,265            (5,773)              -33%                   89,468               100,994            (11,526)            -11%             
                                                 $ 117,881          $ 153,872         $ (35,991)           -23%                   $  832,008           $ 886,528          $ (54,520)          -6%              
                                                                                                                                                                                                               
                                                                                                                                                                                                               
                                                 Operating Segment Information                                                     Operating Segment Information                                                             
                                                 Quarter Ended                                                                     Year Ended                                                                                 
                                                 December 31,                           Growth/(Decline)                              December 31,                              Growth/(Decline)                       
                                                 2012               2011              Dollars              Percent                2012                 2011               Dollars             Percent          
 Net sales:                                                                                                                                                                                                     
                     Golf clubs                  $   97,309         $ 125,599         $ (28,290)           -23%                   $  692,432           $ 726,169          $ (33,737)          -5%              
                     Golf balls                  20,572             28,273            (7,701)              -27%                   139,576              160,359            (20,783)            -13%             
                                                 $ 117,881          $ 153,872         $ (35,991)           -23%                   $  832,008           $ 886,528          $ (54,520)          -6%              
                                                                                                                                                                                                               
 Income (loss) before income taxes:                                                                                                                                                                             
                     Golf clubs                  $ (49,590)         $ (20,591)        $ (28,999)           -141%                  $   (56,838)         $   (3,899)        $ (52,939)          1358%            
                     Golf balls                  (10,675)           (10,382)          (293)                -3%                    (18,724)             (12,655)           (6,069)             -48%             
                     Reconciling items  (3)      (8,733)            (19,570)          10,837               55%                    (42,979)             (73,707)           30,728              42%              
                                                 $ (68,998)         $ (50,543)        $ (18,455)           -37%                   $ (118,541)          $ (90,261)         $ (28,280)          31%              
                                                                                                                                                                                                               


 (1)Accessories & other include packaged sets as well as pre-owned product sales.                                                                                                                                       
 (2)Certain prior period amounts have been reclassified between product categories to conform with the current period presentation.                                                                               
 (3)Represents corporate general and administrative expenses and other income (expense) not utilized by management in determining segment profitability.                                                                
                                                                                                                                                                                                                  


 Callaway Golf Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
 Supplemental Financial Information - Non-GAAP Reconciliation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
 (In thousands, except per share data)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
 (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
                                  Quarter Ended December 31,                                                                                                                                                                                                                                           Quarter Ended December 31,                                                                                                                                                                                                                                                                   
                                  2012                                                                                                                                                                                                                                                                 2011                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
                                  Pro Forma Callaway Golf  (1)                    Cost Reduction Initiatives(1) (3)                  Non-Cash Tax Adjustment(2)                        Total as Reported                                                                                          Pro Forma Callaway Golf  (1)                 Global Operations Strategy(1)               Non-Cash Impairment Charge  (1)               Restructuring(1)                         Non-Cash Tax Adjustment(2)                   Total as Reported                                     
 Net sales                        $              117,881                          $                         -                       $                       -                         $         117,881                                                                                          $              153,872                       $               -                           $                     -                       $                        -               $                      -                     $         153,872                                     
 Gross profit                     16,084                                          (7,969)                                           -                                                 8,115                                                                                                      41,025                                       (3,250)                                     -                                             (202)                                    -                                            37,573                                                
 % of sales                       14%                                             n/a                                               n/a                                               7%                                                                                                         27%                                          n/a                                         n/a                                           n/a                                      n/a                                          24%                                                   
 Operating expenses               73,566                                          5,982                                             -                                                 79,548                                                                                                     78,771                                       3,859                                       1,120                                         3,570                                    -                                            87,320                                                
 Expense from operations          (57,482)                                        (13,951)                                          -                                                 (71,433)                                                                                                   (37,746)                                     (7,109)                                     (1,120)                                       (3,772)                                  -                                            (49,747)                                              
 Other income (expense), net      2,435                                           -                                                 -                                                 2,435                                                                                                      (796)                                        -                                           -                                             -                                        -                                            (796)                                                 
 Loss before income taxes         (55,047)                                        (13,951)                                          -                                                 (68,998)                                                                                                   (38,542)                                     (7,109)                                     (1,120)                                       (3,772)                                  -                                            (50,543)                                              
 Income tax provision (benefit)   (21,193)                                        (5,372)                                           29,573                                            3,008                                                                                                      (14,839)                                     (2,737)                                     (431)                                         (1,453)                                  31,902                                       12,442                                                
 Net loss                         (33,854)                                        (8,579)                                           (29,573)                                          (72,006)                                                                                                   (23,703)                                     (4,372)                                     (689)                                         (2,319)                                  (31,902)                                     (62,985)                                              
 Dividends on convertible         783                                             -                                                 -                                                 783                                                                                                        2,625                                        -                                           -                                             -                                        -                                            2,625                                                 
 preferred stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
 Net loss allocable to common     $               (34,637)                        $                (8,579)                          $            (29,573)                             $          (72,789)                                                                                        $               (26,328)                     $      (4,372)                              $              (689)                          $               (2,319)                  $           (31,902)                         $          (65,610)                                   
 shareholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
 Diluted loss per share:          $                   (0.49)                      $                  (0.12)                         $                (0.42)                           $              (1.03)                                                                                      $                   (0.41)                   $        (0.07)                             $             (0.01)                          $                 (0.03)                 $               (0.49)                       $              (1.01)                                 
 Weighted-average shares          70,996                                          70,996                                            70,996                                            70,996                                                                                                     64,887                                       64,887                                      64,887                                        64,887                                   64,887                                       64,887                                                
 outstanding:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
                                  Year Ended Ended December 31,                                                                                                                                                                                                                                          Year Ended Ended December 31,                                                                                                                                                                                                                                                                  
                                  2012                                                                                                                                                                                                                                                                   2011                                                                                                                                                                                                                                                                                           
                                  Pro Forma Callaway Golf  (1)                    Gain on Sale of Top-Flite & Ben                   Cost Reduction Initiatives(1) (3)                  Non-Cash Tax Adjustment  (2)                  Total as Reported                                            Pro Forma Callaway Golf  (1)                 Global Operations Strategy(1)               Non-Cash Impairment Charge  (1)               Restructuring  (1)                       Gain on Sale of Buildings  (1)               Non-Cash Tax Adjustment  (2)       Total as Reported  
                                                                                  Hogan(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
 Net sales                        $              832,008                          $                         -                       $                       -                         $                     -                       $     832,008                                                $              886,528                       $               -                           $                     -                       $                        -               $                      -                     $                     -            $     886,528      
 Gross profit                     283,171                                         -                                                 (36,232)                                          -                                             246,939                                                      333,143                                      (20,590)                                    -                                             (1,251)                                  -                                            -                                  311,302            
 % of sales                       34%                                             n/a                                               n/a                                               n/a                                           30%                                                          38%                                          n/a                                         n/a                                           n/a                                      n/a                                          n/a                                35%                
 Operating expenses               352,797                                         (6,602)                                           17,474                                            -                                             363,669                                                      372,859                                      4,090                                       6,533                                         15,078                                   (6,170)                                      -                                  392,390            
 Income (expense) from operations (69,626)                                        6,602                                             (53,706)                                          -                                             (116,730)                                                    (39,716)                                     (24,680)                                    (6,533)                                       (16,329)                                 6,170                                        -                                  (81,088)           
 Other expense, net               (1,811)                                         -                                                 -                                                 -                                             (1,811)                                                      (9,173)                                      -                                           -                                             -                                        -                                            -                                  (9,173)            
 Income (loss) before income taxes (71,437)                                        6,602                                             (53,706)                                          -                                             (118,541)                                                    (48,889)                                     (24,680)                                    (6,533)                                       (16,329)                                 6,170                                        -                                  (90,261)           
 Income tax provision (benefit)   (27,503)                                        2,542                                             (20,678)                                          51,301                                        5,662                                                        (18,822)                                     (9,502)                                     (2,515)                                       (6,287)                                  2,247                                        116,438                            81,559             
 Net income (loss)                (43,934)                                        4,060                                             (33,028)                                          (51,301)                                      (124,203)                                                    (30,067)                                     (15,178)                                    (4,018)                                       (10,042)                                 3,923                                        (116,438)                          (171,820)          
 Dividends on convertible         8,447                                           -                                                 -                                                 -                                             8,447                                                        10,500                                       -                                           -                                             -                                        -                                            -                                  10,500             
 preferred stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
 Net income (loss) allocable to   $               (52,381)                        $                  4,060                          $            (33,028)                             $          (51,301)                           $   (132,650)                                                $               (40,567)                     $    (15,178)                               $           (4,018)                           $             (10,042)                   $               3,923                        $        (116,438)                 $   (182,320)      
 common shareholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
 Diluted earnings (loss) per      $                   (0.78)                      $                    0.06                         $                (0.49)                           $              (0.77)                         $         (1.98)                                             $                   (0.63)                   $        (0.23)                             $             (0.06)                          $                 (0.16)                 $                 0.06                       $              (1.80)              $         (2.82)   
 share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
 Weighted-average shares          67,061                                          67,061                                            67,061                                            67,061                                        67,061                                                       64,601                                       64,601                                      64,601                                        64,601                                   64,601                                       64,601                             64,601             
 outstanding:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
 (1)For comparative purposes, the Company applied an annualized statutory tax rate of 38.5% to derive pro forma results.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
 (2)Current period impact of valuation allowance established against the Company's U.S. deferred tax assets and impact of applying statutory tax rate of 38.5% to pro forma results.                                                                                                                                                                                                                                                                                                                                                                                                               
 (3)Includes costs associated with workforce reductions, transition costs associated with licensing the Company's North American apparel and footwear businesses, transition costs associated with outsourcing the development of any new technology                                                                                                                                                                                                                                                                                                                                                       
 in the Company's uPro GPS business, and cost associated with the reorganization of the Company's golf ball manufacturing supply chain.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
                                  2012 Trailing Twelve Month Adjusted EBITDA                                                                                                                                                                                                                             2011 Trailing Twelve Month Adjusted EBITDA                                                                                                                                                                                                                                                 
 Adjusted EBITDA:                 Quarter Ended                                                                                                                                                                                                                                                          Quarter Ended                                                                                                                                                                                                                                                                              
                                  March 31,                                       June 30,                                          September 30,                                     December 31,                                                                                               March 31,                                    June 30,                                    September 30,                                 December 31,                                                                                                                                
                                  2012                                            2012                                              2012                                              2012                                          Total                                                        2011                                         2011                                        2011                                          2011                                     Total                                                                                              
 Net income (loss)                $                31,802                         $                  2,799                          $            (86,798)                             $          (72,006)                           $   (124,203)                                                $                12,818                      $    (59,066)                               $         (62,587)                            $             (62,985)                   $         (171,820)                                                                                
 Interest expense, net            817                                             884                                               1,343                                             1,919                                         4,963                                                        142                                          207                                         399                                           324                                      1,072                                                                                              
 Income tax provision (benefit)   (292)                                           2,196                                             750                                               3,008                                         5,662                                                        8,780                                        45,483                                      14,854                                        12,442                                   81,559                                                                                             
 Depreciation and amortization    8,745                                           9,489                                             8,342                                             7,835                                         34,411                                                       9,880                                        9,311                                       9,247                                         10,198                                   38,636                                                                                             
 expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
 Impairment charge                -                                               -                                                 17,056                                            4,877                                         21,933                                                       -                                            5,413                                       -                                             1,120                                    6,533                                                                                              
 Adjusted EBITDA                  $                41,072                         $                15,368                           $            (59,307)                             $          (54,367)                           $     (57,234)                                               $                31,620                      $        1,348                              $         (38,087)                            $             (38,901)                   $           (44,020)                                                                               
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    


                                                                                                                                                                                                                                                     
                                                                                                                                                                                                                                                     
                                                                                                                                                                                                                                                     
                                                     Callaway Golf Company                                                                                                                                                                           
                                                     Supplemental Financial Information - Non-GAAP Reconciliation                                                                                                                                    
                                                     (In thousands, except per share data)                                                                                                                                                           
                                                     (Unaudited)                                                                                                                                                                                     
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
                                                     Six Months Ended June 30,                                                                                                                                                                       
                                                     2012                                                                                                                                                                                            
                                                     Pro Forma                      Non-Cash Tax Adjustment  (2)           Cost Reduction Initiatives(1) (3)           Gain on Sale of Top-Flite & Ben Hogan(1)           Total as Reported  
                                                     
Callaway Golf  (1)                                                                                                                                                                     
 Net sales                                           $     566,221                  $             -                        $               -                           $                -                                 $ 566,221          
 Gross profit                                        235,985                        -                                      (961)                                       -                                                  235,024            
 % of sales                                          42%                            n/a                                    n/a                                         n/a                                                42%                
 Operating expenses                                  200,524                        -                                      3,710                                       (6,602)                                            197,632            
 Income (expense) from operations                    35,461                         -                                      (4,671)                                     6,602                                              37,392             
 Other expense, net                                  (887)                          -                                      -                                           -                                                  (887)              
 Income (loss) before income taxes                   34,574                         -                                      (4,671)                                     6,602                                              36,505             
 Income tax provision (benefit)                      13,311                         (12,151)                               (1,798)                                     2,542                                              1,904              
 Net income (loss)                                   21,263                         12,151                                 (2,873)                                     4,060                                              34,601             
 Dividends on convertible preferred stock            5,250                          -                                      -                                           -                                                  5,250              
 Net income (loss) allocable to common shareholders  $       16,013                 $   12,151                             $     (2,873)                               $        4,060                                     $   29,351         
                                                                                                                                                                                                                                             
 Diluted earnings (loss) per share:                  $           0.25               $       0.14                           $       (0.03)                              $          0.05                                    $       0.41       
 Weighted-average shares outstanding:                84,950                         84,950                                 84,950                                      84,950                                             84,950             
                                                                                                                                                                                                                                             


 (1)For comparative purposes, the Company applied an annualized statutory tax rate of 38.5% to derive pro forma results. 
 (2)Current period impact of valuation allowance established against the Company's U.S. deferred tax assets and impact of applying statutory tax rate of 38.5% to pro forma results. 
 (3)Includes costs associated with workforce reductions and transition costs associated with licensing the Company's North American apparel business and footwear business. 
                           
                           
 2013 Non-GAAP Reconciliation          
                           
 The non-GAAP pro forma estimates of net income and earnings per share for full year 2013 exclude carryover charges of $4.2 million (or $0.06 per share) related to the Company's prior cost-reduction initiatives.  The non-GAAP pro forma estimates of net income and earnings per share for the first half of 2013 exclude carryover charges of $3.8 million (or $0.05 per share) related to the Company's prior cost-reduction initiatives. Additionally, the Company's pro forma estimates assume a tax rate of 38.5%. 
                           


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
 Callaway Golf Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
 Summary of Ongoing and Sold or Transitioned Pro Forma Net Sales and Gross Profit                                                                                                                                                                                                                                                                                                                                                                                                                                    
 (In thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
 (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
               Quarter Ended March, 31, 2012                                                                  Quarter Ended June 30, 2012                                                                    Quarter Ended September 30, 2012                                                                 Quarter Ended December 31, 2012                                                                  Year Ended December 31, 2012                                                                 
               Pro Forma Results          Ongoing Business          Sold or Transitioned Business  (1)    Pro Forma Results          Ongoing Business          Sold or Transitioned Business  (1)    Pro Forma Results           Ongoing Business           Sold or Transitioned Business  (1)    Pro Forma Results           Ongoing Business           Sold or Transitioned Business  (1)    Pro Forma Results          Ongoing Business          Sold or Transitioned Business  (1)  
 Net sales     $      285,098             $      263,792            $         21,306                      $      281,123             $      255,137            $         25,986                      $      147,906              $      138,902             $           9,004                     $      117,881              $      113,931             $           3,950                     $      832,008             $      771,762            $         60,246                    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
 Gross profit  $      124,395             $      121,907            $           2,488                     $      111,590             $      106,485            $           5,105                     $        31,102             $        32,731            $         (1,629)                     $        16,084             $        17,529            $         (1,445)                     $      283,171             $      278,652            $           4,519                   
 % of Sales    44%                        46%                       12%                                   40%                        42%                       20%                                   21%                         24%                        -18%                                  14%                         15%                        -37%                                  34%                        36%                       8%                                  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
               Quarter Ended March, 31, 2011                                                                  Quarter Ended June 30, 2011                                                                    Quarter Ended September 30, 2011                                                                 Quarter Ended December 31, 2011                                                                  Year Ended December 31, 2011                                                                 
               Pro Forma Results          Ongoing Business          Sold or Transitioned Business  (1)    Pro Forma Results          Ongoing Business          Sold or Transitioned Business  (1)    Pro Forma Results           Ongoing Business           Sold or Transitioned Business  (1)    Pro Forma Results           Ongoing Business           Sold or Transitioned Business  (1)    Pro Forma Results          Ongoing Business          Sold or Transitioned Business  (1)  
 Net sales     $      285,599             $      260,203            $         25,396                      $      273,814             $      247,886            $         25,928                      $      173,243              $      158,011             $         15,232                      $      153,872              $      139,643             $         14,229                      $      886,528             $      805,743            $         80,785                    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
 Gross profit  $      129,983             $      126,345            $           3,638                     $      108,509             $      104,667            $           3,842                     $        53,626             $        55,160            $         (1,534)                     $        41,025             $        43,500            $         (2,475)                     $      333,143             $      329,673            $           3,470                   
 % of Sales    46%                        49%                       14%                                   40%                        42%                       15%                                   31%                         35%                        -10%                                  27%                         31%                        -17%                                  38%                        41%                       4%                                  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        


 (1) Includes: Top-Flite and Ben Hogan branded products, apparel and footwear in North America and uPro GPS devices.             
                                                                                                                        


SOURCE  Callaway Golf

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.