Callaway Golf Company reported its losses in the third quarter widened to $89.2 million, or $1.33, in the third quarter from $60.1 million, or $1.01, a year ago.
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.
The Company also announced today that it was making good progress on
the cost reduction initiatives it announced in July 2012 and that the
Company is taking additional actions that are expected to result in an
incremental $8 million in savings for a total of approximately $60
million in gross annualized savings related to the cost-reduction
initiatives, with approximately $18 million being realized in 2012 and
an additional $42 million expected to be realized in 2013. Taking into
account the charges related to these additional actions, the Company
currently estimates that the pre-tax charges associated with these
initiatives will be $55 million (as compared to its prior estimate of
$40 million), approximately two-thirds of which will be non-cash
charges. Approximately $50 million of the charges will be incurred in
2012 with the balance being incurred in 2013.
"Our pro forma financial results for the third quarter, while mixed,
were consistent with our expectations as we entered the quarter,"
commented Chip Brewer, President and Chief Executive Officer. "Our
decline in sales and gross margins during the third quarter are the
result of the sale of the Top-Flite and Ben Hogan brands earlier this
year as well as the sales promotions and other actions we took to
stimulate sell-through on our 2012 products and prepare our business for
a successful 2013. On the other hand, our results also include a
decrease in operating expenses as a result of our cost reduction
initiatives. Overall, our results, while not acceptable on an absolute
basis, reflect many actions that should be beneficial in the long-term."
"We are continuing to make solid progress on our turnaround plan,"
continued Mr. Brewer. "In addition to the actions taken earlier this
year, including the sale of the Top-Flite and Ben Hogan brands, the
licensing of the apparel and footwear businesses, the cost-reduction
initiatives, changes in senior management, and changes in our approach
to product design and the sales and marketing functions, during the
third quarter we also replaced a majority of our outstanding preferred
stock with much less expensive 3.75% convertible debt, reached an
agreement in principle on a sale/leaseback of our Chicopee,
Massachusetts ball factory for a much smaller footprint and lower costs,
and began transitioning to a third party based model for our GPS
business. These key initiatives are all consistent with our efforts to
simplify our business, focus the team on our core business of golf clubs
and golf balls, and reduce our cost structure."
"I am encouraged by the progress we have made in the eight months I
have been at Callaway," commented Mr. Brewer. "We are beginning to see
some of the benefits of the actions we have taken in the form of reduced
operating expenses and an increase in market share for the last five
consecutive months in the U.S., albeit at modest levels. I am also very
pleased with the changes we have made in our 2013 product line and
marketing strategy, both of which will be more consumer-oriented and
relevant. Although we have revised downward our full year 2012 guidance
in light of continued softness in the European market and actions we
plan to take in the U.S. for the balance of the year to increase
sell-through and prepare for 2013, I am confident in our turnaround
plans and optimistic that our results will improve significantly in
The Company provided revised financial guidance, estimating that full
year 2012 net sales will range from $830 to $845 million compared to
$887 million in 2011. The Company's estimated decline in net sales
includes the impact of actions taken by the Company during the first
half of the year to streamline its business, including the sale of the
Top-Flite and Ben Hogan brands and the transition of its footwear and
apparel businesses to a licensing model. The Company estimates that
full year pro-forma loss per share will range from $0.73 to $0.83,
compared to a pro forma loss per share of $0.63 in 2011. These pro
forma estimates exclude from 2012 gains and charges associated with the
sale of the Top Flite/Ben Hogan brands, non-cash tax adjustments, and
the charges related to the cost-reduction initiatives and exclude from
2011 charges relating to a non-cash impairment of assets, non-cash tax
adjustments, global operations strategy, restructuring, and the gain on
the sale of buildings in 2011.