On a GAAP basis, the company's sales in the first quarter grew 1 percent for the first quarter of 2013 as compared to the same period in 2012
GAAP RESULTS.
For the first quarter of 2013, the Company reported the following results, as compared to the same period in 2012:
Dollars in millions except
per share amounts
|
First Quarter
2013
|
% of Sales
|
First Quarter
2012
|
% of Sales
|
Improvement/ (Decline)
|
Net Sales
|
$288
|
-
|
$285
|
-
|
$3
|
Gross Profit
|
$130
|
45%
|
$124
|
44%
|
$6
|
Operating Expenses
|
$90
|
31%
|
$97
|
34%
|
$7
|
Operating Income
|
$40
|
14%
|
$28
|
10%
|
$12
|
Income Tax Provision
|
$2
|
1%
|
$0
|
0%
|
($2)
|
Net Income
|
$42
|
14%
|
$32
|
11%
|
$10
|
Earnings per share (Diluted)
|
$0.47
|
-
|
$0.37
|
-
|
$0.10
|
NON-GAAP FINANCIAL RESULTS.
In addition to the Company's results prepared in accordance with GAAP, the Company also provided additional information concerning its results on a non-GAAP basis. The manner in which this 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 first quarter of 2013, the Company reported the following non-GAAP results, as compared to the same period in 2012:
Dollars in millions except per share amounts
|
First Quarter 2013
|
% of Sales
|
First Quarter 2012
|
% of Sales
|
Improvement/ (Decline)
|
Net Sales
|
$288
|
-
|
$285
|
-
|
$3
|
Gross Profit
|
$133
|
46%
|
$124
|
44%
|
$9
|
Operating Expenses
|
$89
|
31%
|
$103
|
36%
|
$14
|
Operating Income
|
$44
|
15%
|
$21
|
7%
|
$23
|
Income Tax Provision
|
$18
|
6%
|
$10
|
3%
|
($8)
|
Net Income
|
$29
|
10%
|
$15
|
5%
|
$14
|
Earnings per share (Diluted)
|
$0.33
|
-
|
$0.18
|
-
|
$0.15
|
The Company's net sales for the first quarter of 2013 increased to $288 million, as compared to $285 million for the same period in 2012. The strength of the Company's 2013 product line allowed the Company to more than offset the negative impact of foreign currency and the 2012 sale of the Top-Flite and Ben Hogan brands and the transition in 2012 to a third party model for other products, including U.S. apparel and footwear. As compared to 2012, the Company's first quarter 2013 net sales were adversely affected by $8 million due to changes in foreign currency exchange rates and by $20 million due to the sold or transitioned brands and products. For the first quarter of 2013, net sales relating to the Company's current business, which excludes these sold or transitioned brands and products, increased by 8 percent and on a constant currency basis increased by 12 percent.
In addition to the increase in sales, improvements in gross margins and operating expenses contributed to a 27 percent increase in GAAP fully diluted earnings per share for the first quarter of 2013 compared to the same period in 2012. The Company's GAAP earnings results for both periods benefited from the effects of the Company's deferred tax valuation allowance, which significantly reduced the Company's income tax provision. The Company's GAAP fully diluted earnings per share for the first quarter of 2013 was also adversely affected by approximately $0.02 per share related to charges incurred in connection with the Company's 2012 cost-reduction initiatives. The Company's GAAP fully diluted earnings per share for the first quarter of 2012 was positively affected by approximately $0.05 per share related to a gain on the sale of the Top-Flite and Ben Hogan brands. On a non-GAAP basis, which excludes these charges/gains and uses an assumed tax rate of 38.5 percent, the Company's fully diluted earnings per share increased to $0.33 for the first quarter of 2013 as compared to $0.18 for the first quarter of 2012.
"I am very pleased with our overall results this quarter," commented Chip Brewer, President and Chief Executive Officer. "The strength of our 2013 product line, including our new X Hot products and Versa line of putters, allowed us to achieve a 12 percent increase in net sales on our current business on a constant currency basis. In addition, we are beginning to see the results of the many cost-reduction and other initiatives we took in 2012, which contributed to improvements in gross margins and operating expenses, and all of which culminated in a $23 million increase in non-GAAP operating income for the first quarter of 2013. However, it is still early in the year, and the second quarter always has a big impact on our ability to achieve our full year financial targets. With that said, the first quarter was an important first step in our multi-year turnaround plan and we are pleased to report our turnaround is on track."
Business Outlook
First Half 2013
"We are lowering our first half 2013 net sales guidance due to continued foreign currency headwinds and a slower than expected start to the golf season in the United States and Europe as a result of unfavorable weather conditions," commented Brad Holiday, Chief Financial Officer. "Our earnings for the first quarter of 2013 were higher than anticipated due to better than expected gross margins and operating expenses, as well as gains on foreign exchange hedging contracts, all of which together more than offset the negative impact of foreign currency exchange rates during the quarter," continued Mr. Holiday. "As a result of our better than expected first quarter earnings, we are raising our earnings guidance for the first half of 2013."
The Company is currently providing the following revised guidance for the first half of 2013:
Net sales for the first half of 2013 are currently estimated to be $540 million, compared to previous guidance of $555 million. Net sales for the first half of 2012 were $566 million, which included net sales of $47 million relating to the brands and products that in 2012 were sold or transitioned to a third party model. Excluding sales from the sold or transitioned businesses, the Company estimates that net sales from its current business on a constant currency basis will increase by approximately 7 percent in the first half of 2013 compared to the first half of 2012.
Non-GAAP earnings per share is currently estimated at $0.44 for the first half of 2013, compared to previous guidance of $0.33 per share. During the first half of 2012, the Company reported non-GAAP earnings per share of $0.25.*
Full Year 2013
"We are lowering our full year 2013 net sales guidance, primarily due to our expectations that the unfavorable foreign currency headwinds experienced during the first quarter of 2013 will continue for the balance of the year," explained Brad Holiday, Chief Financial Officer. "We believe, however, that gains on our foreign currency hedging contracts, along with better operating efficiencies, will enable us to mitigate the anticipated adverse foreign currency conditions and maintain our full year earnings guidance at this time."
As a result, the Company is currently providing the following revised guidance for the full year 2013:
Net sales for the full year 2013 are currently estimated to be $830 million, compared to previous guidance of $850 million. Net sales for 2012 were $834 million, which included net sales of $60 million related to the brands and products that in 2012 were sold or transitioned to a third party model. Excluding sales from the sold or transitioned businesses, the Company estimates that net sales from its current business on a constant currency basis will increase by approximately 12 percent in 2013 compared to 2012.
For the full year 2013, the Company continues to estimate that non-GAAP net income will be break-even with a non-GAAP loss per share of $0.04 due to the impact of dividends paid on the Company's outstanding convertible preferred stock. For the full year 2012, the Company's non-GAAP loss was $43 million with a non-GAAP loss per share of $0.77.*
*Note: The non-GAAP estimates of net income and earnings per share exclude for 2013 carryover charges related to the Company's 2012 cost-reduction initiatives and exclude for 2012 gains and charges related to the sale of the Top Flite/Ben Hogan brands and the 2012 cost-reduction initiatives. The non-GAAP estimates for both 2013 and 2012 are based upon an assumed tax rate of 38.5 percent because the GAAP tax rates are not directly correlated to the Company's pre-tax results due to the effect of the Company's deferred tax valuation allowance.
Source Callaway Golf
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