The company's results include 6 percent sales growth for the first half of 2013, and 1 percent sales growth for the second quarter of 2013, both on a constant currency basis on its current business, which excludes the brands and businesses that in 2012 were sold or transitioned to a third party model. The company's GAAP sales results reflect the impact of the sold or transitioned businesses, which negatively impacted GAAP sales comparisons by approximately $45 million for the first half of 2013 and by approximately $25 million for the second quarter of 2013. The reported GAAP sales results were also impacted by changes in foreign currency rates in 2013 as compared to 2012, which adversely affected sales by approximately $18 million for the first half of 2013 and by approximately $10 million for the second quarter of 2013. GAAP sales, which include the impact of foreign currency and the sold or transitioned businesses, decreased by 5 percent and 11 percent for the first half and second quarter of 2013, respectively.
The company's improved brand momentum, operating efficiencies and cost management enabled the company to overcome the softer than expected market conditions, adverse effects of the changes in foreign currency rates, and the impact of the sold or transitioned businesses. As a result, the company reported improvements in operating income and earnings per share on a GAAP and non-GAAP basis for both the first half of 2013 and second quarter of 2013 as compared to the same periods in 2012.
GAAP RESULTS.
For the second quarter of 2013, the Company reported the following GAAP results:
Dollars in millions except per share amounts
|
2013
|
% of Sales
|
2012
|
% of Sales
|
Improvement / (Decline)
|
Net Sales
|
$250
|
-
|
$281
|
-
|
($31)
|
Gross Profit
|
$96
|
38.3%
|
$111
|
39.4%
|
($15)
|
Operating Expenses
|
$84
|
34%
|
$101
|
36%
|
$17
|
Operating Income
|
$11
|
5%
|
$10
|
3%
|
$1
|
Net Income
|
$10
|
4%
|
$3
|
1%
|
$7
|
Earnings per share
|
$0.12
|
-
|
$0.00
|
-
|
$0.12
|
Dollars in millions except per share amounts
|
2013
|
% of Sales
|
2012
|
% of Sales
|
Improvement / (Decline)
|
Net Sales
|
$537
|
-
|
$566
|
-
|
($29)
|
Gross Profit
|
$226
|
42.1%
|
$235
|
41.5%
|
($9)
|
Operating Expenses
|
$174
|
33%
|
$198
|
35%
|
$24
|
Operating Income
|
$52
|
10%
|
$37
|
7%
|
$15
|
Net Income
|
$52
|
10%
|
$35
|
6%
|
$17
|
Earnings per share
|
$0.59
|
-
|
$0.41
|
-
|
$0.18
|
NON-GAAP 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 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 second quarter of 2013, the Company reported the following non-GAAP results:
Dollars in millions except per share amounts
|
2013
|
% of Sales
|
2012
|
% of Sales
|
Improvement / (Decline)
|
Net Sales
|
$250
|
-
|
$281
|
-
|
($31)
|
Gross Profit
|
$100
|
40.0%
|
$112
|
39.7%
|
($12)
|
Operating Expenses
|
$83
|
33%
|
$97
|
35%
|
$14
|
Operating Income
|
$16
|
7%
|
$14
|
5%
|
$2
|
Net Income
|
$10
|
4%
|
$6
|
2%
|
$4
|
Earnings per share
|
$0.12
|
-
|
$0.05
|
-
|
$0.07
|
Dollars in millions except per share amounts
|
2013
|
% of Sales
|
2012
|
% of Sales
|
Improvement / (Decline)
|
Net Sales
|
$537
|
-
|
$566
|
-
|
($29)
|
Gross Profit
|
$232
|
43.3%
|
$236
|
41.7%
|
($4)
|
Operating Expenses
|
$172
|
32%
|
$201
|
35%
|
$29
|
Operating Income
|
$60
|
11%
|
$35
|
6%
|
$25
|
Net Income
|
$39
|
7%
|
$21
|
4%
|
$18
|
Earnings per share
|
$0.45
|
-
|
$0.25
|
-
|
$0.20
|
"We are pleased with the results for the second quarter and first half of the year, with continued gains in market share in most major markets driving an increase in sales on a constant currency, continuing business basis of 1 percent and 6 percent respectively," commented Chip Brewer, President and Chief Executive Officer. "Likewise, non-GAAP net income for the second quarter and first half of the year increased 71 percent and 86 percent, respectively, compared to the same periods in 2012. Our turnaround plan remains on track and we have been able to continue to grow our hard goods market share despite market conditions that remained challenging during the quarter due to both continued adverse weather conditions and higher than normal promotional activity in both North America and Europe."
"Our new products, and in particular our X Hot line of woods and irons, have resonated well this year with consumers globally," continued Mr. Brewer. "Additionally, we are equally excited about the new products being introduced during the second half of this year, which include the new OptiForce driver and fairway woods, the Mack Daddy 2 wedges designed by Roger Cleveland, as well as our new Legacy Black product line to be introduced in Japan and the rest of Asia later this quarter. However, due to softer than expected market conditions and increased promotional activity, we are reducing our full year sales guidance and indicating in our revised earnings guidance that it is unclear whether our improved operating performance will be able to continue to offset fully the reduced sales estimates as we have been able to so far this year."
Business Outlook
Because of softer than expected market conditions and increased promotional activity, the company is revising its full year financial guidance. 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 $810-$820 million, compared to previous guidance of $830 million. Net sales for 2012 were $834 million, which included 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 10 percent compared to 2012.
- For the full year 2013, the company estimates a non-GAAP pre-tax loss within a range of $9 million to breakeven, which based upon an assumed tax rate of 38.5 percent equates to an estimated non-GAAP net loss within a range of $6 million to breakeven and a non-GAAP loss per share of $0.12-$0.04 including the impact of dividends paid on the company's outstanding convertible preferred stock. The company's prior guidance was for net income at breakeven and a loss per share of $0.04. 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 earnings/loss 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 for comparative purposes 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.
Callaway Golf Company
|
||||||
Statements of Operations
|
||||||
(In thousands, except per share data)
|
||||||
(Unaudited)
|
||||||
Quarter Ended
|
||||||
June 30,
|
||||||
2013
|
2012
|
|||||
Net sales
|
$ 249,646
|
$ 281,123
|
||||
Cost of sales
|
153,994
|
170,470
|
||||
Gross profit
|
95,652
|
110,653
|
||||
Operating expenses:
|
||||||
Selling
|
61,672
|
75,711
|
||||
General and administrative
|
15,169
|
18,446
|
||||
Research and development
|
7,333
|
6,930
|
||||
Total operating expenses
|
84,174
|
101,087
|
||||
Income from operations
|
11,478
|
9,566
|
||||
Other income (expense), net
|
28
|
(4,571)
|
||||
Income before income taxes
|
11,506
|
4,995
|
||||
Income tax provision
|
1,435
|
2,196
|
||||
Net income
|
10,071
|
2,799
|
||||
Dividends on convertible preferred stock
|
783
|
2,625
|
||||
Net income allocable to common shareholders
|
$ 9,288
|
$ 174
|
||||
Earnings per common share:
|
||||||
Basic
|
$0.13
|
$0.00
|
||||
Diluted
|
$0.12
|
$0.00
|
||||
Weighted-average common shares outstanding:
|
||||||
Basic
|
71,111
|
65,060
|
||||
Diluted
|
86,349
|
65,112
| ||||
By press release
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