Singapore (February 9): In announcing its fourth quarter and year-to-date 2013 financial results, Callaway Golf Company clearly demonstrated that its turnaround is well underway.
Led by a more than US$55 million (28%) increase in driver and fairway woods sales, the company’s full year results include sales growth as well as significant improvements in gross margins and operating expenses.
As a result, the company’s operating income/loss improved by US$105 million to a loss of US$11 million compared to a loss of US$116 million in 2012, and on a non-GAAP basis was profitable for the first time in several years.
Given this significantly improved financial performance, along with the initial trade reception to the company’s 2014 product line, the company’s annual guidance predicts a return to profitability in 2014 on a GAAP basis.
Chip Brewer, Callaway’s President and Chief Executive Officer, said: “We are pleased with our financial results during the first full year of our new operating model. Despite challenging market conditions throughout much of the year, we were able to grow sales of our current business, on a constant currency basis, by 14%.
“This sales growth, together with the benefits resulting from the many actions we have taken this year to improve our operations, have a resulted in a US$74 million improvement in non-GAAP operating income and even more on a GAAP basis. In fact, this year we achieved positive operating income on a non-GAAP basis for the first time since 2008, which is an important milestone in our turnaround and clear evidence we are on the right track.
“We have made great progress to date in our turnaround. In addition to refocusing our business on golf equipment and more performance-oriented products, leveraging our strengths in research and development, and changing our approach to sales and marketing, we have also retired all of our preferred stock, increased our presence on Tour, and completed the transition of our golf ball and golf club manufacturing platforms.
“The progress we made continued through the fourth quarter with improvements in sales, gross margins, and operating expenses. We believe that this continued progress and the initial positive trade reception to our 2014 product line position us for a good start to the new golf season and a return to creating shareholder value in 2014.”
The company achieved these financial results despite a late start to the golf season in the Americas and Europe due to weather, adverse changes in foreign currency rates, and a significantly reduced base business resulting from the 2012 sale of the Top-Flite and Ben Hogan Brands and the transition to a licensing arrangement for apparel and footwear in North America.
As compared to 2012, the sale of these brands and licensing arrangements negatively impacted 2013 sales by approximately US$57 million for the full year (approximately US$4 million for the fourth quarter). In addition, as compared to 2012, changes in foreign currency rates negatively affected 2013 net sales by approximately US$40 million for the full year (approximately US$8 million for the fourth quarter).
Unfortunately, said Callaway, these factors mask the strength of the company’s improved performance of its current business. For example, compared to 2012, on a constant currency basis, the company’s current business, which excludes the sold or licensed brands and businesses, actually achieved 14% sales growth for the full year of 2013 (17% sales growth for the fourth quarter of 2013). Overall, these results reflect not only the continued success of the company’s turnaround plan but also the increased hard goods market share and brand momentum the company experienced in 2013.
**Callaway Golf is a Charter Member of the Asian Golf Industry Federation. For further information about the company, please visit www.callawaygolf.com/