New York, United States: Asian Golf Industry Federation Charter Member Callaway Golf Company has announced its first quarter 2014 financial results, including a 22% increase in sales driven by double digit growth in woods (+33%), irons (+29%), and golf balls (+24%).
Additionally, income from operations increased 54% to US$62 million and fully diluted earnings per share increased 30% to US$0.61, both driven by the increased sales and improvements in gross margins of 160 basis points, which more than offset an increase of US$13 million in operating expenses and a US$9 million decrease in other income.
“We are pleased with our results for the first quarter,” said Chip Brewer, President and Chief Executive Officer. “These results reflect our continued brand momentum and the success of the first stage of our multi-year turnaround plan.
“In particular, our renewed focus on more consumer-oriented products has resulted in double digit sales increases in our woods, irons and golf ball product categories, resulting in a 22% increase in net sales for the quarter and market share gains in each of our key markets around the world.
“As evidenced by our recent results, we are now clearly seeing the benefits of the many changes we have made at the Company as part of our turnaround plan.
“We believe that our turnaround plan is firmly on track and that we are laying the proper foundation for a sustained recovery over the long-term. With that said, in the short term, we are anticipating very challenging market conditions for the second quarter and possibly the balance of the year.
“The golf market has been slow to open in many regions where we conduct business, including our largest region, the United States, which continues to have unfavourable weather in many parts of the country. In addition, overall retail inventory levels are high and we anticipate a heavy promotional environment while the industry works through the excess inventory.
“We are maintaining our full year guidance, but if the golf market does not open shortly or the promotional activity is heavier than we anticipate, we would expect to be at the low end of our earnings guidance.”
The 2014 results benefitted from a US$4 million decrease in pre-tax charges related to the cost reduction initiatives that were completed in 2013. The Company was able to achieve these significantly improved financial results despite adverse changes in foreign currency rates, which negatively impacted 2014 sales by US$6 million, a US$9 million decrease in other income/expense resulting primarily from adverse changes in foreign currency contract values, and a US$4 million increase in stock compensation expense as a result of increases in the Company’s stock price.
The Company’s net sales for the first quarter of 2014 increased to US$352 million or up 22%, as compared to US$288 million for the same period in 2013.