2001: Callaway Golf earnings take 39 percent hit

Wednesday, November 30, 2011

Callaway Golf Co. July 25 announced a 13 percent decline in sales and a 39 percent drop in net income for the second quarter, blaming several factors, including a volatile California energy market, slow sales in some international markets and an unfavorable currency market.

Weakness in the U.S. market also affected results, as domestic sales decreased 10 percent.

For the three months ending June 30, the Carlsbad, Calif.-based equipment company posted sales of $253.7 million, compared with $289.9 million during the same period a year ago. Net income fell to $27 million from $44.2 million in the second quarter of 2000.

However, excluding an energy supply contract charge, Callaway’s net income fell 25 percent to $33.2 million. In the second quarter, the club and ball maker entered into a long-term energy supply contract to manage its electricity costs in light of an uncertain California energy market.

Callaway reported that selling and tour expenses for the second quarter were $54.1 million, compared with $48 million in 2000. The increase was attributed to higher marketing costs related to new product launches, additional advertising, the rollout of new, computer-aided fitting cart systems and the company’s “store-in-store” retail display project.

“While our international business remains solid, our consolidated results were negatively impacted by the strong U.S. dollar relative to other currencies,” said Ron Drapeau, Callaway’s president and chief executive. “When measured in constant dollars, our first half net income increased 25 percent from last year.”

With its strong first-quarter results, Callaway managed to post record sales for the first six months of the year of $515 million, up 6 percent from $487.3 million during the same period in 2000. Net income, meanwhile, increased 9 percent to $61.1 million from $56.3 million in the same period a year ago. Excluding the energy supply contract charge, Callaway’s net income for the first six months increased 20 percent to $67.3 million.

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