2004: Metalwood rebound powers Callaway results

Callaway Golf Co. reported a sharp increase in metalwood sales during the first quarter as the company took additional steps to integrate the Top-Flite Golf Co., which Callaway acquired in a bankruptcy auction seven months ago.

For the three months ended March 31, Callaway reported total sales of $363.8 million compared with $271.7 million a year ago, prior to acquiring Top-Flite. Sales of the Callaway and Odyssey brands accounted for $297.3 million, while the Top-Flite unit contributed $66.5 million to the top line.

The company’s operating income was $69.1 million, or $64 million after $5.1 million in Top-Flite integration charges. Net income was $44 million, or $41 million including charges.

While Callaway and Odyssey sales rose 9 percent in the quarter, that increase was largely attributable to the metalwood category, indicating the company is addressing the sharp decline in that portion of its business over the past two years. Metalwood sales rose 33 percent to $124 million, driven by sales of new products such as the $500 ERC Fusion driver and $250 Big Bertha driver. Callaway also has sought to win back exposure on the professional tours, which was reflected in increased marketing costs of about $8 million for the Callaway brand.

“We’re on track to regaining our woods share,” said Ron Drapeau, Callaway’s chairman and chief executive.

The company also showed signs that it is fixing the problems in its ball business. Callaway-branded balls posted a $1 million operating profit, reversing a $5 million loss a year ago. Total ball sales for the Callaway and Top-Flite brands were $72 million in the quarter. Callaway has shifted its two-piece ball business to Top-Flite’s facility in Chicopee, Mass., and it is in the process of moving its three-piece ball business there.

Iron sales declined 4 percent to $96 million, and putter sales, which have more than doubled over the past two years, finally began to cool off, falling 18 percent to $37 million. Top-Flite contributed $12 million of the iron sales and $2 million of the putter sales.

Callaway began producing range balls for Nike Golf in the first quarter, and Drapeau left no doubt that he would like to expand that relationship.

“If we do a good job, we’ll be able to bid against their other suppliers for the rest of their business. . .” Drapeau said. “I would hope that they’d come back to bid some other products quickly.”

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