Callaway Golf Company Announces Cost-Reduction Initiatives, Including 12% Reduction in Workforce
Callaway Golf Company (NYSE: ELY) announced Wednesday the implementation of cost-reduction initiatives that are expected to generate approximately $52 million in gross annualized savings. The comprehensive action, which includes a 12% reduction in workforce that impacted all regions and all levels of the organization, supports the Company's plans to streamline operations and sharpen the focus placed on the core product lines of the Callaway and Odyssey brands. Estimated costs over the next twelve months associated with these actions are $40 million, over half of which are expected to be non-cash charges. The announcement was made by Chip Brewer, President and Chief Executive Officer of Callaway, who also provided preliminary second quarter and first-half results for 2012, as well as guidance on the balance of the year.
"As I mentioned last quarter, the Company's business has not recovered at a satisfactory pace and we are taking actions to accelerate the recovery," commented Mr. Brewer. "The cost reduction initiatives we announced today are part of those actions and are consistent with the significant changes we are making in streamlining and simplifying our organization and in how we approach and operate our business. These changes, however, will have a greater impact on our financial results in 2013 and 2014 than on 2012. As a result, and given the slower than anticipated pace of recovery, we no longer expect that 2012 full year financial results will be significantly better than last year. At this point, we expect for full year 2012 a pro forma loss per share of $0.55-$0.75."
Based on current information, the Company estimates net sales for the second quarter ended June 30, 2012 of $280 million, an increase of 3% compared to the second quarter of 2011. Pro forma earnings per share for the second quarter of 2012 is estimated at $0.05 per share (on 65.1 million shares), as compared to a pro forma loss of $0.01 per share (on 64.4 million shares) for the same period in 2011. GAAP earnings per share for the second quarter of 2012 is estimated at breakeven (on 65.1 million shares) compared to a loss of $1.03 per share (on 64.4 million shares) in 2011, which included a $0.87 per share charge related to the establishment of a deferred tax valuation allowance. First half 2012 net sales are estimated at $565 million, a 1% increase compared to the same period in 2011. Pro forma earnings per share for the first half of 2012 is estimated at $0.25 per share (on 85.0 million shares), as compared to $0.15 per share (on 64.4 million shares) for the same period in 2011. GAAP earnings per share for the first half of 2012 is estimated at $0.41 per share (on 85.0 million shares), compared to a loss of $0.87 per share (on 64.4 million shares) in 2011, which included a $0.86 per share charge related to the deferred tax valuation allowance.
"I am pleased with the progress on the changes we are making to our business," continued Mr. Brewer. "In the last few months, we have sold the Top-Flite and Ben Hogan brands, licensed our North American apparel business, licensed our footwear business to our current footwear partner, and have made significant changes in senior management, including new hires to oversee our global marketing and global operations organizations. Furthermore, the actions we are announcing today will better align our cost structure with our current business and the changes we are making to our sales and marketing strategy will position us for sales growth in 2013 and beyond. Lastly, I am very excited by the consumer-oriented changes we have made to our 2013 product line and look forward to providing more information about those new products later in the year. There is certainly more work to be done, but I am very pleased with the progress we have made in just the past few months and am excited by the potential opportunities I see for the Company's turnaround. We will provide additional details on these actions and our financial results during our upcoming earnings conference call."
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