Callaway Golf: Announces Preliminary Results For Second Quarter 2011; Revenues $270M vs. $309.5M Est
Callaway Golf announced that, for the second quarter of 2011, it expects revenues to be approximately $270 million.
The Company expects a net loss of approximately $55 million for the second quarter, including $48 million of noncash charges. These noncash charges include a valuation allowance of approximately $46 million related to the Company's U.S. deferred tax assets. The Company's U.S. business, which has been adversely affected by the recent economic downturn and continued investment in the final phase of the Company's global operations strategy, has not yet returned to profitability. As a result, U.S. accounting rules require that the Company establish the valuation allowance. The Company expects to be able to reverse the allowance in future periods as the Company's U.S. business returns to profitability. The net loss for the quarter also includes charges of approximately $8 million related to the organizational changes and approximately $4 million related to the Company's global operations strategy.
As part of its reorganization, the Company expects to reduce headcount at all levels of the organization. The Company said it expects its organizational changes and reevaluation of business processes and priorities to deliver annualized pre-tax savings of approximately $50 million, a portion of which will benefit 2011. Pre-tax charges associated with these actions, including severance expenses, are currently estimated to be approximately $20 million for 2011, including the $8 million recognized in the second quarter.
"While it is clear that it was the global economic recession that derailed our record sales and earnings pace, it is also clear that our business is not keeping pace with the industry recovery," said Mr. Thornley. "It is therefore necessary for the company to take immediate and aggressive actions to reduce costs in order to return the Company to profitability as quickly as possible. We will also focus our efforts on strengthening our Brands by reinvesting a portion of the cost savings in key marketing initiatives. While we have the best performing products in the industry, that message has sometimes been overshadowed by the sheer volume of competitive marketing. In addition, the actions we are announcing today will also result in a leaner organization that is better able to respond to changing market conditions. We will provide more details about the reorganization during our earnings call in late July."
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