Market Overview

Callaway Golf Company Announces Record Net Sales And Earnings For The Second Quarter And First Half Of 2018 And Increases Full Year Financial Guidance

Share:

Callaway Golf Company Announces Record Net Sales And Earnings For The Second Quarter And First Half Of 2018 And Increases Full Year Financial Guidance

- Second quarter 2018 net sales of $396 million, a $91 million (30%) increase compared to the second quarter of 2017.

- Second quarter 2018 earnings per share of $0.63, a $0.30 per share (91%) increase compared to the second quarter of 2017.

- Full year 2018 net sales guidance increased to $1,210 - $1,225 million, compared to prior guidance of $1,170 - $1,185 million.

- Full year 2018 earnings per share guidance increased to $0.95 - $1.00, compared to prior guidance of $0.77 - $0.82.

PR Newswire

CARLSBAD, Calif., Aug. 2, 2018 /PRNewswire/ -- Callaway Golf Company (NYSE:ELY) announced today record sales and earnings for the second quarter and first half of 2018 and increased its full year 2018 sales and earnings guidance.

In the second quarter of 2018, as compared to the same period in 2017, the Company's net sales increased $91 million (30%) to $396 million, and earnings per share increased $0.30 (91%) to $0.63.  These record financial results were driven by increased sales in all operating segments, all major product categories and all major regions. For the second quarter of 2018, compared to the second quarter of 2017, net sales increased as follows:

Woods

+   5.2%


U.S.

+ 38.7%

Irons

+ 35.0%


Europe

+   8.0%

Putters

+ 12.4%


Japan

+ 24.5%

Golf Balls

+ 35.1%


Rest of Asia

+ 36.5%

Gear & Other

+ 64.1%


Other

+ 12.4%

As a result of the Company's better than expected first half, the Company increased its full year 2018 sales guidance to $1,210 million - $1,225 million as compared to its prior guidance of $1,170 million - $1,185 million. The Company also increased its full year 2018 earnings per share guidance to $0.95 - $1.00 compared to prior guidance of $0.77 - $0.82.

"The excellent start in Q1 has continued through Q2," commented Chip Brewer, President and Chief Executive Officer of Callaway Golf Company. "Business around the globe remains strong with all major regions reporting significant sales growth and our new businesses, particularly TravisMathew, performing at or above plan.  On the product side, we have strength across the entire line, especially with the Rogue line of woods and irons as well as the new Chrome Soft golf balls.  We also continued to benefit from favorable market conditions. As a result, our EBITDA increased 62% during the second quarter compared to the prior year.  I continue to be extremely pleased with our performance and our long term outlook."   

GAAP and Non-GAAP Results

In addition to the Company's results prepared in accordance with GAAP, the Company provided information on a non-GAAP basis. The purpose of this non-GAAP presentation is to provide additional information to investors regarding the underlying performance of the Company's business without non-recurring items. This non-GAAP information presents the Company's financial results for the second quarter and first half of 2017 excluding the non-recurring transaction and transition expenses related to the OGIO acquisition. The manner in which this non-GAAP information is derived is discussed in more detail toward the end of this release, and the Company has provided in the tables to this release a reconciliation of the non-GAAP information to the most directly comparable GAAP information. 

Summary of Second Quarter 2018 Financial Results

The Company announced the following GAAP and non-GAAP financial results for the second quarter of 2018 (in millions, except EPS):

 2018 RESULTS (GAAP) 


NON-GAAP PRESENTATION


Q2
2018

Q2

2017

Change


Q2 2018
GAAP

Q2 2017
non-GAAP

Change

Net Sales

$396

$305

$91


$396

$305

$91

Gross Profit/
% of Sales

$193

48.6%

$148

48.7%

$45

(10 b.p.)


$193

48.6%

$148

48.7%

$45

(10 b.p.)

Operating Expenses

$118

$99

$19


$118

$97

$21

Pre-Tax Income

$78

$48

$30


$78

$50

$28

Income Tax Provision

$17

$16

$1


$17

$17

$0

Net Income

$61

$31

$30


$61

$33

$28

EPS

$0.63

$0.33

$0.30


$0.63

$0.34

$0.29

 


Q2 2018

Q2 2017

Change

EBITDA

$85

$52

$33

For the second quarter of 2018, the Company's net sales increased $91 million (30%) to $396 million, compared to $305 million for the same period in 2017. Net sales increased in all operating segments and regions, and across all major product categories. The increase in net sales is attributable to the strength of the Company's 2018 product line and continued brand momentum, a $6 million favorable impact resulting from changes in foreign currency rates, an increase in product launches during the first half of the year and improved market conditions. In addition, second quarter net sales of gear and accessories increased significantly as a result of the Company's acquisition of TravisMathew in the third quarter of 2017.    

For the second quarter of 2018, the Company's gross margin decreased 10 basis points to 48.6% compared to 48.7% for the second quarter of 2017.  This slight decrease was impacted by higher product costs as more technology is incorporated into the new launches, but was partially offset by increases in average selling prices, the TravisMathew business, which is accretive to gross margins, and the net favorable translation impact of changes in foreign currency rates.

Operating expenses increased $19 million to $118 million in the second quarter of 2018 compared to $99 million for the same period in 2017. This increase is primarily due to the addition in 2018 of operating expenses from the TravisMathew business as well as some variable expenses associated with higher core business net sales. 

Second quarter 2018 earnings per share increased $0.30 (91%) to $0.63, which is a record second quarter for the Company, compared to $0.33 for the second quarter of 2017.  On a non-GAAP basis, 2017 second quarter earnings per share was $0.34, which excludes $0.01 per share related to the impact of the non-recurring OGIO transaction and transition expenses.  The increased earnings in 2018 reflect the increased sales in the core business, the addition of the TravisMathew business, operating expense leverage, favorable foreign currency rates and hedging activities and a lower tax rate due to the tax reform legislation enacted at the end of 2017. 

Summary of First Half 2018 Financial Results

The Company announced the following GAAP and non-GAAP financial results for the first half of 2018 (in millions, except EPS):

2018 RESULTS (GAAP)


NON-GAAP PRESENTATION


H1
2018

H1

2017

Change


H1 2018
GAAP

H1 2017
non-GAAP

Change

Net Sales

$800

$613

$187


$800

$613

$187

Gross Profit/
% of Sales

$393

49.2%

$296

48.2%

$97

100 b.p.


$393

49.2%

$296

48.2%

$97

100 b.p.

Operating Expenses

$233

$203

$30


$233

$196

$37

Pre-Tax Income

$158

$87

$71


$158

$93

$65

Income Tax Provision

$34

$29

$5


$34

$31

$3

Net Income

$124

$57

$67


$124

$61

$63

EPS

$1.28

$0.59

$0.69


$1.28

$0.64

$0.64

 


H1 2018

H1 2017

Change

EBITDA

$171

$96

$75

For the first half of 2018, the Company's net sales increased $187 million (30%) to $800 million, compared to $613 million for the same period in 2017. Net sales increased in all operating segments and all regions, and across all major product categories. The increase in net sales is attributable to the strength of the Company's 2018 product line and continued brand momentum, a $17 million favorable impact resulting from changes in foreign currency rates, an increase in product launches during the first half of 2018 versus 2017, and improved market conditions. In addition, first half net sales of gear and accessories increased significantly as a result of the Company's acquisition of TravisMathew in the third quarter of 2017.  For the first half of 2018, compared to the first half of 2017, net sales increased as follows:

Woods

+ 13.2%


U.S.

+ 35.2%

Irons

+ 46.0%


Europe

+ 11.4%

Putters

+ 18.3%


Japan

+ 36.6%

Golf Balls

+ 24.6%


Rest of Asia

+ 35.9%

Gear & Other

+ 48.9%


Other

+   9.9%

For the first half of 2018, the Company's gross margin increased 100 basis points to 49.2% compared to 48.2% for the first half of 2017.  This increase reflects an overall increase in average selling prices, the addition of the TravisMathew business, which is accretive to gross margins, and the net favorable translation impact of changes in foreign currency rates, partially offset by higher product costs as more technology is incorporated into the new launches.

Operating expenses increased $30 million to $233 million in the first half of 2018 compared to $203 million for the same period in 2017. This increase is primarily due to the addition in 2018 of operating expenses from the TravisMathew business as well as some variable expenses associated with higher core business net sales. 

First half 2018 earnings per share increased $0.69 (117%) to $1.28, which is a record first half for the Company, compared to $0.59 for the first half of 2017.  On a non-GAAP basis, 2017 first half earnings per share was $0.64, which excludes $0.05 per share related to the impact of the non-recurring OGIO transaction and transition expenses.  The increased earnings in 2018 reflect the increased sales in the core business, the addition of the TravisMathew business, operating expense leverage, favorable foreign currency rates and hedging activities and a lower tax rate due to the tax reform legislation enacted at the end of 2017. 

Business Outlook for 2018

Basis for 2017 Non-GAAP ResultsIn order to make the 2018 guidance more comparable to 2017, as discussed above, the Company has presented 2017 results on a non-GAAP basis by excluding from 2017 the non-recurring expenses related to the OGIO and TravisMathew acquisitions ($0.07 per share for the full year and $0.02 for the third quarter). Furthermore, the Company excluded from full year 2017 earnings per share certain non-cash, non-recurring tax adjustments ($0.04 per share).    

Full Year 2018

Given the Company's financial performance during the first half of 2018, the Company is increasing its full year 2018 financial guidance as follows:


Revised 2018

GAAP Estimate

Previous 2018

GAAP Estimate

2017

Non-GAAP
Results

Net Sales

$1,210 - $1,225 million

$1,170 - $1,185 million

$1,049 million

Gross Margins

46.8%

47.0%

46.0%

Operating Expenses

$445 million

$444 million

$393 million

Earnings Per Share

$0.95 - $1.00

$0.77 - $0.82

$0.53

The Company's revised 2018 net sales estimate of $1,210 million - $1,225 million represents an increase of $40 million over its prior estimate.  This would result in net sales growth of 15% - 17% in 2018 compared to 2017.  The estimated incremental sales growth versus previous estimates is expected to be driven by further increases in the core business (currently estimated at 8-10% full year sales growth compared to 2017, on a currency neutral basis), and increases in the TravisMathew business.  The increases in core business are expected to be driven by the Rogue line of woods and irons, the new Chrome Soft golf balls, including continued success of the Truvis golf balls, and healthy market conditions.  As a result of an overall strengthening of foreign currencies during the first half of 2018, the Company currently estimates that changes in foreign currency rates will positively impact 2018 full year net sales by approximately $14 million, a $5 million decrease from when the Company last gave guidance as the U.S. dollar strengthened during the second quarter of 2018.  

The Company currently estimates that its 2018 gross margin will decrease 20 basis points from the prior estimate. This decrease is expected to be driven in most part by a strengthening of the U.S. dollar.  

The Company estimates that its 2018 operating expenses will increase $1 million compared to prior estimates. Variable expenses related to higher sales are being mostly offset by a strengthening U.S. dollar.  The Company continues to realize operating expense leverage as the top line continues to expand. 

The Company increased its GAAP earnings per share guidance to $0.95 - $1.00 primarily due to the projected increase in net sales, operating expense leverage, and a lower estimated tax rate. The Company's 2018 earnings per share estimates currently assume a tax rate of approximately 21.5% and a base of 97 million shares.

The cadence of the Company's golf equipment launches in 2018 is skewed toward the first half of the year compared to 2017. As a result, all of the Company's projected sales and earnings growth for 2018 is expected to occur during the first half of the year. Consistent with the Company's expectations at the start of the year, the second half of the year is planned to decrease slightly compared to the same period in 2017.  For the full year the Company expects sales growth of 15% – 17% in 2018 compared to 2017.  

Third Quarter 2018

The Company currently estimates the following results for the third quarter of 2018 compared to 2017 non-GAAP results for the same period:


Q3 2018

GAAP Estimate

Q3 2017

Non-GAAP Results

Net Sales

$243 - $253 million

$244 million

Earnings Per Share

($0.03) - $0.01

$0.05

The Company expects flat to 4% sales growth in the third quarter of 2018 compared to the same period in 2017. This projection reflects no major product launches in the third quarter of 2018 versus the 2017 launch of the Company's EPIC Star Irons and Hybrids as well as the launch of the Odyssey Works Red & Black Putters.  The addition of the TravisMathew business will partially offset the negative launch timing, and foreign currencies are expected to be slightly negative in the quarter.

The Company's GAAP earnings per share for the third quarter of 2018 is estimated to decrease by $0.04 - $0.08 compared to $0.05 of non-GAAP earnings per share for the third quarter of 2017. GAAP earnings per share for the third quarter of 2017 was $0.03.  This projected decrease is due to launching fewer new products compared to the same period in 2017, while continuing to invest in the core and new businesses, and is partially offset by the favorable impact of the TravisMathew business.  The Company's 2018 third quarter earnings per share estimates assume approximately 97 million shares, which is consistent with the third quarter of 2017. 

Conference Call and Webcast

The Company will be holding a conference call at 2:00 p.m. PDT today to discuss the Company's financial results, outlook and business. The call will be broadcast live over the Internet and can be accessed at http://ir.callawaygolf.com/. To listen to the call, and to access the Company's presentation materials, please go to the website at least 15 minutes before the call to register and for instructions on how to access the broadcast. A replay of the conference call will be available approximately three hours after the call ends, and will remain available through 9:00 p.m. PDT on Thursday, August 9, 2018.  The replay may be accessed through the Internet at http://ir.callawaygolf.com/.

Non-GAAP Information

The GAAP results contained in this press release and the financial statement schedules attached to this press release have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP").  To supplement the GAAP results, the Company has provided certain non-GAAP financial information as follows:

Constant Currency Basis. The Company provided certain information regarding the Company's financial results or projected financial results on a "constant currency basis." This information estimates the impact of changes in foreign currency rates on the translation of the Company's current or projected future period financial results as compared to the applicable comparable period.  This impact is derived by taking the current or projected local currency results and translating them into U.S. Dollars based upon the foreign currency exchange rates for the applicable comparable period. It does not include any other effect of changes in foreign currency rates on the Company's results or business.  

Adjusted EBITDA.  The Company provides information about its results excluding interest, taxes, depreciation and amortization expenses, as well as non-recurring OGIO and TravisMathew transaction-related expenses.

Other Adjustments. The Company presents certain of its financial results (i) excluding the 2017 non-recurring OGIO and TravisMathew transaction-related expenses and (ii) excluding the 2017 non-cash, non-recurring tax adjustments.

In addition, the Company has included in the schedules to this release a reconciliation of certain non-GAAP information to the most directly comparable GAAP information.  The non-GAAP information presented in this release and related schedules should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP. The non-GAAP information may also be inconsistent with the manner in which similar measures are derived or used by other companies.  Management uses such non-GAAP information for financial and operational decision-making purposes and as a means to evaluate period-over-period comparisons and in forecasting the Company's business going forward. Management believes that the presentation of such non-GAAP information, when considered in conjunction with the most directly comparable GAAP information, provides additional useful comparative information for investors in their assessment of the underlying performance of the Company's business without regard to these items. The Company has provided reconciling information in the attached schedules.

Forward-Looking Statements

Statements used in this press release that relate to future plans, events, financial results, performance or prospects, including statements relating to the Company's estimated 2018 sales, gross margins, operating expenses, and earnings per share (or related tax rate and share count), future industry or market conditions, and the assumed benefits to be derived from investments in the Company's core business or the OGIO and TravisMathew acquisitions, are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements are based upon current information and expectations. Accurately estimating the forward-looking statements is based upon various risks and unknowns, including unanticipated delays, difficulties or increased costs in integrating the acquired OGIO and TravisMathew businesses or implementing the Company's growth strategy generally; any changes in U.S. trade, tax or other policies, including impacts of the 2017 Tax Cuts and Jobs Act or restrictions on imports or an increase in import tariffs; consumer acceptance of and demand for the Company's products; the level of promotional activity in the marketplace; unfavorable weather conditions; future consumer discretionary purchasing activity, which can be significantly adversely affected by unfavorable economic or market conditions; future retailer purchasing activity, which can be significantly negatively affected by adverse industry conditions and overall retail inventory levels; and future changes in foreign currency exchange rates and the degree of effectiveness of the Company's hedging programs. Actual results may differ materially from those estimated or anticipated as a result of these risks and unknowns or other risks and uncertainties, including continued compliance with the terms of the Company's credit facilities; delays, difficulties or increased costs in the supply of components or commodities needed to manufacture the Company's products or in manufacturing the Company's products; the ability to secure professional tour player endorsements at reasonable costs; any rule changes or other actions taken by the USGA or other golf association that could have an adverse impact upon demand or supply of the Company's products; a decrease in participation levels in golf; and the effect of terrorist activity, armed conflict, natural disasters or pandemic diseases on the economy generally, on the level of demand for the Company's products or on the Company's ability to manage its supply and delivery logistics in such an environment. For additional information concerning these and other risks and uncertainties that could affect these statements, the golf industry, and the Company's business, see the Company's Annual Report on Form 10-K for the year ended December 31, 2017 as well as other risks and uncertainties detailed from time to time in the Company's reports on Forms 10-K, 10-Q and 8-K subsequently filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

About Callaway Golf
Through an unwavering commitment to innovation, Callaway Golf Company (NYSE:ELY) creates products designed to make every golfer a better golfer. Callaway Golf Company manufactures and sells golf clubs and golf balls, and sells bags, accessories and apparel in the golf and lifestyle categories, under the Callaway Golf®, Odyssey®, OGIO and TravisMathew brands worldwide. For more information please visit www.callawaygolf.com, www.odysseygolf.com, www.OGIO.com, and www.travismathew.com.

Contacts:

Brian Lynch


Patrick Burke


(760) 931-1771

 

CALLAWAY GOLF COMPANY

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(In thousands)



June 30,
2018


December 31,
2017

ASSETS










Current assets:





Cash and cash equivalents

$

57,748




$

85,674


Accounts receivable, net

242,023




94,725


Inventories

237,068




262,486


Other current assets

32,960




23,099


Total current assets

569,799




465,984







Property, plant and equipment, net

77,604




70,227


Intangible assets, net

281,279




282,187


Deferred taxes, net

65,538




91,398


Investment in golf-related ventures

70,777




70,495


Other assets

10,425




10,866


Total assets

$

1,075,422




$

991,157







LIABILITIES AND SHAREHOLDERS' EQUITY










Current liabilities:





Accounts payable and accrued expenses

$

162,217




$

176,127


Accrued employee compensation and benefits

30,754




40,173


Asset-based credit facilities

96,140




87,755


Accrued warranty expense

8,035




6,657


Other current liabilities

2,389




2,367


Income tax liability

9,792




1,295


Total current liabilities

309,327




314,374







Long-term liabilities

16,359




17,408


Total Callaway Golf Company shareholders' equity

740,682




649,631


Non-controlling interest in consolidated entity

9,054




9,744


Total liabilities and shareholders' equity

$

1,075,422




$

991,157


 

CALLAWAY GOLF COMPANY

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)



Three Months Ended
June 30,


2018


2017

Net sales

$

396,311



$

304,548


Cost of sales

203,614



156,383


Gross profit

192,697



148,165


Operating expenses:




Selling

83,261



68,102


General and administrative

24,408



22,155


Research and development

10,708



8,863


Total operating expenses

118,377



99,120


Income from operations

74,320



49,045


Other income (expense), net

3,861



(1,521)


Income before income taxes

78,181



47,524


Income tax provision

17,247



16,050


Net income

60,934



31,474


Less: Net income attributable to non-controlling interest

67



31


Net income attributable to Callaway Golf Company

$

60,867



$

31,443






Earnings per common share:




Basic

$

0.65



$

0.33


Diluted

$

0.63



$

0.33


Weighted-average common shares outstanding:




Basic

94,367



94,213


Diluted

96,928



96,197







Six Months Ended
June 30,


2018


2017

Net sales

$

799,502



$

613,475


Cost of sales

406,343



317,595


Gross profit

393,159



295,880


Operating expenses:




Selling

166,221



139,864


General and administrative

46,302



45,019


Research and development

20,332



17,745


Total operating expenses

232,855



202,628


Income from operations

160,304



93,252


Other expense, net

(2,173)



(6,642)


Income before income taxes

158,131



86,610


Income tax provision

34,466



29,256


Net income

123,665



57,354


Less: Net income (loss) attributable to non-controlling interest

(57)



222


Net income attributable to Callaway Golf Company

$

123,722



$

57,132






Earnings per common share:




Basic

$1.31



$0.61


Diluted

$1.28



$0.59


Weighted-average common shares outstanding:




Basic

94,670



94,142


Diluted

96,981



96,073


 

CALLAWAY GOLF COMPANY

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW

(Unaudited)

(In thousands)



Six Months Ended
June 30, 2018


2018


2017

Cash flows from operating activities:




Net income

$

123,665



$

57,354


Adjustments to reconcile net income to net cash provided by operating activities:




   Depreciation and amortization

9,766



8,497


   Deferred taxes, net

30,273



33,028


   Non-cash share-based compensation

6,464



5,402


   (Gain)/loss on disposal of long-lived assets

(3)



1,035


   Unrealized (gains)/losses on foreign currency hedges

(1,021)



1,550


Changes in assets and liabilities

(164,057)



(80,542)


Net cash provided by operating activities

5,087



26,324






Cash flows from investing activities:




Capital expenditures

(17,107)



(12,186)


Investments in golf related ventures

(282)




Acquisitions, net of cash acquired



(57,890)


Proceeds from sales of property and equipment



560


Net cash used in investing activities

(17,389)



(69,516)






Cash flows from financing activities:




Proceeds from (repayments of) credit facilities, net

8,385



(5,735)


Repayments of long-term debt

(1,083)




Exercise of stock options

1,258



3,085


Dividends paid, net

(1,897)



(1,882)


Acquisition of treasury stock

(22,301)



(16,410)


Distributions to non-controlling interests

(821)



(974)


Net cash used in financing activities

(16,459)



(21,916)


Effect of exchange rate changes on cash and cash equivalents

835



1,092


Net decrease in cash and cash equivalents

(27,926)



(64,016)


Cash and cash equivalents at beginning of period

85,674



125,975


Cash and cash equivalents at end of period

$

57,748



$

61,959


 

CALLAWAY GOLF COMPANY

Consolidated Net Sales and Operating Segment Information

(Unaudited)

(In thousands)



Net Sales by Product Category


Net Sales by Product Category


Three Months Ended
June 30,


Growth


Non-GAAP

Constant

Currency

vs. 2017(1)


Six Months Ended
June 30,


Growth


Non-GAAP

Constant

Currency

vs. 2017(1)


2018


2017


Dollars


Percent


Percent


2018


2017


Dollars


Percent


Percent

Net sales:




















Woods

$

93,958



$

89,276



$

4,682



5.2%


3.4%


$

222,760



$

196,851



$

25,909



13.2%


10.5%

Irons

111,059



82,285



28,774



35.0%


32.9%


206,268



141,296



64,972



46.0%


43.1%

Putters

27,785



24,730



3,055



12.4%


10.2%


61,215



51,735



9,480



18.3%


14.7%

Golf balls

65,882



48,767



17,115



35.1%


33.4%


120,804



96,991



23,813



24.6%


22.5%

Gear/Accessories/Other

97,627



59,490



38,137



64.1%


62.1%


188,455



126,602



61,853



48.9%


46.0%


$

396,311



$

304,548



$

91,763



30.1%


28.2%


$

799,502



$

613,475



$

186,027



30.3%


27.6%

(1) Calculated by applying 2017 exchange rates to 2018 reported sales in regions outside the U.S.






















Net Sales by Region


Net Sales by Region


Three Months Ended
June 30,


Growth


Non-GAAP

Constant

Currency

vs. 2017(1)


Six Months Ended
June 30,


Growth


Non-GAAP

Constant

Currency

vs. 2017(1)


2018


2017(2)


Dollars


Percent


Percent


2018


2017(2)


Dollars


Percent


Percent

Net Sales




















United States

$

233,373



$

168,253



$

65,120



38.7%


38.7%


$

468,534



$

346,517



$

122,017



35.2%


35.2%

Europe

46,325



42,912



3,413



8.0%


1.7%


97,527



87,529



9,998



11.4%


2.1%

Japan

59,666



47,908



11,758



24.5%


22.2%


128,941



94,410



34,531



36.6%


31.9%

Rest of Asia

33,059



24,216



8,843



36.5%


30.9%


57,834



42,569



15,265



35.9%


29.4%

Other foreign countries

23,888



21,259



2,629



12.4%


9.2%


46,666



42,450



4,216



9.9%


6.6%


$

396,311



$

304,548



$

91,763



30.1%


28.2%


$

799,502



$

613,475



$

186,027



30.3%


27.6%





















(1) Calculated by applying 2017 exchange rates to 2018 reported sales in regions outside the U.S.

(2) Prior period amounts have been reclassified to conform to the current year presentation of regional sales related to OGIO-branded products.






















Operating Segment Information




Operating Segment Information




Three Months Ended
June 30,


Growth




Six Months Ended
June 30,


Growth




2018


2017


Dollars


Percent




2018


2017


Dollars


Percent



Net Sales




















Golf Club

$

232,802



$

196,291



$

36,511



18.6%




$

490,243



$

389,882



$

100,361



25.7%



Golf Ball

65,882



48,767



17,115



35.1%




120,804



96,991



23,813



24.6%



Gear/Accessories/Other

97,627



59,490



38,137



64.1%




188,455



126,602



61,853



48.9%




$

396,311



$

304,548



$

91,763



30.1%




$

799,502



$

613,475



$

186,027



30.3%























Income (loss) before income taxes:



















Golf clubs

$

50,751



$

38,445



$

12,306



32.0%




$

117,338



$

73,398



$

43,940



59.9%



Golf balls

13,288



10,939



2,349



21.5%




25,813



22,460



3,353



14.9%



Gear/Accessories/Other

24,069



11,877



12,192



102.7%




44,406



21,496



22,910



106.6%



Reconciling items(1)

(9,927)



(13,737)



3,810



-27.7%




(29,426)



(30,744)



1,318



4.3%




$

78,181



$

47,524



$

30,657



64.5%




$

158,131



$

86,610



$

71,521



82.6%























(1) Represents corporate general and administrative expenses and other income (expense) not utilized by management in determining segment profitability.

 

CALLAWAY GOLF COMPANY

Supplemental Financial Information and Non-GAAP Reconciliation

(Unaudited)

(In thousands)



Three Months Ended June 30,


2018


2017


As
Reported


As
Reported


Acquisition
Costs(1)


Non-
GAAP

Net sales

$

396,311



$

304,548



$



$

304,548


Gross profit

192,697



148,165





148,165


% of sales

48.6

%


48.7

%




48.7

%

Operating expenses

118,377



99,120



2,254



96,866


Income (loss) from operations

74,320



49,045



(2,254)



51,299


Other income (expense), net

3,861



(1,521)





(1,521)


Income (loss) before income taxes

78,181



47,524



(2,254)



49,778


Income tax provision (benefit)

17,247



16,050



(761)



16,811


Net income (loss)

60,934



31,474



(1,493)



32,967


Less: Net income attributable to non-controlling interest

67



31





31


Net income (loss) attributable to Callaway Golf Company

$

60,867



$

31,443



$

(1,493)



$

32,936










Diluted earnings (loss) per share:

$

0.63



$

0.33



$

(0.01)



$

0.34


Weighted-average shares outstanding:

96,928



96,197



96,197



96,197



(1) Represents non-recurring costs associated with the acquisition of Ogio International, Inc in January 2017.

 

CALLAWAY GOLF COMPANY

Non-GAAP Reconciliation and Supplemental Financial Information

(Unaudited)

(In thousands)



Six Months Ended June 30,


2018


2017


As
Reported


As
Reported


Ogio
Acquisition
Costs(1)


Non-GAAP

Net sales

$

799,502



$

613,475



$



$

613,475


Gross profit

393,159



295,880





295,880


% of sales

49.2

%


48.2

%




48.2

%

Operating expenses

232,855



202,628



6,210



196,418


Income (loss) from operations

160,304



93,252



(6,210)



99,462


Other expense, net

(2,173)



(6,642)





(6,642)


Income (loss) before income taxes

158,131



86,610



(6,210)



92,820


Income tax provision (benefit)

34,466



29,256



(2,098)



31,354


Net income (loss)

123,665



57,354



(4,112)



61,466


Less: Net income (loss) attributable to non-controlling interest

(57)



222





222


Net income (loss) attributable to Callaway Golf Company

$

123,722



$

57,132



$

(4,112)



$

61,244










Diluted earnings (loss) per share:

$

1.28



$

0.59



$

(0.05)



$

0.64


Weighted-average shares outstanding:

96,981



96,073



96,073



96,073



(1) Represents non-recurring costs associated with the acquisition of Ogio International, Inc. in January 2017.

 






















2018 Trailing Twelve Month Adjusted EBITDA


2017 Trailing Twelve Month Adjusted EBITDA


Quarter Ended


Quarter Ended


September 30,


December 31,


March 31,


June 30,




September 30,


December 31,


March 31,


June 30,




2017


2017


2018


2018


Total


2016


2016


2017


2017


Total

Net income (loss)

$

3,060



$

(19,386)



$

62,855



$

60,867



$

107,396



$

(5,866)



$

123,271



$

25,689



$

31,443



$

174,537


Interest expense, net

642



2,004



1,528



1,661



5,835



431



348



715



550



2,044


Income tax provision (benefit)

1,486



(4,354)



17,219



17,247



31,598



1,294



(137,193)



13,206



16,050



(106,643)


Depreciation and amortization expense

4,309



4,799



4,737



5,029



18,874



4,204



4,045



4,319



4,178



16,746


EBITDA

$

9,497



$

(16,937)



$

86,339



$

84,804



$

163,703



$

63



$

(9,529)



$

43,929



$

52,221



$

86,684


Ogio & TravisMathew acquisition costs

3,377



1,677







5,054







3,956



2,254



6,210


Adjusted EBITDA

$

12,874



$

(15,260)



$

86,339



$

84,804



$

168,757



$

63



$

(9,529)



$

47,885



$

54,475



$

92,894


 

CALLAWAY GOLF COMPANY

Reconciliation of Non-GAAP Third Quarter and Full Year 2017 Results

(Unaudited)

(In thousands)



Three Months Ended September 30, 2017


Total As
Reported


Acquisition
Costs(1)


Non-GAAP

Net sales

$

243,604



$



$

243,604


Gross profit

104,902



(798)



105,700


% of sales

43.1

%




43.4

%

Operating expenses

98,865



2,579



96,286


Income (loss) from operations

6,037



(3,377)



9,414


Other expense, net

(1,462)





(1,462)


Income (loss) before income taxes

4,575



(3,377)



7,952


Income tax provision (benefit)

1,486



(1,134)



2,620


Net income (loss)

3,089



(2,243)



5,332


Less: Net income attributable to non-controlling interest

29





29


Net income (loss) attributable to Callaway Golf Company

$

3,060



$

(2,243)



$

5,303








Diluted earnings (loss) per share:

$

0.03



$

(0.02)



$

0.05


Weighted-average shares outstanding:

96,879



96,879



96,879



(1)  Represents non-recurring costs associated with the acquisitions of Ogio International, Inc. in January 2017, and TravisMathew, LLC in August 2017.

 


Year Ended December 31, 2017


Total As
Reported


Acquisition
Costs(1)


Non-Cash
Tax
Adjustment(2)


Non-GAAP

Net sales

$

1,048,736



$



$



$

1,048,736


Gross profit

480,448



(2,439)





482,887


% of sales

45.8

%






46.0

%

Operating expenses

401,611



8,825





392,786


Income (loss) from operations

78,837



(11,264)





90,101


Other expense, net

(10,782)







(10,782)


Income (loss) before income taxes

68,055



(11,264)





79,319


Income tax provision (benefit)

26,388



(4,118)



3,394



27,112


Net income (loss)

41,667



(7,146)



(3,394)



52,207


Less: Net income attributable to non-controlling interest

861







861


Net income (loss) attributable to Callaway Golf Company

$

40,806



$

(7,146)



$

(3,394)



$

51,346










Diluted earnings (loss) per share:

$0.42



($0.07)



($0.04)



$

0.53


Weighted-average shares outstanding:

96,577



96,577



96,577



96,577



(1)  Represents non-recurring costs associated with the acquisitions of Ogio International, Inc. in January 2017, and TravisMathew, LLC in August 2017.

(2)  Represents approximately $7.5 million of non-recurring income tax expense resulting from the 2017 Tax Cuts and Jobs Act, partially offset by a non-recurring benefit of approximately $4.1 million related to the revaluation of taxes on intercompany transactions, resulting from the 2016 release of the valuation allowance against the Company's U.S. deferred tax assets.

 

Callaway Golf Company Logo. (PRNewsFoto/Callaway Golf Company) (PRNewsfoto/Callaway Golf Company)

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/callaway-golf-company-announces-record-net-sales-and-earnings-for-the-second-quarter-and-first-half-of-2018-and-increases-full-year-financial-guidance-300691366.html

SOURCE Callaway Golf Company

View Comments and Join the Discussion!