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Callaway Quarter

The Top-Flite and Ben Hogan brands continue to drain parent Callaway Golf Company (NYSE). The Carlsbad, Calif., equipment company said it expects a third quarter loss of 17 cents to 19 cents per share, with sales to range from $193 million to $195 million. Callaway will release its official third quarter results Nov. 1.

For the third quarter of 2005, Callaway reported sales of $221 million, with a loss of seven cents per share.

“Over the first nine months of this year, sales of these products have increased seven percent adding to the double digit growth experienced in 2005,’’ said Callaway Golf Chief Executive Officer George Fellows. “Sales of the Top-Flite and Hogan products, however, have not performed to expectations and have offset the gains in our core brands. We are in the process of restoring these brands, targeting a formal re-launch of Top-Flite in 2007.”

Fellows said Callaway Golf’s “two-staged approach’’ to its business is well underway.

“The first stage, which targeted a gross reduction of operating expenses of $50 to $60 million in the first year, or $25 to $30 million net of reinvestment, has been more successful than initially expected,’’ Fellows said. “In fact, over the last twelve months we have realized approximately $44 million in savings net of reinvestment.’’

The second stage, Fellows said, will target gross margins, which have been at “unacceptable levels’’ in recent years.

“This margin performance was further impacted this year by some additional factors related to the Top-Flite business, including an inventory reduction initiative of older Top-Flite products in preparation for the re-launch of the Top-Flite brand,’’ Fellows said. “We recognize the importance of improving gross margins as it relates to our overall profitability, and have already begun implementing initiatives which are expected to significantly improve gross margins in 2007 and beyond.’’


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