CARLSBAD, Calif., April 27, 2020 /PRNewswire/ -- Callaway Golf
Company (the "Company") (NYSE:ELY) announced today preliminary
financial results for the quarter ended March 31, 2020 and provided additional commentary
on the Company's performance amid the COVID-19 pandemic.
"Through early March, we were pleased that our business
continued to deliver strong results and was on track for record net
sales for 2020, continuing our trend of delivering successive
record results in each of the last three years," commented
Chip Brewer, President and Chief
Executive Officer of Callaway Golf Company. "Notably,
Japan and Korea delivered
year-over-year growth in the first quarter of 2020 despite
challenges from COVID-19. Additionally, our golf equipment
market shares remained strong in all of our major markets.
Through March, we held the #1 share position in the U.S. for total
Hardgoods as well as for total Golf Clubs, and in Europe we held the #1 position in Hardgoods
through February, which is the last month for which data is
available. We believe we gained share in both Europe and Asia while ceding some share in the U.S.
primarily due to launch timing."
Mr. Brewer continued, "In March, global regulatory responses
implementing social distancing and shelter-in-place orders
significantly slowed retail sales and created various business
operations challenges worldwide which significantly affected our
first quarter financial results after a great start. Although
we still delivered a profitable quarter, given the uncertain
duration of the impact, the Company has been focused on
significantly reducing costs and enhancing liquidity to ensure we
are well-positioned to navigate through a protracted downturn. Our
thoughts and prayers go out to all those globally who are affected
by the virus and our sincerest gratitude goes out to all those
working diligently to stop the virus or care for those affected by
the virus."
Preliminary Summary of First Quarter 2020 Financial
Results
The results in this section reflect preliminary expectations
of financial results for the quarter ended March 31, 2020, and
have been prepared in good faith on a consistent basis with prior
periods. The Company and its auditors have not completed
their financial closing and review procedures and actual results
are therefore subject to change. Additional information concerning
the preparation of these preliminary estimates is set forth toward
the end of this release.
In addition, the manner in which the non-GAAP EBITDAS
information is derived is discussed further towards 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.
Based on currently available information, the Company estimates
the following results for the quarter ended March 31,
2020:
|
2020
Estimate
|
2019
Results
|
Net Sales
|
$438 - $443
million
|
$516
million
|
Earnings Per
Share
|
$0.27 -
$0.31
|
$0.50
|
EBITDAS*
|
$55 - $59
million
|
$79
million
|
|
*Earnings before
Interest, Taxes, Depreciation and Amortization Expense, and Stock
Compensation Expense
|
The Company expects to report consolidated net sales in the
range of $438 million - $443 million for the first quarter of 2020,
compared to $516 million for the same
period in 2019. This decrease is attributable to the impact
of COVID-19 on the Company's golf equipment business and soft goods
business. Foreign currencies negatively impacted net sales by
approximately $4 million in the first
quarter of 2020 compared to the same period in 2019. The
Company expects to report first quarter 2020 GAAP EPS in the range
of $0.27 - $0.31 compared to first quarter 2019 GAAP EPS of
$0.50. The Company expects to
report cash and cash equivalents of approximately $167 million and net debt of approximately
$631 million as of March 31, 2020.
Response to COVID-19
The Company previously reported that due to the COVID-19
pandemic the Company was taking actions to significantly reduce
costs, maximize liquidity and protect its employees. The Company
continues to take such actions and strengthen its operating and
financial position during this prolonged disruption. This
includes:
- Achieved an almost 20% reduction in planned operating expenses
and capital expenditures through efforts to reduce discretionary
spending and infrastructure costs on a worldwide basis, including
voluntary reductions in compensation by the Board of Directors, the
CEO and Senior Management.
- Implemented other programs to maximize cash and liquidity,
including proactive inventory reduction programs and a suspension
of the Company's open market stock repurchase program.
- As of March 31, 2020, the Company
had over $250 million in cash and
availability under its credit facilities. While the Company
believes its cash and credit facilities are adequate to sustain its
business through this crisis, the Company continues to consider
other available sources of capital as market conditions and
programs present themselves. As previously reported, during the
first quarter of 2020 the Company added $40
million of loan commitments and the Company is in the
process of amending its credit facilities to increase its
flexibility to opportunistically take advantage of other available
sources of capital, including capital markets and government
sponsored programs for which the Company may qualify in
the United States and
internationally.
- The safety and health of the Company's employees, customers and
partners has remained paramount. Using guidelines promulgated by
health organizations around the world, the Company has implemented
preventive measures to help protect its constituents, including
restricting travel, visitors, and meetings and implementing
work-from-home programs. A majority of the Company's employees in
the United States and Europe, including its corporate offices in
California, are currently working
from home. The Company has established a global leadership
taskforce that meets on a weekly basis to develop protocols to
protect its employees now and as it transitions back to normal
operations, including protocols for social distancing, in-office
safety precautions and reporting procedures.
Business Outlook
"Although the full impact of the COVID-19 outbreak on society,
the economy, and our businesses remains unclear, we are confident
that our principal businesses (golf equipment, golf apparel and
accessories as well as outdoor apparel and accessories) position us
well for a world of social distancing and a 'new normal,'"
commented Mr. Brewer. "The joy of being outdoors, whether
hiking, camping or simply taking a walk in nature, has never been
more evident and is both logically and emotionally appealing today
more than ever. At the same time, we expect the sport of golf to
come back quickly as it is commonly viewed as a relatively safe and
healthy outdoor activity that one can enjoy while still observing
social distancing guidelines. This theory is supported by
high usage rates of many golf courses that are open in North America as well as the reported usage
rates as markets opened up post COVID-19 outbreaks in both Korea
and China. It is also supported by third party National Golf
Foundation research which indicates a pent-up desire to play the
game. Furthermore, while many portions of our business are
currently operating on a limited basis due to various government
orders, which will significantly impact our second quarter
financial results, we are starting to see some signs of recovery,
particularly in the regions that were first affected by COVID-19
and are in the process of recovering."
The Company also announced that:
- E-commerce (both in the Company's soft goods and golf equipment
businesses) has been exceeding expectations globally and is
partially offsetting the decline in wholesale and retail.
- Due to the early impact from COVID-19, the Company's golf and
apparel businesses in China were
down significantly at the beginning of the year but both have
rebounded well, exceeding the Company's expectations in April, with
golf rebounding particularly strongly in-country.
- Overall, the business is seeing core resilience across
Asia, especially in Korea. As a
result, the Company expects sales in that region will be a strong
net contributor for the full year. Even with the severe disruptions
associated with COVID-19 in the first quarter, the Company's
business in both Japan and Korea
delivered revenue growth in the first quarter and is continuing to
perform well in April.
- Recent steps to relax social distancing regulations in
Germany and the DACH region are
encouraging given Jack Wolfskin's business has a significant
portion of sales in this region relative to broader Europe.
- In the United States, the
National Golf Foundation estimates that approximately half of U.S.
golf courses are open currently. Trends indicate continued opening
of courses as golf is commonly viewed as a safe and healthy outdoor
activity. The Company is also starting to see some golf retail
activity phase back in as state and county governments allow
courses to open.
"As we move forward, we remain committed to maintaining our
disciplined approach to managing capital and expenses in this
uncertain environment, while continuing to make sure we are
structured and positioned appropriately in our 'new normal.' The
strength of our brands, geographic diversity and the strong
operational steps we've taken to date affirm the ability of
Callaway to navigate through this crisis," concluded Mr.
Brewer.
The Company previously reported that due to COVID-19 the Company
was no longer providing financial guidance at this time. The
Company expects to provide a further update on its business and
market conditions at its first quarter earnings call in May.
Preliminary Financial Estimates
The preliminary estimates presented above are the responsibility
of management and have been prepared in good faith on a consistent
basis with prior periods. However, the Company has not completed
its financial closing procedures for the three months ended
March 31, 2020, and its actual results could vary materially
from these preliminary estimates. In addition, the Company's
independent registered public accounting firm has not audited this
information or completed its quarterly review procedures for the
quarter ended March 31, 2020 and does
not express an opinion or any other form of assurance with respect
to these preliminary estimates or their achievability. During the
course of the preparation of the Company's consolidated financial
statements and related notes as of and for the three months ended
March 31, 2020, the Company and its auditors may identify
items that would require the Company to make material adjustments
to the preliminary estimates presented above. As a result,
investors should exercise caution in relying on this information
and should not draw any inferences from this information regarding
financial or operating data not provided. These preliminary
estimates should not be viewed as a substitute for full financial
statements prepared in accordance with GAAP. In addition, these
preliminary estimates are not necessarily indicative of the results
to be achieved in any future period. Investors are cautioned not to
place undue reliance on such preliminary estimates.
Non-GAAP Information
The GAAP results contained in 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:
EBITDAS. The Company provides information about its
results excluding interest, taxes, depreciation and amortization
expense, and non-cash stock compensation expense.
In addition, the Company has included in the schedules to this
release a reconciliation of 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 with 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, prospects or growth
and scale opportunities, including statements relating to the
Company's estimated first quarter 2020 net sales, earnings per
share and other financial guidance, future industry and market
conditions, the impact of the COVID-19 pandemic on the Company's
business, results of operations and financial condition and the
impact of any measures taken to mitigate the effect of the
pandemic, availability of capital under the Company's credit
facilities, the capital markets and other sources, and the
Company's liquidity and cost reduction efforts, are forward-looking
statements as defined under the Private Securities Litigation
Reform Act of 1995. The words "believe," "expect," "estimate,"
"could," "should," "intend," "may," "plan," "seek," "anticipate,"
"project" and similar expressions, among others, generally identify
forward-looking statements, which speak only as of the date the
statements were made and are not guarantees of future performance.
These statements are based upon current information and
expectations. Accurately estimating the forward-looking statements
is based upon various risks and unknowns, including disruptions to
business operations whether from travel restrictions, mandated
quarantines or voluntary "social distancing" that affects
employees, customers and suppliers; production delays, closures of
manufacturing facilities, retail locations, warehouses and supply
and distribution chains; staffing shortages as a result of remote
working requirements or otherwise; uncertainty regarding global
economic conditions, particularly the uncertainty related to the
duration and impact of the COVID-19 pandemic, and related decreases
in customer demand and spending; our level of indebtedness;
continued availability of credit facilities and ability to comply
with applicable debt covenants; continued brand momentum and
product success; growth in the direct-to-consumer and e-commerce
channels; consumer acceptance of and demand for the Company's and
its subsidiaries' products; competitive pressures; the Company's
ability to attract talent for key positions within the
organization; any changes in U.S. trade, tax or other policies,
including restrictions on imports or an increase in import tariffs;
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 the effect of
terrorist activity, armed conflict, natural disasters or pandemic
diseases, including expanded outbreak of COVID-19, on the economy
generally, on the level of demand for the Company's and its
subsidiaries' products or on the Company's ability to manage its
operations, supply chain and delivery logistics in such an
environment; 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; and
a decrease in participation levels in golf generally, as well as
during or as a result of the COVID-19 outbreak. 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, 2019 as well as
other risks and uncertainties detailed from time to time in the
Company's reports on Forms 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 Company
Callaway Golf Company
(NYSE: ELY) is a premium golf equipment and active lifestyle
company with a portfolio of global brands, including Callaway Golf,
Odyssey, OGIO, TravisMathew and Jack Wolfskin. Through an
unwavering commitment to innovation, Callaway manufactures and
sells premium golf clubs, golf balls, golf and lifestyle bags, golf
and lifestyle apparel and other accessories. For more
information please visit www.callawaygolf.com,
www.odysseygolf.com, www.OGIO.com, www.travismathew.com,
and www.jack-wolfskin.com.
Contacts:
|
Brian
Lynch
|
|
Patrick
Burke
|
|
(760)
931-1771
|
CALLAWAY GOLF
COMPANY
|
Non-GAAP
Reconciliation
|
(Unaudited)
|
(In
Millions)
|
|
|
|
|
|
|
|
EBITDAS
|
|
|
|
Quarter
Ended
|
|
|
|
March 31, 2020
(2)
|
|
|
|
|
|
|
|
|
Net income
|
$26
|
-
|
$30
|
|
|
Interest expense,
net
|
9
|
-
|
9
|
|
|
Income tax
provision
|
9
|
-
|
9
|
|
|
Depreciation and
amortization expense
|
9
|
-
|
9
|
|
|
Non-cash stock
compensation expense
|
2
|
-
|
2
|
|
|
EBITDAS
(1)
|
$55
|
-
|
$59
|
|
|
|
(1) EBITDAS excludes
from estimated net income estimated interest expense, taxes,
depreciation and amortization expense, and non-cash stock
compensation expense.
|
|
(2) The Company has
not completed its financial closing procedures for the three months
ended March 31, 2020, and its actual results could vary materially
from these preliminary estimates.
|
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SOURCE Callaway Golf Company