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Callaway Golf Company (ELY)
Q2 2009 Earnings Call
July 29, 2009; 5:00 pm ET
George Fellows - President & Chief Executive Officer
Brad Holiday - Chief Financial Officer
Dan Wewer - Raymond James
Rick Nelson - Stevens Inc
Scott Hamann - KeyBanc Capital Markets.
Tom Shaw - Stifel Nicolaus
Rommel Dionisio - Wedbush Morgan.
Todd Slater - Lazard Capital
Jeff Blaeser - Morgan Joseph & Company
Tim Conder - Wells Fargo
Kristine Koerber - JMP Securities
Previous Statements by ELY
» Callaway Golf Company Q1 2009 Earnings Call Transcript
» Callaway Golf Company Q4 2008 Earnings Call Transcript
» Callaway Golf Company Q3 2008 Earnings Call Transcript
I would now like to turn the call over to Brad Holiday, Chief Financial Officer for Callaway Golf. Mr. Holiday, you may begin your conference.
Thank you Marcello, and welcome everyone to Callaway Golf Company second quarter 2009 earnings conference call. Joining me today is George Fellows, President and CEO of Callaway Golf. During today’s conference call George will provide a few opening remarks, and I will provide an overview of the company’s results and we will then open the call for questions.
I would like to point out that any comments made about future performance, events or circumstances, including statements relating to estimated sales, gross margins, operating expense, preferred equity dilution, collectability of accounts receivable, estimated future inventory levels and the company’s estimated 2009 capital expenditures and depreciation and amortization expenses are forward-looking statements subject to Safe Harbor protection under the federal securities laws.
Such statements reflect our best judgment today based on current market trends and conditions. Actual results could differ materially from those projected in the forward-looking statements, as a result of certain risks and uncertainties applicable to the company and its business.
For details concerning these and other risks and uncertainties you should consult our earnings release issued today as well as the company’s current report on Form 8-K filed with SEC on June 8, 2009, together with the company’s other reports subsequently filled with the SEC from time-to-time.
In addition during the call in order to assist interested parties with period-over-period comparisons on a consistent and comparable basis we will provide certain pro forma information after the company’s performance, excluding charges associated with the company’s gross margin initiatives and on a currency neutral basis.
This pro forma information may include non-GAAP financial measures with within the means of Regulation G. A reconciliation of such non-GAAP financial measures to those most directly comparable financial measures prepared in accordance with GAAP will be provided on today’s call and additional reconciling information is provided in the earnings release we issued today. The earnings release is available on the Investor Relations section of the company website at www.callawaygolf.com.
I would like now to turn the call over to George, for a few opening remarks.
Thanks Brad, and thank you all for joining us. As you know during the first half of 2009 the Golf landscape continue to reflect the overall uncertainty of the worldwide economy and sustained its downward trajectory during the second, albeit at a somewhat reduced rate. This was not unexpected given the record pace achieved through this period a year ago.
While signs of recovery are evidence in a number of areas, the pace appears to be slower than originally hoped based on the most recent data and we feel call for somewhat more conservative projection for the balance of the year. The important takeaway however is that we are focused on the rate of recovery and stability rather than expectation of further uncertain declines.
The strategy we applied to navigate these difficult times targeted striking a balance between aggressive cost control to maintain liquidity with selective reinvestment and projects focused on strengthen the company’s long term market position to better take advantage of the recovery when it gets in to full swing.
Towards these end the company has exercised tight expense management, significantly reducing discretionary expenditures as well as executing major risks eliminated over 300 positions this year. At the same time selective investments have been made in several areas, including international market expansion, additional margin improvement initiatives the uPlay acquisition, and aggressive first move promotional activity to help kick off the golf retail season.
These investments are beginning to payoff and we believe will contribute to the company’s recovery as market conditions return to normal. The international business environment mirrors the U.S. in many respects, signs of stability or recovery particularly in Korea, Japan and Australia, continued strong performance in China and a stabilizing in much of Europe.
Further based on recent investments in infrastructure in Singapore and Malaysia, India and Latin America these markets are beginning to provide growth opportunities that will benefit the business in the mid to longer term.
The uPlay acquisition completed in December of 2008, is being very well received in the marketplace and demand is out stripping supply at this moment. This business will be profitable and accretive in 2009.
As an industry leader, we felt it important to take aggressive first move our action to stimulate the retail golf market in order to get the season kicked off given all the economic uncertainty. Clearly, this was not in expensive, but has achieved its object and benefited the Callaway market position in the U.S. and most international markets.
Year-to-date in the U.S., we’ve picked up 3.1 share points in drivers, 2.1 share points in irons, and 2 share points in putters with most international markets performing in a like fashion. These performance results bode well as we approach the end of the 2009 season and prepare for an anticipated better 2010.