SBD/Issue 25/Finance

Callaway Golf Shares Drop After Missing Q3 Expectations

Callaway Execs Blame Missed Q3 Expectations
On Weakness In Top-Flite Ball Unit

Shares of Callaway Golf dropped more than 11% in after-hours trading yesterday after the company said that Q3 results “will miss analyst expectations,” according to Jennifer Davies of the SAN DIEGO UNION-TRIBUNE. The company estimated that net sales for Q3 will be $193-195M, with a loss of $0.17-0.19 per share. Analysts had been expecting sales of $223M and earnings of $0.08 per share. In the year-ago period, Callaway had $221M in sales with a loss of $0.07 per share. The company “blamed the numbers on continued weakness in its Top-Flite golf ball unit and sluggish sales of its Hogan brand.” Callaway CFO Brad Holiday said that Q3 ’05 sales “were higher because it had introduced several key products such as the popular FT-3 driver and the HX-56 golf ball.” He added that Callaway in Q3 ’06 “did not launch any new products because it plans to introduce its new products next year during the height of the golf-equipment buying season.” California Stock Report publisher Bud Leedom said that the “key problem facing Callaway is the Top-Flite acquisition.” Callaway acquired Top-Flite in ’03 out of bankruptcy, but Leedom said, “Here we are in 2006 and we are talking about Top-Flite acquisition costs.” Holiday said that Callaway is planning an “ambitious relaunch of Top-Flite next year with new products and a high-profile marketing campaign” (SAN DIEGO UNION-TRIBUNE, 10/17). At presstime, shares of Callaway were trading at $12.54, down 11.1% from yesterday’s close of $14.10 (THE DAILY).

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