Callaway expects ’02 rebound

Callaway Golf officials projected cautious optimism for the company in 2002 after posting a net loss of $9.2 million during the fourth quarter and a decline in profit for the year compared to 2000.

The loss of 14 cents per share on net sales of $105.3 million compares to a profit of $4.6 million, or 7 cents per share, in the same quarter 2000, on sales of $142.2 million. The per-share loss was worse than the consensus estimate of 8 cents.

For the year, Callaway had a profit of $58.4 million on sales of $816.2 million, compared to $81 million in profit in 2000 on sales of $837.6 million. Earnings per share were 82 cents in 2001, $1.13 the year prior.

Callaway officials, in an earnings call Jan. 18, expressed expectations that net sales and operating earnings in 2002 will improve on totals posted last year. They put Callaway's 2001 performance against a backdrop of a generally soft economy, poor weather in key months, the U.S. Golf Association's opposition to its ERC II driver, weakened foreign currencies, the events of Sept. 11 and the death in July of founder Ely Callaway.

A recent Merrill Lynch report described the company's year as "not a bad showing in a recession" and noted that the year-over-year fourth-quarter dip was partly because the company shipped and sold a large amount of product in the fourth quarter of 2000.

Merrill Lynch outlined concern over year-end inventories of $168 million, the highest in the company's history, but speculated that a new, unannounced product could be the cause. It also stated concern about the possible effect of the successful recent ball launches from competitor Titleist.

"Increased tour presence is essential to driving better sales, but it will be a costly strategy," the report said.

As it was, selling and tour expenses for Callaway in 2001 were $188.3 million, or 23.1 percent of net sales, up from $170.5 million (20.4 percent of net sales) in 2000.