Callaway Golf Company (NYSE:ELY) has announced its 2014 full year and fourth quarter financial results.
- 2014 full year sales increased 5% to $887 million, compared to $843 million in 2013; income from operations increased to $31 million, compared to a loss of ($11) million in 2013; earnings per share increased to $0.20, compared to a loss per share of ($0.31) in 2013.
- 2014 fourth quarter sales increased 6% to $135 million, compared to $127 million in 2013; loss from operations improved to ($39) million compared to ($45) million in 2013; loss per share improved to a loss of ($0.54) compared to a loss of ($0.65) in 2013.
For the full year, despite challenging conditions that beset the golf industry for much of 2014, including unfavorable weather and changes in foreign currency exchange rates, Callaway returned to profitability for the first time since 2008.
Callaway reported full year sales growth of 5% for 2014 driven by growth in most major product categories (woods +8%; irons +12%; golf balls +4%; and accessories and other +2%) and growth in all geographic segments (United States +5%; Japan +3%; Europe +11%; Rest of Asia +7%; and Other foreign countries +1%). Additionally, income from operations improved significantly to $31 million compared to a loss of ($11) million in 2013 and fully diluted earnings per share increased to $0.20 compared to a loss of ($0.31) in 2013.
This positive turnaround was driven by the increase in sales, improvements in gross margins of 310 basis points, and flat operating expenses, all of which more than offset an approximately $6 million increase in other expense due to a decrease in foreign currency contract gains. The 2014 results also benefitted from a $17 million decrease in pre-tax charges related to the cost reduction initiatives that were completed in 2013.
For the fourth quarter, 2014 sales were $135 million, an increase of 6% compared to last year due primarily to increased sales of woods (+21%), irons (+27%) and golf balls (+3%). The increase in woods and irons was led by a strategic change in product launch timing resulting in the fourth quarter release of the Big Bertha 815 family of woods and Big Bertha Beta Irons and Hybrids compared to no similar product launches in 2013.
Although the Company generally reports a loss during the fourth quarter due to the seasonality of its business, this increase in sales, together with a 440 basis point improvement in gross margins, allowed the Company to reduce its net loss per share to ($0.54) compared to a net loss per share of ($0.65) last year. The 2014 results also benefitted from a $6 million decrease in pre-tax charges related to the cost reduction initiatives that were completed in 2013.
“We are pleased with our results for 2014,” commented Chip Brewer, President and Chief Executive Officer of Callaway Golf Company. “Notwithstanding challenging market conditions for the golf industry as a whole, we were able to grow sales, increase our market share and return to profitability for the first time since 2008 – a significant milestone for us in our turnaround. Our return to profitability has clearly benefitted from the many actions we have taken during the last few years to improve our operating efficiencies, as evidenced in part by our 300+ basis point improvement in gross margins in 2014. Also, our continued emphasis on cost management has allowed us to increase our investments in tour and marketing and still hold our operating expenses essentially flat with 2013. All in all, we are pleased with how our turnaround has progressed thus far.”
“Looking forward, while the recent weakening of foreign currencies will adversely impact our 2015 GAAP results, we expect our underlying operational performance to continue to improve in 2015,” continued Mr. Brewer. “Given the strength of our product line for 2015, which was well received at the recent PGA show in Orlando, and anticipated additional improvements in our operations, we expect for 2015 on a constant currency basis not only sales growth and market share gains, but also further improvements in gross margins and profitability. Golf is a momentum business and fortunately momentum is now on our side.”
Callaway Golf www.callawaygolf.com.
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