Callaway Golf Reports Third Quarter Sales and Earnings

CARLSBAD, Calif. (PROTEXT) - Callaway Golf Company (NYSE: ELY)today reported net sales of $183.3 million for the third quarterended September 30, 1999, a 6% increase from net sales of $172.9million reported in the third quarter of 1998. Net incomeincreased 201% to $17.6 million in the third quarter of 1999 from$5.8 million in the comparable quarter of 1998, and dilutedearnings per share increased 213% to $0.25 in the third quarterof 1999 from $0.08 in the third quarter of 1998. For the nine months ended September 30, 1999, net salesincreased 3% to $598.8 million from $583.1 million for the sameperiod in 1998. Net income increased 45% to $55.2 million ($0.78per diluted share) from $38.1 million ($0.53 per diluted share)for the nine months ended September 30, 1999 and 1998,respectively. "We are pleased with our third quarter earnings, which reflectboth the strong profitability of our current product lines andthe successful closeout sale of our non-current products," saidEly Callaway, Founder, Chairman and C.E.O. "At the beginning of1999 I said, 'We are implementing strategies this year that areaimed more at improving profitability than at increasing salesvolume per se.' The results of this third quarter -- and of theprevious two quarters -- indicate that those strategies arehaving a positive impact." Net sales of $183.3 million for the third quarter werecomprised of: revenues of $72.2 million from sales of Great BigBertha(R) Hawk Eye(R) Titanium Drivers and Fairway Woods; $31.9million from sales of Big Bertha(R) Steelhead(TM) Metal Woods;$45.4 million from sales of Big Bertha(R) X-12(R) Irons; $7.1million from sales of Great Big Bertha(R) Hawk Eye(R) TungstenInjected(TM) Titanium Irons; $11.3 million from Odyssey(R) andCallaway Golf putter sales, and $15.4 million from other sales.Included in third quarter results were non-current product salesof $16.0 million -- mainly from sales of Great Big Bertha(R)Titanium Drivers and Fairway Woods, Great Big Bertha(R)Tungsten*Titanium(TM) Irons, Big Bertha(R) War Bird(R) Driversand Fairway Woods, and Biggest Big Bertha(R) Drivers, which weresold in the final phase of the close-out program initiated in1999's second quarter. The Company's U.S. sales decreased 7% to$103.6 million and international sales increased 30% to $79.7million for the third quarter of 1999 vs. the third quarter of1998. Net sales of $598.8 million for the nine months endedSeptember 30, 1999, were comprised of: revenues of $226.7 millionfrom sales of Great Big Bertha(R) Hawk Eye(R) Titanium Driversand Fairway Woods; $111.4 million from sales of Big Bertha(R)Steelhead(TM) Metal Woods; $148.1 million from sales of BigBertha(R) X-12(R) Irons; $7.1 million from sales of Great BigBertha(R) Hawk Eye(R) Tungsten Injected(TM) Titanium Irons; $40.3million from Odyssey(R) and Callaway Golf putter sales, and $65.2million from other sales. The nine month results include non-current product sales of $55.3 million -- mainly from sales ofGreat Big Bertha(R) Titanium Drivers and Fairway Woods, Great BigBertha(R) Tungsten*Titanium(TM) Irons, Big Bertha(R) War Bird(R)Drivers and Fairway Woods, and Biggest Big Bertha(R) TitaniumDrivers. The Company's U.S. sales decreased 8% to $339.8 millionand international sales increased 21% to $259.0 million for thenine months ended September 30, 1999 vs. September 30, 1998. Cost of goods sold as a percentage of net sales was 51% in thethird quarter of 1999, versus 52% during the comparable period in1998. This decrease primarily resulted from a higher level ofmetal wood sales in the current quarter, as compared to 1998,which carry a higher margin, and continued reduction inmanufacturing labor and overhead costs along with reductions incertain component costs. Cost of goods sold as a percentage ofnet sales would have improved to 48%, but for close-out sales ofGreat Big Bertha(R) Tungsten*Titanium(TM) Irons, Great BigBertha(R) and Biggest Big Bertha(R) Titanium Metal Woods, and BigBertha(R) War Bird(R) Metal Woods, which have lower margins. Selling expenses in the third quarter decreased to $32.7million from $40.3 million in the same quarter of the prior year.This decrease was primarily related to planned reductions inadvertising, pro tour and other promotional expenses. General and administrative expenses for the third quarter of1999 were $22.9 million compared to $24.5 million for the thirdquarter of 1998. The decrease was primarily attributable todecreases in consulting, bad debt expense, and other general andadministrative expenses. These decreases were partially offset byincreased costs associated with the ramp-up of the Company's golfball operations. Mr. Callaway continued, "The third quarter was an encouragingone for the Company for a number of reasons, including thefollowing: -- "Our current product lines in woods, irons and putters allcontinued to be the number one selling brands in golf worldwide; -- "The Company continued to show improvement in its coststructure, including its cost of manufacturing golf clubs; -- "The Company also continued to strengthen its retaildistribution network worldwide by being more selective of theretailers chosen as business partners; -- "We remain on track for our golf ball introduction into themarket in the first quarter of 2000; -- "Great Big Bertha(R) Hawk Eye(R) Tungsten Injected(TM)Titanium Irons were introduced in September and have receivedvery strong initial acceptance in the marketplace; -- "Sales in Japan exceeded our expectations; and -- "The Board of Directors selected Chuck Yash as President ofCallaway Golf Company and designated Mr. Yash to succeed me asC.E.O., likely effective as of the end of December 2000. "Moreover, subsequent to September 30, we successfullycompleted negotiations with our Japanese distributor, SumitomoRubber Industries, Ltd., for the smooth transition of ourJapanese business to our wholly-owned subsidiary. We anticipatethat the fourth quarter charges resulting from the transitionagreement will be no more than $8 million. This is less than wehad previously expected. "All of the above gives us a good, solid basis forencouragement and for confidence about next year and beyond," Mr.Callaway concluded. In accordance with the Company's dividend practice for 1999,the dividend for the third quarter will be determined by theBoard of Directors at its meeting in November 1999, payable inDecember. Callaway Golf makes and sells Big Bertha(R) metal woods andirons, including Great Big Bertha(R) Hawk Eye(R) Titanium MetalWoods, Big Bertha(R) Steelhead(TM) Stainless Steel Metal Woods,Great Big Bertha(R) Hawk Eye(R) Tungsten Injected(TM) TitaniumIrons, Big Bertha(R) X-12(R) Irons and Odyssey(R) putters andwedges with Stronomic(R) and Lyconite(R) inserts. Statements used in this press release that relate to futureplans, events, financial results or performance are forward-looking statements as defined under the Private SecuritiesLitigation Reform Act of 1995. Actual results may differmaterially from those anticipated as a result of certain risksand uncertainties, including but not limited to market acceptanceof current and future products, including the golf ball to beintroduced in early 2000, seasonality, adverse market andeconomic conditions, competitive pressures, the "Y2K" or Year2000 issue, and costs and potential disruption of business as aresult of the restructuring of operations and the transition ofthe Company's Japanese distribution to a wholly-owned subsidiary,as well as other risks and uncertainties detailed from time totime in the Company's periodic reports on Forms 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission. Readers arecautioned not to place undue reliance on these forward-lookingstatements, which speak only as of the date hereof. The Companyundertakes no obligation to republish revised forward-lookingstatements to reflect events or circumstances after the datehereof or to reflect the occurrence of unanticipated events. For more information about Callaway Golf Company, please visitthe Company's website at www.callawaygolf.com. For more information about Odyssey Golf, please visit theCompany's website at www.odysseygolf.com. If you would like to receive Callaway Golf's press releasesvia e-mail in the future, please send your request to:newslist@callawaygolf.com. Callaway Golf Company Consolidated Condensed Statement of Operations (unaudited) (In thousands, except per share data) Three Months Ended

Nine Months Ended

September 30,

September 30, 1999

1998

1999

1998 Net sales $183,335 100% $172,944 100% $598,788 100% $583,104 100% Cost of goods sold 93,439 51% 89,859 52% 316,707 53% 307,523 53% Gross profit 89,896 49% 83,085 48% 282,081 47% 275,581 47% Operating expenses: Selling 32,687 18% 40,285 23% 98,929 17% 118,314 20% General and administrative 22,911 12% 24,534 14% 67,358 11% 68,718 12% Research and

development 8,672 5%

9,132

5% 25,405 4% 26,209 4% Restructuring (65)

431 Income from operations 25,691 14%

9,134

5% 89,958 15% 62,340 11% Other income, net 2,934

343

769

303 Income before income taxes 28,625 16%

9,477

5% 90,727 15% 62,643 11% Provision for income taxes 11,053

3,641

35,562

24,509 Net income $17,572 10% $5,836

3% $55,165 9% $38,134 7% Earnings per common share:

Basic $0.25

$0.08

$0.78

$0.55

Diluted $0.25

$0.08

$0.78

$0.53 Common equivalent shares:

Basic 70,581

69,610

70,290

69,383

Diluted 71,094

71,199

71,026

71,323 Callaway Golf Company Consolidated Condensed Balance Sheet (In thousands)

September 30, December 31,

1999

1998 ASSETS

(unaudited) Current assets:

Cash and cash equivalents

$75,490

$45,618

Accounts receivable, net

105,459

73,466

Inventories, net

76,057

149,192

Deferred taxes

48,603

51,029

Other current assets

4,651

4,301

Total current assets

310,260

323,606 Property, plant and equipment, net

174,503

172,794 Intangible assets, net

122,276

127,779 Other assets

32,163

31,648

$639,202

$655,827 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:

Accounts payable and

accrued expenses

$28,676

$35,928

Line of credit

70,919

Note payable

13,562

12,971

Accrued employee compensation

and benefits

28,512

11,083

Accrued warranty expense

37,583

35,815

Accrued restructuring costs

2,515

7,389

Income taxes payable

7,818

9,903

Total current liabilities

118,666

184,008 Long-term liabilities:

Deferred compensation

9,855

7,606

Accrued restructuring costs

9,791

11,117 Stockholders' equity

500,890

453,096

$639,202

$655,827 otsOriginal Text Service: Callaway Golf Company Internet:http://www.newsaktuell.de Contact: David Rane, Larry Dorman, orKrista Mallory of Callaway Golf Company, 760-931-1771 CompanyNews On-Call: http://www.prnewswire.com/comp/124825.html or fax,800-758-5804, ext. 124825 Web site: http://www.odysseygolf.com

http://www.callawaygolf.com

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