Callaway Golf is hoping a few steps back leads to many more going forward. Lately the company has made news for the wrong reasons. Yet its leader remains upbeat despite the way its drawing attention to itself. After financial markets closed for trading, Callaway (ELY: NYSE) announced another of its ongoing cost-reduction initiatives. It reported, what had been rumored earlier, that a workforce reduction would see 12% cut from its ranks. It reaches all regions and levels of the organization.
"As I mentioned last quarter, the Company's business has not recovered at a satisfactory pace and we are taking actions to accelerate the recovery," stated Chip Brewer, President and Chief Executive Officer of Callaway. "The cost reduction initiatives we announced are part of those actions and are consistent with the significant changes we are making in streamlining and simplifying our organization and in how we approach and operate our business. These changes, however, will have a greater impact on our financial results in 2013 and 2014 than on 2012. As a result, and given the slower than anticipated pace of recovery, we no longer expect that 2012 full year financial results will be significantly better than last year.”
Callaway said it believes it will generate approximately $52 million in gross annualized savings. Estimated costs over the next twelve months associated with these actions are $40 million, over half of which are expected to be non-cash charges. Callaway is calling for second quarter net sales of $280 million, an increase of 3% compared to the second quarter of 2011. Pro forma earnings per share for the second quarter is estimated at $0.05 per share (on 65.1 million shares), as compared to a pro forma loss of $0.01 per share (on 64.4 million shares) for the same period in 2011. GAAP earnings per share for the second quarter of 2012 is estimated at break even (on 65.1 million shares) compared to a loss of $1.03 per share (on 64.4 million shares) in 2011, which included a $0.87 per share charge related to the establishment of a deferred tax valuation allowance. “At this point, we expect for full year 2012 a pro forma loss per share of $0.55-$0.75," Brewer said. Based on current information, Callaway estimates first half 2012 at $565 million, a 1% increase compared to the same period in 2011.
"I am pleased with the progress on the changes we are making to our business," Brewer said. "In the last few months, we have sold the Top-Flite and Ben Hogan brands, licensed our North American apparel business, licensed our footwear business to our current footwear partner, and have made significant changes in senior management, including new hires to oversee our global marketing and global operations organizations. Furthermore, the actions we are announcing will better align our cost structure with our current business and the changes we are making to our sales and marketing strategy will position us for sales growth in 2013 and beyond. Lastly, I am very excited by the consumer-oriented changes we have made to our 2013 product line and look forward to providing more information about those new products later in the year. There is certainly more work to be done, but I am very pleased with the progress we have made in just the past few months and am excited by the potential opportunities I see for the Company's turnaround." The Company will be issuing its final financial results on July 26, 2012.