THE TIMES 100 / THE BEST PERFORMING COMPANIES IN AMERICA : RISING FORTUNES : Fat Profits From Oversized Clubs : Carlsbad-based Callaway Dominates the Golf Industry

The letters pour in at Callaway Golf Co., about 10 a day from golfers around the world.

“I received a Callaway No. 7 from my wife,” begins a golfer from Alpharetta, Ga. “While playing with a friend at the Cartersville Golf Club, I pulled my brand-new Callaway out of my bag at their Hole 3 (156 yards) and shot a hole-in-one.”

Stories like that, spread from one clubhouse to another, have helped turn Carlsbad-based Callaway--maker of the oversized Big Bertha drivers--into America’s leading golf club manufacturer.

“We get constant evidence that everybody likes our products,” says Ely Callaway, the company’s 74-year-old chairman and inventor of the revolutionary club that took the industry by storm after its introduction in 1991.

Callaway’s sales have been lofty ever since, hitting $254.6 million last year, an impressive 93% jump from $132 million a year earlier. Earnings more than doubled last year to $43 million.

That kind of performance earned Callaway the No. 2 spot on this year’s Times 100 list, with a 59.2% average two-year return on shareholder equity. It also ranked No. 7 among California companies with the fastest revenue growth, according to data compiled by Star Services, a San Francisco-based business research firm.

Since Callaway first sold stock to the public in February, 1992, its shares have more than tripled.

Callaway’s metal “woods” dominate the industry and account for 80% of company sales. More than 1 million golfers own Big Bertha clubs, which sell for as much as $260 each and get their name from a German cannon used in World War I.

Big Berthas have a stainless steel head and are a quarter-size larger than conventional metal woods--whose contradictory name goes back to the days when most drivers were indeed wooden. The Big Bertha’s larger hitting surface, the company says, helps golfers get the ball airborne easier and make straighter shots.

“It’s more forgiving when one mis-hits,” Callaway says in a raspy voice reminiscent of Ross Perot.

Hoping to expand on its success, Callaway this year introduced a line of Big Bertha irons, based on the same technology. The company spent $2 million to develop the clubs. (Generally, woods are used for hitting longer shots.)

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Callaway’s goal is ambitious: It wants to be the leading seller of both metal drivers and irons. No company has done that, Callaway says, since Wilson Sporting Goods did it some 40 years ago.

“We expect our irons to be very important to the industry,” says Callaway, a former three-handicapper who now plays golf only on weekends to test Big Bertha clubs.

A key feature of Callaway’s new irons is that the hitting surface--or face--is 40% larger than that of conventional clubs.

Callaway faces a tough competitor in Karsten Manufacturing Co., a Phoenix-based maker of Ping clubs, the top-selling brand of irons. A set of Big Bertha steel irons--Nos. 3 to 9, plus a pitching wedge--is expected to retail for about $900, or about 20% more than a comparable set of Pings, Callaway said.

But some analysts think golfers will pay a premium for the Big Bertha irons.

“Callaway has a reputation now for introducing quality products that enhance the game,” said Eric Appell, an analyst at Torrey Pine Securities in San Diego.

“The irons could have a tremendous impact,” he added, noting that they were well-received at a PGA merchandise trade show earlier this year. Among swingers of Big Bertha drivers are many on the PGA tour, as well as former President George Bush.

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Callaway’s success wasn’t won easily. When Ely Callaway, who had already made a fortune in the textile and wine businesses, bought the company in 1982, it employed three people who produced hickory-shaft putters and wedges in a 1,300-square-foot shop. Sales that year were about $500,000.

In 1989, when Callaway introduced a set of clubs that incorporated elements of the Big Bertha design, sales soared, and they’ve nearly doubled every year since. The company sold $255 million worth of products last year, about 30% of that overseas. Today Callaway employs 1,400 people--up from 900 a year earlier--in a 250,000-square-foot plant.

Ely Callaway says it is unrealistic to think his company can maintain such phenomenal growth. Analysts, for example, see sales and earnings growing about 25% this year.

Still, the Georgia native says, his company has a long way to go. “If we keep on doing what we’re doing, the opportunities are so good we don’t need to do anything else.”

Although he laid out plans for his successor last year, Callaway says firmly that he has no plans to retire.

“Hell no, there’s too much to do,” he says.

“Let my competition play golf if they want,” he adds with a hearty laugh.