Callaway Slices Its Loss for Quarter

Callaway Golf Co. reported fourth-quarter and full-year losses Thursday which it attributed to price cuts made to shrink inventory and charges related to its acquisition of golf ball maker Top-Flite.

The Carlsbad, Calif., company, maker of the Big Bertha clubs, posted a net loss of $28.5 million, or 42 cents a share, in the quarter ended Dec. 31, compared with a loss of $33.4 million, or 50 cents, a year earlier. Net sales fell to $144.4 million from $146.6 million, but exceeded analysts’ estimates of $133 million.

Absent charges of $3.2 million, or 5 cents a share, related to the company’s purchase of golf-ball manufacturer Top-Flite Golf Co., Callaway would have reported a loss of $25.3 million, or 37 cents a share. On that basis, analysts had forecast a per-share loss of 31 cents, according to Thomson First Call.

The company released its earnings as the $5-billion golf retail industry suffers from stagnant participation in the sport, which has damped sales for new golf equipment.

Callaway’s U.S. net sales rose 8% in the fourth quarter from a year earlier, but fell 49% in Japan. The company’s golf ball business posted a 25% increase, aided by its Top-Flite purchase, providing a bright spot in an otherwise mixed sales report.

Chief Financial Officer Brad Holiday said Callaway’s mid-year decision to cut prices had succeeded in clearing inventory from retail outlets. He added that new products, including the Big Bertha Titanium 454 Driver and HX Hot Golf Ball, have generated positive responses from retailers and their customers.

“All the feedback we’re getting from retailers is that inventories are in real good shape as we go into 2005,” Holiday said during a conference call Thursday with Wall Street analysts.

Holiday did not provide any earnings guidance for 2005, but warned the company had experienced a record first quarter in 2004 and that it was being more cautious this year in supplying retailers with inventory.

One analyst singled out the Big Bertha Titanium 454 as a club that could help fill out Callaway’s product lineup. “It’s a big club and that’s where they had problems last time,” said Dennis McAlpine, an analyst with McAlpine Associates. “They didn’t have any big clubs.”

Said John Moran, an analyst with Ryan Beck & Co.: “We really believe they are better positioned product-wise than they have been in several years.”

For the full year, Callaway reported a net loss of $10.1 million, or 15 cents a share, contrasted with earnings of $45.5 million, or 68 cents, a year earlier. Excluding charges of $17.5 million, or 26 cents, related to the Top-Flite purchase, Callaway would have earned $7.4 million, or 11 cents, in 2004. Sales climbed 15% to $934.6 million from $814 million.

Shares of Callaway fell 50 cents to $12.31 on the New York Stock Exchange.