Callaway Golf to Cut 500 Jobs
Callaway Golf Co. said Thursday that it would cut 500 jobs as it consolidates manufacturing, trims its sales force and squeezes costs from other parts of its operations. The restructuring, expected to stretch into 2007, aims to reduce annual operating costs by $70 million.
Fifty employees were let go Thursday at the company’s headquarters in Carlsbad in San Diego County. About 150 additional jobs in Carlsbad are to be eliminated by the end of the year as Callaway consolidates golf ball manufacturing at two plants in Massachusetts and New York. Callaway, which began the year with 3,000 employees, will cut 300 jobs at other locations.
The golf equipment manufacturer will take a $12-million charge against earnings, with $6 million coming during the third quarter. The company hopes to realize $50 million to $60 million of the anticipated savings during 2006, with the remainder coming during 2007.
Callaway Chairman George Fellows said the company would spend an unspecified amount of the savings on product development and marketing initiatives.
Callaway -- which manufactures the Big Bertha, Ben Hogan, Odyssey and Top-Flite brands -- told analysts during a conference call that the company anticipated a loss of $4 million to $8 million, or 6 to 12 cents a share, in the third quarter, which ends today.
The company reported a loss of $36 million, or 53 cents a share, in the same period last year. Callaway said sales would rise to about $215 million during the quarter, up from $129 million a year earlier.
Callaway shares rose 7 cents to $14.53 on Thursday.
The restructuring comes during an industrywide slump that has forced higher-end manufacturers to offer discounts to clear inventory and fend off competition from lower-cost competitors. Callaway also has struggled since founder Ely Callaway’s death in 2001.
Fellows, formerly a business consultant and a chief executive of Revlon Inc., was named chairman last month. The company also has hired an investment banking firm to study strategic options. Sources familiar with Callaway said over the summer that two separate investor groups had made unsolicited offers to buy the company.
Fellows said Thursday that his charge from Callaway’s board was to “fix the company and make it profitable again.”
In a reference to the unsolicited offers, said to be from buyout firm Thomas H. Lee Partners and insurance giant Fidelity National Financial Inc., Fellows said that “the company never was for sale.”
“I think the stuff that everyone has been conjecturing about is just that -- conjecture,” he said.