In the 4th quarter ended Dec. 31, the golf company reduced its net losses by 34 percent to $18,664,000, from an increase of 7 percent to $154.5 million in revenues. The gross margin grew by 400 basis points to 31 percent. The quarterly sales increase - its highest since 1997 - was led by three categories: woods jumped by 74 percent to $43.4 million, putters gained by 13 percent to $21.1 million and accessories and certain other products improved by 6 percent to $18.9 million. Conversely, sales of irons declined by 7 percent to $36.6 million, while golf balls dropped by 21 percent to $34.5 million.
It was a mixed bag also geographically. Sales in Japan soared by 86 percent to $22.5 million and sales in the rest of Asia increased by 66 percent to $14.3 million, while in Europe sales dipped by 2 percent to $22.0 million and U.S. sales fell by 10 percent to $77.4 million. The difference was explained by Callaway with the product mix sold in the various countries. For example, the company does not conduct as much Top Flite business in Japan and Asia. Top Flite’s sales have been struggling as Callaway continues to integrate it into its business, restructuring its operations.
For the full year, sales increased by 7 percent as well to $998.1 million, and profit rose substantially to $13,284,000, as compared to the loss of $10,103,000 incurred in the previous year. By product, sales of irons rose by 22 percent to $316.5 million, putters grew by 9 percent to $109.3 million and woods were up by 1 percent to $241.3 million, while golf ball sales fell by 11 percent to $214.7 million.
The ongoing integration of Top Flite will cost Callaway $68 million, just more than the previous estimate of $60-65 million. At the same time, the reorganization should lead to savings of $50-60 million during the current fiscal year, rising to an annual level of $60-70 million by the end of 2007.
