Callaway makes huge cuts

[TN94z]

I really hate to see anyone lose their job.  You take men and women that have worked their butts off and then, from no fault of their own, they lose their jobs.  The economy is a terrible thing sometimes and I feel very lucky to still be one of the fortunate ones working. Chip Brewer, the new chief executive of Callaway Golf , had to make one of those horribly necessary decisions when he announced a 12% reduction within Callaway.

Quote:

“It’s painful stuff," said Brewer, the emotion apparent in his voice. "It keeps you up at night. The reality, though, is that we had too many costs and too many people. So we had to make those tough decisions.”

Brewer had recently done the same thing with Adams and many say that the decision was the turning point in the company.  No doubt this opened the eyes of Callaway and they are hoping for the same result since the following is what they have been seeing:

Quote:

The company (stock ticker ELY on the NYSE) reported a net loss of $171.8 million in 2011 after a net loss of $18.8 million in 2010. Callaway recorded net sales of $886.5 million last year, down from $967.7 million in 2010.

It's sad to see the economy causing such issues with businesses. I have small business owner friends and they are being hit quite hard. It's a tough time right now.

[newtogolf]

Brewer should require the other Callaway execs take a pay cut, they are the ones that made terrible decisions that cost them market share.  Callaway was a leader in irons and in the past drivers (Big Bertha) and even held their own with wedges and got their butts handed to them by Taylor Made over the last three years.  You can just about attribute all the growth TM has seen to lost marketshare by Callaway.

I hate to see workers lose their job because the execs in the company didn't do their job.

[el shanko]

the big recession has hit everything, we had 2 courses go belly up in our area both c.c also a golf shop went under. so i can see this hitting the industry also. you don't see that many corporate sponsored events (golf outings). but a bright point in our area which has greatly improved the economy is the oilfield, lots of work.

[newtogolf]

You can assign some blame to the economy, but TM posted their highest revenue and earnings last year, so I still lean more on the cause being mis-management.  TM was smart with the white driver, they saw the success Canon had with the white lens for DSLR's and how they stood out among the sea of black lenses on the sidelines at sporting events.  They capitalized on that idea and combined with their numerous endorsement deals, they have now reached a point where you just assume any time you see a pro with a white driver that it's TM.

  el shanko said:

Originally Posted by el shanko

the big recession has hit everything, we had 2 courses go belly up in our area both c.c also a golf shop went under. so i can see this hitting the industry also. you don't see that many corporate sponsored events (golf outings). but a bright point in our area which has greatly improved the economy is the oilfield, lots of work.

[chas521]

It IS awful that someone has to lose their job especially in this economy.  Sure hope it's not everyone from the UPRO mx support staff.

[bplewis24]

  newtogolf said:

Originally Posted by newtogolf

Brewer should require the other Callaway execs take a pay cut,

This applies to a lot of companies.  Unfortunately it almost never happens.  Instead they start with middle-management and low-level employees, and force their work onto other people.  Execs keep their fat checks despite being poor or average at their job.

[Mr3Wiggle]

Doesn't Callaway already manufacture almost all of it's stuff in China?  I'd guess a lot of these jobs are corporate infrastructure jobs like accounting, HR, and marketing.  Corporate overhead functions are typically the first to go in a downsize as they budget only a small percentage of total revenue to cover overhead.  Revenue drops and overhead drops.  Seeing these huge losses I'd expect more Callaway layoffs in the future.  I'm guessing the next rounds will be cuts to unprofitable lines of business.  Selling golf clubs is now all about marketing.  TM gets that, Callaway used to get that.

[Mattplusness]

And the economy won't be improving any time soon.

[TN94z]

Quote:

Originally Posted by Mr3Wiggle

Doesn't Callaway already manufacture almost all of it's stuff in China?  I'd guess a lot of these jobs are corporate infrastructure jobs like accounting, HR, and marketing.  Corporate overhead functions are typically the first to go in a downsize as they budget only a small percentage of total revenue to cover overhead.  Revenue drops and overhead drops.  Seeing these huge losses I'd expect more Callaway layoffs in the future.  I'm guessing the next rounds will be cuts to unprofitable lines of business.  Selling golf clubs is now all about marketing.  TM gets that, Callaway used to get that.

Most were cut here domestically...

Quote:

Brewer said the layoffs affect workers across all levels of the organization, but with greater cuts coming domestically than internationally. While corporate support positions were among the most affected areas, research and development was among the least affected.

[inthehole]

Honestly, I think the name of their clubs alienates alot more people than they banked on.     I won't play a driver called diablo, and imagine I'm not the only one.      Food for thought Calloway ...

[sean_miller]

The company (stock ticker ELY on the NYSE) reported a net loss of $171.8 million in 2011 after a net loss of $18.8 million in 2010. Callaway recorded net sales of $886.5 million last year, down from $967.7 million in 2010.

Can someone clarify this for me? I can't be reading this correctly. They only made $886.5 million dollars profit in 2011 versus $967.7 million in 2010?

[newtogolf]

Net income in 2011 is a loss of 171 Million.  In looking at revenue, the loss of revenue is in line with their overall losses from 2010 - 2011 which probably led to the decision to trim overhead as they need to scale the business down for lower revenue and income.  I also believe there were some write-offs and corporate expenses associated with restructuring int the 2011 net income nunbers.

Callaway Golf Company Income Statement

	Dec 11	Dec 10	Dec 09
Revenue	886.5	967.7	950.8
Cost of Goods Sold	575.2	602.2	607.0
Gross Profit	311.3	365.5	343.8
Gross Profit Margin	35.1%	37.8%	36.2%
SG&A; Expense	358.1	348.2	342.1
Depreciation & Amortization	38.6	40.9	40.7
Operating Income	(81.1)	(26.6)	(30.5)
Operating Margin	-9.1%	-2.7%	-3.2%
Nonoperating Income	(8.1)	(11.0)	0.0
Nonoperating Expenses	(1.1)	2.0	0.9
Income Before Taxes	(90.3)	(35.6)	(29.6)
Income Taxes	81.6	(16.8)	(14.3)
Net Income After Taxes	(171.8)	(18.8)	(15.3)
Continuing Operations	(171.8)	(18.8)	(15.3)
Discontinued Operations	--	--	--
Total Operations	(171.8)	(18.8)	(15.3)
Total Net Income	(171.8)	(18.8)	(15.3)
Net Profit Margin	-19.4%	-1.9%	-1.6%
Diluted EPS from Total Net Income	(2.82)	(0.46)	(0.33)
Dividends per Share	0.04	0.04	0.10

  sean_miller said:

Originally Posted by sean_miller

The company (stock ticker ELY on the NYSE) reported a net loss of $171.8 million in 2011 after a net loss of $18.8 million in 2010. Callaway recorded net sales of $886.5 million last year, down from $967.7 million in 2010.

Can someone clarify this for me? I can't be reading this correctly. They only made $886.5 million dollars profit in 2011 versus $967.7 million in 2010?

[sean_miller]

  newtogolf said:

Originally Posted by newtogolf

Net income in 2011 is a loss of 171 Million.  In looking at revenue, the loss of revenue is in line with their overall losses from 2010 - 2011 which probably led to the decision to trim overhead as they need to scale the business down for lower revenue and income.  I also believe there were some write-offs and corporate expenses associated with restructuring int the 2011 net income nunbers.

Callaway Golf Company Income Statement

Dec 11

Dec 10

Dec 09

Revenue

886.5

967.7

950.8

Cost of Goods Sold

575.2

602.2

607.0

Gross Profit

311.3

365.5

343.8

Gross Profit Margin

35.1%

37.8%

36.2%

SG&A; Expense

358.1

348.2

342.1

Depreciation & Amortization

38.6

40.9

40.7

Operating Income

(81.1)

(26.6)

(30.5)

Operating Margin

-9.1%

-2.7%

-3.2%

Nonoperating Income

(8.1)

(11.0)

0.0

Nonoperating Expenses

(1.1)

2.0

0.9

Income Before Taxes

(90.3)

(35.6)

(29.6)

Income Taxes

81.6

(16.8)

(14.3)

Net Income After Taxes

(171.8)

(18.8)

(15.3)

Continuing Operations

(171.8)

(18.8)

(15.3)

Discontinued Operations

--

--

--

Total Operations

(171.8)

(18.8)

(15.3)

Total Net Income

(171.8)

(18.8)

(15.3)

Net Profit Margin

-19.4%

-1.9%

-1.6%

Diluted EPS from Total Net Income

(2.82)

(0.46)

(0.33)

Dividends per Share

0.04

0.04

0.10

Quote:

Originally Posted by sean_miller

The company (stock ticker ELY on the NYSE) reported a net loss of $171.8 million in 2011 after a net loss of $18.8 million in 2010. Callaway recorded net sales of $886.5 million last year, down from $967.7 million in 2010.

Can someone clarify this for me? I can't be reading this correctly. They only made $886.5 million dollars profit in 2011 versus $967.7 million in 2010?

So revenue is also called "net sales"?

[Mattplusness]

  sean_miller said:

Originally Posted by sean_miller

So revenue is also called "net sales"?

Revenue would be any way the companies brings in money.

Net sales would include only sales, whereas revenue might include things like sales + service revenue, and more but I'm having a brain fart.

[Mr3Wiggle]

  sean_miller said:

Originally Posted by sean_miller

So revenue is also called "net sales"?

Revenue would be net sales.  Net because there are negative sales in the golf business.  Sometimes the manufacturers will take back stock when a new line comes out, or they will give them credits toward their accounts so they can sell the old merchandise cheaper.  Like when the Diablo driver initially sold for $300 and then you could get it everywhere for $200 at the end of the season.  The retailer is not taking the hit on that.

[bplewis24]

  None said:

  sean_miller said:

The company (stock ticker ELY on the NYSE) reported a net loss of $171.8 million in 2011 after a net loss of $18.8 million in 2010. Callaway recorded net sales of $886.5 million last year, down from $967.7 million in 2010.

Can someone clarify this for me? I can't be reading this correctly. They only made $886.5 million dollars profit in 2011 versus $967.7 million in 2010?

You're looking at gross profit.  NET profit is the critical number.  Gross profit is before selling expenses (and other overhead) are accounted for.  It's simply a number stating how much the items you sold, sold for.

Example, you sell a club for $300.  $300 is your revenue.  But you bought it for $250, which is your cost of good sold.  Then you have other expenses for marketing, employee overhead, etc.  That may take your net operating income into the red.  Look at Callaways operating income and net operating income.  It's negative.

You can trust me, I'm an accountant.

[sean_miller]

  bplewis24 said:

Originally Posted by bplewis24

Quote:

Originally Posted by sean_miller

The company (stock ticker ELY on the NYSE) reported a net loss of $171.8 million in 2011 after a net loss of $18.8 million in 2010. Callaway recorded net sales of $886.5 million last year, down from $967.7 million in 2010.

Can someone clarify this for me? I can't be reading this correctly. They only made $886.5 million dollars profit in 2011 versus $967.7 million in 2010?

You're looking at gross profit.  NET profit is the critical number.  Gross profit is before selling expenses (and other overhead) are accounted for.  It's simply a number stating how much the items you sold, sold for.

Example, you sell a club for $300.  $300 is your revenue.  But you bought it for $250, which is your cost of good sold.  Then you have other expenses for marketing, employee overhead, etc.  That may take your net operating income into the red.  Look at Callaways operating income and net operating income.  It's negative.

You can trust me, I'm an accountant.

Interesting. I've always just assumed that "profit" was simply revenue minus all the costs.

[BuckeyeNut]

  TN94z said:

Originally Posted by TN94z

I really hate to see anyone lose their job.  You take men and women that have worked their butts off and then, from no fault of their own, they lose their jobs.  The economy is a terrible thing sometimes and I feel very lucky to still be one of the fortunate ones working.  Chip Brewer, the new chief executive of Callaway Golf, had to make one of those horribly necessary decisions when he announced a 12% reduction within Callaway.

There's been a lot of that going around over the past 4 years!!