Callaway makes huge cuts

[Gresh24]

Originally Posted by sean_miller

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

You're right.  You're just associating "profit" with net, and "income" with gross.

Profit and Income are often interchangeable.  Gross and Net are the best way to differentiate.

[newtogolf]

Gross profit is the difference between sales revenue and cost of goods sold.  There's another metric used which is EBIDTA (Earnings Before Interest, Taxes, Depreciation and Amortization).  EBITDA is used to gain real insight into the business health on an fiscal year basis.  Net profit is what comes after interest, taxes, depreciation, and amortization is taken out of EBITDA.

Originally Posted by sean_miller

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

[Beachcomber]

They did the right thing... Their sales are way down meaning their Operating Income is lower while their SG&A; - Operating Expenses were fairly flat.  The only way to right the ship is to either sell more - or cut expenses.  With the economy- the golf market isn't growing at a rapid pace.  So the only way to sell more is to take market share away from another competitor.  As you eluded to earlier - they lost a lot of market share to TaylorMade.

Bottom line in my opinion is that they need to do a better job of signing new talent and professionals to help drive their brand.  Phil Michelson is one of the most recognizable golf professionals around... But they need to have new blood to take the baton.

In addition, they need to drive innovation within the driver market (like TaylorMade did with adjustability and doing the white paint).  That is where the highest margins are at - in the driver... And where most people will spend money year over year.  Irons/Wedges and accessories... Not so much.

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

[iacas]

Originally Posted by 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.

FWIW, I don't think TM did that because of Canon, and Canon says the white L lenses (their non-L lenses are still black) have a lot more to do with heat than anything else.

I too think that it stinks when people are laid off because management did things poorly. They should look to take pay cuts themselves. They probably could have absorbed most of the 12% layoffs themselves.

[mvmac]

Callaway has been on the decline since the C4 all composite driver.  Odyssey has been one of the few highlights for them in the past couple years.  I think they do a good job with the quality and design of their metal woods but they can't create the hype that TM does (well no one can).  Callaway's forged irons look awesome but they've lost their way when it comes to what they were known for with the game improvement line.

[newtogolf]

My brother works for Canon and while there is some science in the white lens development related to heat and expansion the idea was pushed by marketing.

I have no idea if TM borrowed the idea from Canon but what they did makes sense from the standpoint that if you have a good product you want it to visually stand out from your compeition.  Even with HD it's tough to differentiate the various black drivers from one another, but everyone assumes the white ones are TM, even if they aren't.

Originally Posted by iacas

FWIW, I don't think TM did that because of Canon, and Canon says the white L lenses (their non-L lenses are still black) have a lot more to do with heat than anything else.

I too think that it stinks when people are laid off because management did things poorly. They should look to take pay cuts themselves. They probably could have absorbed most of the 12% layoffs themselves.

[BuckeyeNut]

Originally Posted by mvmac

Callaway has been on the decline since the C4 all composite driver.

You make a great point.  I quit buying Callaway when I cracked one of the FT drivers and they failed to replace it.   It was 2yrs old and they said it was out of warranty.  I called Callaway and their best offer a modest discount on the new Razr.   I said no thanks and bought a Taylor Made as a replacement.....

In the very least, they should have offered to send a replacement head...IMO

[RPMPIRE]

How is Titleist fairing right now? I think they have more tour players playing Titleist gear than Callaway or TM.

Also, I think Callaway has lost a lot of market share when it comes to their game improvement irons when they claim to be #1 in irons. Wilson Staff has started coming back into the market with their irons and same with Adams. Personally, I liked Callaway back then but their current iron lines have become a lot more clunky. Also, I agree that drivers are where the better margins are. More people are willing to shell our $300-400 on one driver than spend $600+ on a new set of irons.

Originally Posted by Beachcomber

Bottom line in my opinion is that they need to do a better job of signing new talent and professionals to help drive their brand.  Phil Michelson is one of the most recognizable golf professionals around... But they need to have new blood to take the baton.

In addition, they need to drive innovation within the driver market (like TaylorMade did with adjustability and doing the white paint).  That is where the highest margins are at - in the driver... And where most people will spend money year over year.  Irons/Wedges and accessories... Not so much.

[DirtCheap]

Originally Posted by 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 ...

I was thinking the exact same thing earlier today.

[DirtCheap]

I think one thing that hurt Callaway recently was allowing Wal-Mart to sell their products.
This is just me talkin', but the brand lost some allure when I saw it on a Wal-Mart shelf.

[BuckeyeNut]

Originally Posted by DirtCheap

I was thinking the exact same thing earlier today.

Naming a driver after satan is bad marketing.......LOL

[newtogolf]

Titleist Acushnet was sold to Fila (Korea) so I don't believe audited financials are available for 2011.  Given their golf ball is #1 on tour played by over 75% of the pro's I'd guess they are doing quite well.

Callaway needs to fire their entire marketing team, as they have lost their identity in the industry.  I challenge anyone to name all their versions of Razr irons and describe what target market they are aimed at without a cheat sheet.  I see their advertisements in Golf magazine and shake my head, I bet half the people at Callaway can't keep the names straight.  Most of their ads don't even include the Razr Forged line and I don't think I've never seen the Musclebacks advertised.

I spend a lot of time in pro shops and at Golfsmith and I see people walk right by the Callaway aisle and head to the Taylor Made woods.  In terms of irons, Titleist, Mizuno and Ping seem to have the majority share of the experienced golfer market, but TM is attracting new comers with the RBZ irons and R11's over Callaway.  Unless Callaway pulls out another Big Bertha or X Series game changer I don't see how they survive more than 5 years.

As for endorsements, they continue to lose more and more to the competition, their newest signee is Tommy "Two Gloves" Gainey, hardly the guy to take the reigns from Phil going forward.

Originally Posted by RPMPIRE

How is Titleist fairing right now? I think they have more tour players playing Titleist gear than Callaway or TM.

Also, I think Callaway has lost a lot of market share when it comes to their game improvement irons when they claim to be #1 in irons. Wilson Staff has started coming back into the market with their irons and same with Adams. Personally, I liked Callaway back then but their current iron lines have become a lot more clunky. Also, I agree that drivers are where the better margins are. More people are willing to shell our $300-400 on one driver than spend $600+ on a new set of irons.

[stogiesnbogies]

It's my understanding that all the revenue is in Tee AND Green...not in between...

Drivers and Putters are the big equipment sales items ...golfers , including myself will use the same irons for years...

[bplewis24]

Originally Posted by stogiesnbogies

It's my understanding that all the revenue is in Tee AND Green...not in between...

Drivers and Putters are the big equipment sales items ...golfers , including myself will use the same irons for years...

That's interesting.  I don't see a reason to ever replace my putter, and it's the first one I bought (Odyssey Black #6).  It doesn't even seem like a club that wears.

[Snakey]

When you try to cut costs by outsourcing to China (and handing over technology and specifications to the Chinese) who promptly pass it onto their brother-in-law,cousin in the factory next door therefore flooding the market with shoddy fakes which make customers wary of anything with Callaway on it', these supposedly business genius's should slash from the top not from real working people.

[Shorty]

Originally Posted by Snakey

When you try to cut costs by outsourcing to China (and handing over technology and specifications to the Chinese) who promptly pass it onto their brother-in-law,cousin in the factory next door therefore flooding the market with shoddy fakes which make customers wary of anything with Callaway on it', these supposedly business genius's should slash from the top not from real working people.

Not 'surpri'sing to 'see that a raci'st 'struggle's with our old friend the apo'strophe.

"Real working people" FFS

To think that you can stereotype a nation of a billion people.

Are all Americans gun toting religious nuts? Are they all "real working people"? No.

Are all Chinese dishonest thieves? No.

Shame on you.

[Shorty]

Originally Posted by iacas

I too think that it stinks when people are laid off because management did things poorly. They should look to take pay cuts themselves. They probably could have absorbed most of the 12% layoffs themselves.

Man...what planet are you living on?????

Management usually find themselves in need of multi million dollar bonuses when they drive companies to the wall.

[Snakey]

That time of the month?