Callaway Golf (ELY) Lifts 2014 EPS Guidance; Revises 2015 Guidance on FX

Callaway Golf (NYSE: ELY) is increasing its 2014 earnings guidance to $0.17 - $0.19 per share compared to prior guidance of $0.15 - $0.18 per share.

The Company also announced that it is refining other aspects of its 2014 guidance but maintaining its 2014 sales guidance, which is an expected increase in net sales of approximately 6% in 2014 compared to 2013. In addition, the Company announced revisions to its guidance for 2015 as a result of the recent volatility in foreign currency exchange rates.

"We are pleased with the success we have had in 2014, including significant improvements in our operations and financial results, as well as improvements in brand momentum and market share gains," commented Chip Brewer, President and Chief Executive Officer. "This success will position us well for 2015 from an operational perspective. However, because approximately half of our business is transacted outside of the United States, if the recent strengthening of the U.S dollar persists or strengthens further, it will have a significant unfavorable impact on our reported results for 2015. Fortunately, despite these potential currency effects, we continue to see strong overall results on a constant currency basis in most areas of our business and expect continued brand momentum and market share gains in 2015."

2015 Guidance

The Company is revising its 2015 guidance by providing guidance on a constant currency basis and by discontinuing its prior guidance on a GAAP basis. The Company previously estimated for 2015 on a GAAP basis sales growth of 1% - 2% and steady improvement in profitability. The Company confirmed that the sole reason for the revised guidance is the significant volatility in the foreign currency exchange markets over the last two months.

Since the Company last provided guidance in October, the U.S. dollar strengthened significantly against most foreign currencies in which the Company conducts business. If these rates persist or the U.S. dollar strengthens further, the exchange rates are expected to have a significant negative impact upon the Company's 2015 reported results. For example, the change in rates over the last two months has negatively affected 2015 projected sales by $31 million and projected earnings by $0.26 per share. If the current rates persist at these levels throughout 2015, the Company would expect for 2015 a modest decline in reported sales and approximately breakeven profitability. The impact of foreign currency rates on 2015 results ultimately will be determined by actual foreign currency rates throughout 2015, as well as the effect of any hedging contracts implemented in 2015.

The Company also reiterated that its underlying business remains strong and continues to improve. Given the strength of its business and its 2015 product line, the Company is estimating for 2015, on a constant currency basis compared to 2014, sales growth of 2% - 3% and earnings per share growth nearing 100% based upon 2014 expected results. The sales growth is expected to be driven by an estimated 5% - 6% constant-currency sales growth in the Company's core channel business, partially offset by a strategic change in product launch timing and a reduction in certain closeout sales compared to 2014. The Company added that if the foreign currency rates persist, the Company would seek to mitigate the effects of such rates over the long-term through changes in local market pricing, sourcing strategy, and cost management.

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