Topgolf Callaway Brands Corp (MODG) 2006 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Callaway Golf first-quarter 2006 results conference call.

At this time, all participants are in a listen-only mode.

Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions).

As a reminder, this conference is being recorded.

I would now like to turn the conference over to Brad Holiday.

Please go ahead.

Thank you and welcome, everyone, to Callaway Golf Company's first quarter 2006 earnings conference call.

I'm Brad Holiday, Chief Financial Officer of Callaway Golf Company.

Joining me today is George Fellows, President and CEO of Callaway Golf.

During today's conference call, George will provide a few opening remarks and I will provide an overview of the Company's financial results and we will then open the call for questions.

I would like to point out that any comments made about future performance, events, or circumstances including future product launches, expected momentum in the irons business, future inventory levels, and the Company's estimated 2006 capital expenditures and depreciation and amortization expenses are forward-looking statements subject to Safe Harbor protection under the federal securities laws.

Such statements reflect our best judgment today based on current market trends and conditions.

Actual results could differ materially from those projected in the forward-looking statements as a result of certain risks and uncertainties, including any delays or difficulties with future product launches, a decrease in anticipated reorder business, as well as the general risks and uncertainties applicable to the Company and its business.

For details concerning these and other risks and uncertainties, you should consult part one, item 1A of our most recent Form 10-K filed with the SEC as well as the Company's other reports subsequently filed with the SEC from time to time.

In addition, during the call, in order to assist interested parties with period-over-period comparisons, we will provide certain pro forma information as to the Company's performance excluding charges associated with integration of the Top-Flite operations and charges associated with employee equity based compensation.

This information may include non-GAAP financial measures within the meaning of regulation G. The earnings release we issued today includes a reconciliation of such non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP.

The earnings release is available on the investor relations section of the Company's website at www.CallawayGolf.com.

I would like to now turn the call over to George for a few opening remarks.

Thanks, Brad.

Good afternoon.

Thank you very much for joining us for this call.

I would like to start off actually by reiterating our positive feelings about our first quarter results, particularly in view of the somewhat disappointing reaction by some to our [pre-release].

To the extent that the short-term volatility you had to endure was a result of our not being clear enough about our three year targets were to come about, I would like to take full responsibility for that and apologize.

So I would like to reiterate that guidance and talk a little bit about why a somewhat longer investment view, somewhat longer than one quarter at a time may be both appropriate and beneficial.

As we indicated a while ago, the sales growth targets we had established for the three year period were to be in mid single digits.

Our operating income as a percent of sales, we said would be in the mid-teens.

Our return on invested capital would be in the late 20s, and our free cash flow would be in $90 to $120 million range.

And we felt that these targets over the timeframe that we had indicated would essentially put us as best-in-class in the related industry.

Now, I think it's important to restate that these targets will be reached on more of a ramp and not a step function.

And it's this factor that may have causes some of the confusion for the first quarter, although frankly, a 20% increase in quarterly EPS could be viewed as either.

Now, any business such as ours that's very dependent on new products and the timing of their shipments is very difficult to precisely forecast by quarter.

We believe annual guidance is the most prudent to provide and would be the most helpful to you as investors.

When we gain sufficient confidence in our new processes and systems, we would like to go from three year to one year guidance with obvious periodic updates during the course of the year.

And I would hope that we could get there by 2007.

In the meantime, we're going to try to be as helpful as possible with appropriate information to you, but some short-term quarterly volatility may in fact be inevitable based on the experience we faced in the first quarter.

Now, just to reiterate, our first-quarter results are very much on our plan to achieve our three year numbers that we discussed.

The short-term timing issues aside, there has been no fundamental change in plan or outlook since our last communication.

And for those of you checked your retail sources, I'm sure you received the same positive feedback about the trade and consumer acceptance and the take away of our products that leads us to be quite confident about our performance.

We strongly believe that Callaway is well on its way toward being best-in-class as I indicated, and we believe an excellent investment opportunity for our sector.

Now, I would like to turn back to Brad to fill you in on some more of the specifics and then be very happy to answer any questions you may have about the first quarter.

Thanks, George.

In reviewing the financials for the quarter, we achieved consolidated net sales of $302 million, the second highest first quarter in the Company's history and an increase of 1% compared to last year's sales of $300 million.

We reported net income for the quarter of $23 million compared to $18 million last year and earnings per share of $0.33 versus $0.27 per share in the prior year.

On a pro forma basis, excluding 2006 after-tax charges, of $0.02 for employee equity based compensation expense associated with FAS 123R and $0.01 for Top-Flite integration charges.

And 2005 after-tax charges of $0.03 for Top-Flite integration charges, our fully diluted earnings per share for 2006 increased 20% to $0.36 compared to $0.30 in 2005.

In reviewing net sales, we were pleased with the results for a couple of reasons.

First, foreign currency translation had a negative impact on sales of $6 million.

So in constant dollars, we achieved 3% sales growth compared to last year.

Second, we had a new product pipeline timing difference in irons and putters compared to last year.

This becomes evident when you look at the sales mix of new products introduced in 2006, where they represented approximately 43% of our total sales mix as compared to 56% of the mix last year, a difference of approximately $30 million.

Excluding this pipeline timing difference, sell-in of woods and carryover products were strong as they offset these timing differences, allowing us to achieve the sales increase for the quarter.

Looking at sales by product segments, our wood sales for the quarter were $97 million, an increase of $32 million or 48% compared to 2005.

This increase was due to an expanded line of woods, including three drivers in the line of Fairway Woods.

Sell-in of our X series of Driver and Fairway Woods has been good and feedback from our retailers is positive.

Sales of FT-3 are beginning to increase, fueled in part by Phil's back-to-back wins with two drivers in his bag.

Combined with the new Optifit system we have developed to support our retailers in custom fitting, we are anticipating an increase in demand for this product throughout the season.

We just received market share data for U.S. for March, and it shows 2.5% increase compared to last month for revenue share, which supports the positive feedback we have been getting on our Wood products this year.

Sales of irons were $87 million compared to first quarter sales last year of $108 million.

These results reflect fewer new products introduced so far this year and the lower price point on our new Big Bertha '06 irons compared to last year's product line.

We have been encouraged by the year two momentum surrounding the X-18 line, which in many retail shops is still the number one selling iron.

We just introduced our new Hogan Apex line of irons at the beginning of the second quarter and our new Fusion Wide Sole model is scheduled to be introduced next month.

So we expect our iron business to continue to gain momentum as the year progresses.

Golf ball sales were $56 million for the quarter compared to last year's sales of $59 million.

This decrease was due to lower Top-Flite sales, nearly offset by continued growth in our Callaway line, which included the introduction of our new Big Bertha and Hex Tour models and the continued strong demand for our Hex 56 model.

In looking at the Top-Flite business, there are several dynamics going on.

The brand had been badly neglected prior to our acquiring it in 2003.

We addressed retail inventory issues the first year, rationalized the number of SKUs in the product line last year, and have since introduced additional new product at retail.

While most products are selling well at retail, we're seeing increased competition in the $15 to $20 segment of the business.

We're formatting our marketing plan and will be implementing these changes in the very near-term to address these issues.

Putter sales were $25 million compared to $32 million last year.

This decrease reflects the successful launch of our White Steel line of putters introduced last year compared to just one model, our new Tri-ball SRT model that is in our 2006 product line.

During the second quarter, we will be introducing the Odyssey XG line, which Phil used in his recent wins, along with a two-ball model of the SRT, as well as some additional model scheduled to be introduced in the second half of the year.

Turning to our regional breakout, U.S. sales were $181 million for the quarter compared to $185 million last year.

Increases in our Callaway brand driven by the Woods category partially offset decreases in Top-Flite and Ben Hogan brands.

The Ben Hogan decrease was driven by the timing of new product launches in 2005 which included a driver, Fairway Woods, and a line of irons versus no new products this year.

Our new Ben Hogan Apex line of irons begin shipping into the market in the beginning of the second quarter.

International sales were $121 million compared to $115 million last year, an increase of 6% with strong results in all regions except Europe, which was down 4% year-over-year.

On a currency neutral basis, sales for Europe had growth of 4% with total international growth at 11%.

Pro forma first-quarter gross margins, excluding integration charges, were 44% of net sales compared to 45% in the prior year.

Positive product mix trends driven by Woods and Callaway golf balls partially offset lower sales mix of higher margin irons and higher golf ball costs this year.

Reported gross margins were 43% of net sales compared to 44% in 2005, which included integration charges of approximately $1 million in 2006 and $3 million in 2005.

Pro forma operating expenses for the quarter excluding FAS 123R and integration charges were $93 million compared to $100 million last year.

The year-over-year decrease reflects the positive impact of the cost reduction initiatives taken late last year, as well as a shift in the timing of advertising expense to align with the later timing of new product launches.

Included in our reported 2006 operating expenses are integration and FAS 123R are pre-tax charges of $2.5 million in 2006 and integration charges of $800,000 in 2005.

Moving to the balance sheet, net working capital increased 8% compared to last year driven by increases in inventory, partially offset by increases in accounts payable and borrowings on our credit facility.

Consolidated net receivables were $245 million compared to $228 million last year.

Consolidated DSO was 74 days compared to 69 days last year.

The slight increase was due to the timing of sales that occurred later in the quarter when compared to last year, but overall DSO is in line with historical levels.

Collections on AR remain strong and the overall quality of our AR is good.

Net inventory totaled $247 million compared to $172 million last year.

This increase is in line with our expectations due to a couple of factors.

First, inventory levels were low last year due to the supply issues we had on several products.

Inventory levels this year are more representative of the levels required as we enter our peak selling season and in line with the targeted levels.

Second, we have more models in this year's product line up, including higher value drivers and Fairway Woods which were also launched later in the quarter.

Third, inventory this year includes pre-launch inventory for some new products to be launched in the second quarter, including both irons and putters, which I already mentioned.

The quality of our inventory is good and all slow-moving items have been adequately reserved for.

Looking forward, I would expect inventories at the end of the second quarter will be lower compared to this quarter but remain higher than last year due to the supply issues we experienced most of last year.

Capital expenditures for the quarter were $8 million.

We estimate 2006 capital expenditures to be in the $35 million range.

This is an increase in our full year estimate due to additional investment in ball capacity for our RIM process for our Hex Tour line of products and some gross margin enhancing initiatives we're undertaking.

Depreciation and amortization was $7 million for the quarter.

Our estimate for 2006 is a range of approximately $25 to $30 million, consistent with our previous guidance.

As you know, last November, our Board of Directors authorized $50 million for share repurchases.

During the first quarter, we repurchased 923,000 shares at an average price of $16.02.

And year-to-date, we have repurchased a total of 1.8 million shares at an average prices $15.91.

We have a balance of $21 million of the authorization remaining.

Those are the highlights for the quarter.

We would now like to open the call for questions.

(OPERATOR INSTRUCTIONS).

Rommel Dionisio, Wedbush Morgan.

I just wanted to ask about the new product launches and the timing of market spend.

That's going to hit obviously second quarter, but do you expect that to also continue through the balance of the year in terms of significant advertising and marketing spend as a percentage of sales compared to last year?

Well, as we have indicated, we were going to invest some additional monies into advertising information for the year, so I don't know exactly what level you're anticipating.

But yes, we expect a continuation of the support programs throughout the year.

Also, George, just -- on your goal of 50 to 60 million of anticipated savings for this year, could you characterize how you feel you are in terms of achieving that goal?

We are in fact tracking quite well against the target to do that.

We are actually updating literally every month on how we are progressing against the targets and so far, everybody is pretty much very close to meeting their objectives.

There are a couple of areas that obviously are going to require a little more attention, but in general, I would say that our target of 50 to 60 is going to be achieved.

Great.

Thanks very much.

Tim Conder, A.G. Edwards.

Thank you.

A couple of things, gentlemen.

George, just to continue on that note, can you give any direction as to how those cost savings, that 50 to 60 could be spread?

I think you alluded earlier in the call in your commentary that that will ramp throughout the year.

Any color though as to how much you realized in the first quarter and then any type of spread?

And then from a revenue perspective, gentlemen, maybe first half versus second half type of split of revenue.

Third question would be, channels telling us that there's some worries about delivery of some of your new Odyssey Putter products, if you could have some commentary on that.

Sure.

As far as the savings are concerned, I may have misled you.

The ramp is in the earnings and sales ramp.

The savings are -- within reason, reasonably flat across the quarters.

Now, the reinvestment of portions of those savings may vary quarter to quarter.

And that, in part, will in some part address the ramping of profitability, but in general, the savings levels are reasonably evenly split among the quarters.

Tim, I might interject there also, keep in mind that fourth quarter of last year, we probably recognized about $8 million worth of savings from the initiatives we took in third quarter.

Okay.

Okay.

And now the -- I am sorry -- the first half, second half -- short of giving you specific quarterly guidance which I'm sure you would like, I don't think that I really can answer that.

I think that as the first quarter was impacted by some timing issues with regard to product introductions, it would not be unfair to expect that the second quarter would have a tailwind associated with it because of the introduction schedule for the second quarter.

I know that's not a specific as you would like me to be, but that would essentially give you at least a little bit of guidance on what to expect in the second quarter.

As far as the 2-Ball product introduction is concerned, that's one that is problematic for us.

When I indicated to you in the earlier calls that we have essentially remapped most of the development process, we were able to get most of the ball -- most of the new product development on the new schedule.

There were some projects and we were crashing to try to get on that new schedule, but because of their status in their development, it was not possible to do that.

The 2-Ball SRT, unfortunately, was one of those projects.

And because it had a relatively high new technology content to it, we have run into some scale up difficulties with a few of the manufacturers.

We believe that we have those in hand now, but the delays caused at the early stages required us to put the initial delivery date back a little bit.

It looks as if we're pretty much -- I won't say out of the woods, but getting close to being of the woods, so we should be okay on that.

But it indeed did have some delaying effect on the 2-Ball SRT introduction.

I wish that we would have been perfect this year.

I think if you check with some other retailers, you'll find their response to our overall product delivery performance has been significantly better than last year.

But unfortunately, it's not perfect and the 2-Ball SRT impact is one we continue to have some difficulty with.

When are you anticipating delivery of that now, George?

Right now, the delivery is called for June.

Okay.

But like I said, we have a number -- we have the 3-Ball SRT of course that was delivered in the first quarter.

We have the HG that's being delivered very shortly.

And the 2-Ball SRT will follow, so it's not that we were without new product introductions on putters.

It would have been actually wonderful had we been able to do the 2-Ball SRT, but it is going to be a little later than originally planned.

Okay, and then on Top-Flite and some of the issues you outlined there, again, you said that obviously it appears the channel is clean and so forth, but a little bit of problems at the price points and brand.

You said $15 to the $21 price point range.

15 to 20.

Yes.

Okay.

Is part of the CapEx -- the increase you discussed, is part of that related to some equipment?

Anything there to -- because if your volume are down in Top-Flite and maybe that could weigh on the gross margin, is there any tie-in to that?

Or was the CapEx just more specifically related to the Callaway side on the -- with balls?

The CapEx is related primarily to the Callaway side because of the rather good success we're meeting with the new Hex Tour and Hex balls.

We've acquired some additional capacity.

There is some capital investment relating to a 2-Ball manufacturer that are solely associated with cost reduction, so no, the Top-Flite thing doesn't really bear very directly on that.

Okay, and --

Tim, one other comment just also, the capacity for the ball that George just mentioned, we also have the Ben Hogan Tour Deep that uses that same technology, so it's not just Callaway, but the majority of it is.

Okay.

Just a clarification question, Brad you said in the first quarter you [repo'd] about a little bit ever 900,000 shares and then year-to-date, 1.8 million, implying the balance was done in the month of April.

Yes.

Okay thank you.

[Mr.

Samuels] your line is open.

Good afternoon guys.

Can you just quickly talk about raw material costs and what sort of impact that's had on the business?

And then is there any way to quantify what Phil's win at the Masters will mean or does mean for your business, specifically on the FT-3 driver?

Sure.

We -- obviously the two major areas that we've incurred some cost pressure, the power needs clearly were affected to some degree and that cost us something in the neighborhood of $2 million in the first quarter.

We have, however locked in our energy needs for the balance of the year and that should no longer be a factor for the balance -- certainly the balance of '06.

There were some cost pressures on ball; some of the pressure was obviously petrochemically related because of the cover and some of it related to rubber.

We have found that we've made some opportunistic buys on rubber and I think we have essentially eliminated the pressure in that area as well.

So we have fundamentally I think absorbed most of the impact at this point through the first quarter and don't really anticipate any additional problems for the balance of the year.

Great.

And then just in terms of the impact Phil's win could have or has had on --

Sure.

We -- our original plan was to have Phil use three drivers.

Unfortunate -- no, I'm only kidding.

We've had a very, very positive response to that two driver action on his part.

That was -- that was actually originated during the course of some conversations between Phil our R&D group -- our [Dr.

Hocknell] has been consulting with Phil for much of the early part of the year specifically leading up to the Masters, and that idea came about during the course of those discussions.

The reaction in the marketplace has really been extraordinary.

The press coverage has been over the top.

We are beginning to see some impact at retail with some [actors] actually going out there wanting to do two drivers.

But I think more important impact has been that the FT-3 driver, that we really believe is the best driver in the marketplace today, has gotten quite a kick as a consequence of that.

And the combination of Phil's win and the Optifit system, which is in the early days focused on the FT-3, both of those effects have been very positive in terms of the sellthrough of FT-3.

So we've begun to see some impact.

Now, a lot of it is anecdotal at this point because it is the early part of the year, but we think it may turn into a very measurable bump in sales, certainly of the FT-3.

Great.

And one last thing, can you just comment on the lawsuit with Titleist, just in terms of where are we with that?

We are in the midst of a lawsuit with Titleist.

John Shanley, Susquehanna Financial.

Good afternoon.

I wonder if you could shed some light on the other country, foreign country sales generation.

It grew at a really rapid rate in the first quarter.

Is it -- where are those sales being generated and is it sustainable at a double-digit level for the balance of the fiscal year?

Well, the growth by region was strongest in -- really in the Asian areas, if you will.

Korea was particularly strong.

We had some good growth in Japan and kind of rest of Asia was very strong.

Europe got hit with some currency issues.

As I mentioned, it was down 4% in U.S. dollars, but up 4% currency neutral.

So it's really kind of around the world we have seen some good growth.

Maybe I'm not reading is correctly, but it shows Europe and Japan and the rest of Asia are separate breakout categories and then it has another category on your P&L for other foreign countries.

That is what I was really getting to.

What are those other foreign countries?

Those are distributors that we have in -- so that's -- you know what, Canada's in there also.

Yes, it's Latin America, Canada, and the rest of Asia.

Okay.

And could those grow at that kind of a level in -- for the rest of the year?

That is problematic.

I doubt -- Canada will pretty much follow the U.S.

I would suspect.

As far as the distributor markets are concerned, they're so heavily dependent on other issues.

I would expect that they will continue to grow rather substantially because we are relatively underdeveloped in some of these regions, but in terms of their having a very material effect on our business going forward, I don't think in the short-term they're going to be controlling.

Okay fine.

And then I wonder if you could -- you gave us a good insight in terms of currency adjustments, in terms of sales.

Could you give us any insight in terms of what impact currency adjustments may have had on bottom-line results in the first quarter?

Now, that is a really hard one to get at and one that I don't have at my fingertips, but there are just so many moving parts there.

Obviously, you get hurt on the topline, but expenses are favorable.

There are just so many moving parts; it's hard to take it all the way down to an impact on the profit.

Okay.

Last question I had, at an analyst meeting I attended for Adidas in London a week or so ago --

Who is that?

I haven't heard of them.

Could you explain who they are?

They're a little company that has a little operation called TaylorMade.

At any rate, there were very bullish on their expectations for growth in the U.S. market, indicating high single, maybe low single digit revenue growth in the U.S. market and it was pretty much across all major product categories.

Could that represent an issue in terms of not only what it may do to Callaway's business prospect, but more importantly, would you meet them in terms of advertising and sales promotion?

And would that do anything in terms of your SG&A if you do match some expanded advertising they indicated will help them launch months that aggressive sales plan?

Again, I can't speak to their sales plan as it relates to golf.

I know that their battles with Nike as far as the shoe business and the clothing businesses concerned might require a great deal of that, but we're certainly prepared to more than defend our businesses far as the golf equipment and ball area are concerned.

I really think that product really speaks to the fortunes of the business much more than advertising spending.

At this particular time, I'm very comfortable and very confident of the product line that we have out there.

Again, I would really encourage any and all of you to talk to the retailers in terms of which sets of equipment, if you will, are leading the pack out there right now as far as the consumers are concerned.

I think you'll find that we are in a very comfortable position.

But again, if it comes to a battle of dollars, they clearly have more of them than we do, but when it comes to an issue of product and consumer acceptability of our product, I think we're in very, very good shape.

Fair enough.

Thanks a lot.

(OPERATOR INSTRUCTIONS).

Alexander Paris, Barrington Research.

Good afternoon.

Nice quarter.

Do you or your -- (indiscernible) your new fitting cart for drivers, has that been delivered to a lot of retailers already or is that still happening in the --

It's still happening although a good proportion of them are out.

All of the reports we are getting back in -- we exposed the cart obviously to a lot of people before we delivered it so that there was a fair amount of anticipation built-up beforehand.

Really, without exception, at least as far as my exposure is concerned, the reception to that cart and what it has been able to do in terms of product sale has been quite extraordinary.

We are actually examining the opportunities to create more of them and get a greater number of them out there a bit faster than we had originally anticipated because the response has been so positive.

Do you have numbers when you will be -- it was just a few years ago when you brought out the cart for [customer] -- a cart for irons and did you have -- do you have any numbers where you have seen where the [location] is there your sales go up or where you would expect this now with drivers to increase sales?

Or it's just -- instead of just aim to build loyalty or what?

No, I would certainly anticipate that it would have the positive effect on sellthrough.

The very unique character of this fitting system compared to any others that have been out there before, the combinations of head and shaft that can be tested with this fitting cart are unique in that the tested item is identical to a production product.

Unlike any other of these fitting systems that allow interchangeable parts, they were never designed so that the balance and weight distribution of the club would be identical to a production product.

And therefore, the experience one got from the test product to the finished product was quite different.

In this particular instance, the design is such that the weight and balance of the entire club is virtually identical to a finished product, and therefore when you get tested and fitted through this system, you are getting exactly the same response you would get from a finished product as well.

This is -- and also, it gives you the opportunity, without having 100 different drivers around, to test many, many, many different combinations that were unattainable before.

So the opportunity it gives for both the client as well as the store to really fit you properly is significantly enhanced.

This is really a breakthrough kind of fitting system and we do have it patented.

It is proprietary to us.

And we think it's going to have a very positive effect longer-term.

It currently is focused on the FT-3 driver.

Later on this year, it will be expanded to include other of our products as well.

So we think we have something that can drive business long-term.

Thank you.

I didn't hear anything mentioned about the 460 driver.

How is that doing?

460 driver is doing very, very well.

And in fact, the expansion of the Optifit system I just indicated will be going into the 460 later on this year.

But all of the initial response to the 460 has been extraordinary.

Do you have just on a big picture basis, do you have any feeling at all as to how the golf industry as a whole will do this year just from industry talk?

Well, the crystal ball is a little tough, but I think I had indicated I take a somewhat different view about the fortunes of the industry and don't rely solely on rounds played, although certainly at the early part of this year, rounds played were up measurably.

I think the success of the industry to drive sales is dependent on innovation, and is dependent largely on our ability to intrigue people with new products and new technologies that promise to improve their game.

And last year was a good example of that because the industry went up 10.9% in dollars when the rounds played went up only 0.4%.

I think based on the product line up we're looking at for '06, I would hope, and I certainly can't predict with any confidence, but I would certainly hope that we will see a very positive response in the marketplace as well.

[James Yon], AIG.

Just one question regarding customization.

Is it possible for you to break out the percentage of sales by Woods and irons, what is customized them what is just off the rack?

Thank you.

We might be able to get close to it in that -- you see the problem is that if you get fitted on the card and you end up getting fitted properly for a standard product, that will come in as a standard product.

If you get fitted for something that's unusual and out of the ordinary, then that will come in as a custom build.

And yes, we can isolate the custom-builds, but there are some proportion of people that are fitted and it actually turns out that they -- don't forget, we make our standard product to be quite suitable for a very large proportion of players, so that if one gets fitted and one ends up with a standard product, it should not be a surprise.

So the answer is I can't necessarily give it to you that finitely, but at least those that get fitted for unusual combinations, we will in fact be able to break out.

Is it possible to share that? (multiple speakers)?

I don't -- well, I guess it's possible.

I don't see it's that -- we don't have it available right now and it's really early days.

I guess we'll try to get -- we obviously are going to try to get those statistics to look at it from our own point of view, and if there's something meaningful there, we would be happy to share it with you.

Thank you.

With that, gentlemen, I will turn the conference back to you.

Well thank you again very much.

Again, I'm sorry that we faced the volatility that we did in the first quarter.

I think that the volatility to a very large extent was unfortunate in that we are, in fact, on the plan that we had announced.

We feel very confident that we are progressing quite comfortably against the three year guidance that we did give a few months ago.

And we hope that those of you who may have a somewhat lower tolerance for volatility will have some patience with us until the marketplace sort of settles in and accepts the kind of guidance that we are intending to give.

In the meantime, I just want to reiterate we are quite happy with the progress the Company is making.

We hope you are as well, and we look forward to having this same conversation with you in the next quarter.

Thank you for joining us.

Thank you ladies and gentlemen.

That does conclude our conference for today.

Thank you for your participation and for using AT&T executive teleconference.

You may now disconnect.

Callaway Golf Co. (ELY) 1302891

George Fellows President and CEO Brad Holiday CFO