Callaway financial issues??

lcsmrtn

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Don't want to start wild rumours here, but heard from a Golftown employee that Callaway might have a few financial issues. Not sure what he based this on but said GMac not resigning was a sign and that the upro not doing so well cause them some harm. Anyone hear anything like that or is the guy at Golftown out to lunch?
 

coolbreeze

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Don't want to start wild rumours here, but heard from a Golftown employee that Callaway might have a few financial issues. Not sure what he based this on but said GMac not resigning was a sign and that the upro not doing so well cause them some harm. Anyone hear anything like that or is the guy at Golftown out to lunch?
My guess is out to lunch but I know nothing.
 

JB

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Don't want to start wild rumours here, but heard from a Golftown employee that Callaway might have a few financial issues. Not sure what he based this on but said GMac not resigning was a sign and that the upro not doing so well cause them some harm. Anyone hear anything like that or is the guy at Golftown out to lunch?
Its really no secret since they are a public company. They have reported losses that are fairly substantial.

I will say that the employee I believe is way off base with those two reasons though.
 

Golf 'N Gator

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I know last winter when our club pro made the decision to drop the Callaway line, he had several sit downs with his rep, both at the PGA show and at home and the rep made it no secret then that they were taking some hits in market share and profit.
I have not looked at their reports for sometime, but they can be found here; http://ir.callawaygolf.com/phoenix.zhtml?c=68083&p=irol-reportsAnnual
 

Hanks

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If Callaway has a super successful product line at the THP Outing in May, they may have their financial woes cured. Look at the buzz and instant success and desire of the Masie after the last demo day.
 

coolbreeze

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If Callaway has a super successful product line at the THP Outing in May, they may have their financial woes cured. Look at the buzz and instant success and desire of the Masie after the last demo day.
Good thinking but I doubt it. After looking into this morning they are going to need a lot more than some THP Karma.
 

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Good thinking but I doubt it. After looking into this morning they are going to need a lot more than some THP Karma.
You will be VERY surprised at the type of swell created by what actual consumers have to say about products. It reaches far more than this forum that is for sure.

Do I think one product line can change everything? No. But I think successful showings are a great start.
 

Kmac

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I cant say Im surprised by this and Ive heard this before but I sure hope they turn things around. Callaway is good for the consumer and good for golf. No Callaway is no good and nobody wins.
 

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I cant say Im surprised by this and Ive heard this before but I sure hope they turn things around. Callaway is good for the consumer and good for golf. No Callaway is no good and nobody wins.
I did hear a rumble that Nike would look into Callaway. I doubt it, but it would be really interesting.
 

coolbreeze

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You will be VERY surprised at the type of swell created by what actual consumers have to say about products. It reaches far more than this forum that is for sure.

Do I think one product line can change everything? No. But I think successful showings are a great start.
No doubt it would be a great start, and based on my experience with my business there is nothing as good as good as feedback from what actual consumers have to say. I was simply making the point that looking at the numbers they are going to need more than one good year to get back on solid financial footing.
 

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Isn't the rumor that's been going around lately is that Dick's was eyeballing Callaway as a way to get into the Asian market?
 

interlooper

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Callaway is in major cash-burn right now. During their last reported 3 months, their income loss was $37 million. They are announcing earnings next Tuesday, so we will know soon just how much worse it has become since their last reporting quarter. To make matters worse, they have access to a $250 million line of credit, but that expires in one year. First, they may not even be able to tap that right now because they may be blowing covenants that restrict the use of the line of credit, plus, it may be difficult, if not practically impossible to refinance that debt should they still be in a cash-burn situation.

I mentioned this a few months ago in the Callaway Outsourcing thread, but I believe they are going to have to sell of some profitable units, or admit that the stand-alone strategy was a failure, and allow another company or hedgie to come in as a white-knight.
 

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Callaway is in major cash-burn right now. During their last reported 3 months, their income loss was $37 million. They are announcing earnings next Tuesday, so we will know soon just how much worse it has become since their last reporting quarter. To make matters worse, they have access to a $250 million line of credit, but that expires in one year. First, they may not even be able to tap that right now because they may be blowing covenants that restrict the use of the line of credit, plus, it may be difficult, if not practically impossible to refinance that debt should they still be in a cash-burn situation.

I mentioned this a few months ago in the Callaway Outsourcing thread, but I believe they are going to have to sell of some profitable units, or admit that the stand-alone strategy was a failure, and allow another company or hedgie to come in as a white-knight.
you are the man when it comes to this info. you always have the low down for us. thanks buddy!
 

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You will be VERY surprised at the type of swell created by what actual consumers have to say about products. It reaches far more than this forum that is for sure.

Do I think one product line can change everything? No. But I think successful showings are a great start.
I think this is a very good post JB. I can't help but wonder what kind of action or success Callaway might see if they participated in some seeding. The one thing that I have seen drum up a ton of interest if not sales is when OEM's send stuff in for long term review. I think it does a couple of things:

1. Puts their products in the hands of a true, informed amateur.
2. Shows that they are willing to participate (which honestly, sways the crap out of my purchasing decisions)

If they truly want to compete with Taylormade like they do in their national marketing campaigns, why not compete with them here per se?
 

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I can't imagine people are beating down doors to buy or try items like new golf clubs right now. If they want to sell clubs they gotta get them out there, however/wherever. I love coming across an unexpected demo day and will try hitting anything you put into my hands. However I have a perfectly usable set so I'm not going to ask the pro to tape some up just so I can try a different club.
 

coolbreeze

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Callaway is in major cash-burn right now. During their last reported 3 months, their income loss was $37 million. They are announcing earnings next Tuesday, so we will know soon just how much worse it has become since their last reporting quarter. To make matters worse, they have access to a $250 million line of credit, but that expires in one year. First, they may not even be able to tap that right now because they may be blowing covenants that restrict the use of the line of credit, plus, it may be difficult, if not practically impossible to refinance that debt should they still be in a cash-burn situation.

I mentioned this a few months ago in the Callaway Outsourcing thread, but I believe they are going to have to sell of some profitable units, or admit that the stand-alone strategy was a failure, and allow another company or hedgie to come in as a white-knight.
Great info! Thank you.
 

jnug

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Originally Posted by interlooper
Callaway is in major cash-burn right now. During their last reported 3 months, their income loss was $37 million. They are announcing earnings next Tuesday, so we will know soon just how much worse it has become since their last reporting quarter. To make matters worse, they have access to a $250 million line of credit, but that expires in one year. First, they may not even be able to tap that right now because they may be blowing covenants that restrict the use of the line of credit, plus, it may be difficult, if not practically impossible to refinance that debt should they still be in a cash-burn situation.

I mentioned this a few months ago in the Callaway Outsourcing thread, but I believe they are going to have to sell of some profitable units, or admit that the stand-alone strategy was a failure, and allow another company or hedgie to come in as a white-knight.

Very insightful interlooper.

I saw the line of credit dilemma in their annual statement. Their 10-Q's through 2010 don't look very promising.

the 2010 annual could make interesting reading. However, unless something earth shattering happened in the last reporting quarter of the year, I am not sure there will be anything that will flip 2010 the right way for them or even look like things are better directionally. They got whacked pretty good in 2009 and at least based on the 2010 10-Q's I have seen it does not look like a turnaround year of any sort.

This is now such a competitive market. They don't seem to have adapted as well as one would have hoped at least from a business perspective having nothing to do with the quality of their product or their R&D. That said even on the product front they look hard pressed. Their product releases almost pale when compared to their primary competitors. While they may be well capable of hanging on to what share they have by virtue of continuing to be attractive to their existing customer base, it is hard to see how they can grow share unless they maybe beat the other guys somehow to the growing market in Asia. They don't get much out of that market currently.

Any thoughts regarding their strategy interlooper?
 

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This is now such a competitive market. They don't seem to have adapted as well as one would have hoped at least from a business perspective having nothing to do with the quality of their product or their R&D. That said even on the product front they look hard pressed. Their product releases almost pale when compared to their primary competitors. While they may be well capable of hanging on to what share they have by virtue of continuing to be attractive to their existing customer base, it is hard to see how they can grow share unless they maybe beat the other guys somehow to the growing market in Asia. They don't get much out of that market currently.
If you look at where their losses were at their lowest, it was not as big a hard goods issue or equipment issue. Since that time they have shifted production and resources to lower cost. They have done away with internal apparel, leather, and shoe manufacturing/designing costs and have it done based on licensing (generalizing) and have cut costs in almost every area including tour costs.

While I dont think 2010 quarterly will reflect that, I do think necessary changes have been made to see light at the end of the tunnel. Glimmers anyway.

Im curious where your Asia marketshare numbers are coming from and what numbers you are showing for Callaway?
 

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I was referring to the percentage of their total business that comes from Asia as opposed to their share of the Asia market. Those numbers are in their reports. Although one could guess that given the percentage of their total business that comes from Asia that market would seem to represent something of an opportunity. They do claim that part of their desire to change manufacturing locations was to locate manufacturing resources regionally from a market perspective. That would seem to suggest they think they have some additional opportunity that they have not been able to address "effectively" to date.
 

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One thing I should have added:
As they roll up to that 2012 date, it would seem that they have some things going for them. I know that date is really right around the corner now but among the things i would hope the banks would consider:
a. They are a good company clearly making an effort to get the cost side of the equation under control
b. They do have a loyal following and good products (at least I think so)

All by way of saying that I do understand interlooper's point but I would hope that if the situation does not substantially improve those eight banks would see forcing Callaway into an even tougher spot as something that would not likely benefit anybody. I guess there is the possibility of a really good white night out there.

Putting Callaway's specific issues aside for a moment do interlooper or JB see somebody out there that is acquisitive that would make a "good" white knight for someone in the golf equipment business? I am going to suggest that "good" implies an acquirer that would be a good steward of a golf equipment business and good for us as market participants.
 

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This is the new reality for all businesses, if your strategies are not being tailored for Asia-Pac and South America you are a dying business. U.S. Growth has ground to a halt and the fight is not for growth but for someone else's customers. The growth markets are A-P and S-A so your go to market strategy, distribution network, and product offering has to be strong.
 
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jnug

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The growth markets are A-P and S-A so your go to market strategy, distribution network, and product offering has to be strong.
Here is where i think Callaway might have a leg up. When they really muscled their way into the golf equipment market they made a strong effort to appeal to golfers that for whatever reason needed clubs that would help them advance the ball. While their competition would talk about hitting the ball longer and hitting the ball straighter, Callaway did it in such a way as to suggest that if you really had a hard time hitting it long and straight, their clubs would help you. As I remember it the big names in golf equipment of that era would talk about that from the perspective of someone that was already a pretty decent amateur golfer who wanted to improve from there.

I don't think the golf industry expects to find legions of accomplished amateurs in the growing Asian golf market but will more likely find many new golfers just taking up the sport. While I don't mean to imply that Callaway only makes clubs for people that really need help advancing the ball I do mean to suggest that if they could find their way back to that marketing position it might help them differentiate themselves in the Asian market in a way that would be meaningful in that market.

I think people consider Callaway to be one of the elite club manufacturers. I certainly think of them that way. However, that is a double edged sword. While it says they are every bit as good as the other elite makers, it does not really differentiate them within that group and that is tough sledding competitively. It certainly would be a major feather in their cap if they could become king of the hill in the Asian market and returning to what I remember to be their roots from a marketing perspective may just be the ticket.
 

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Callaway came onto the golf scene the same way Taylormade came onto the golf scene (popularity). With a driver. With the marketing of distance!
 

jnug

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Callaway came onto the golf scene the same way Taylormade came onto the golf scene (popularity). With a driver. With the marketing of distance!
I completely agree with that. Where they differ I think is in how they made that pitch. For example, for many of us our initial access to Callaway was through the Harrington catalog, not though a pro shop or a golf specialty store or sporting goods store. In fact I think Callaway may have been the only golf club line that had whole iron sets for sale in the Harrington catalog, although Ping may have had iron sets for sale at one point there as well. However Ping irons would not have been pitched differently than the Callaway clubs were pitched. For many of us the first we saw of Big Bertha driver was in the Harrington catalog. If you look at the golf clubs that are marketed in the Harrington catalog today, the pitch is pretty much the same. The golf clubs that are pitched there today are pretty much pitched as problem solving clubs, as something truly unique in that regard. They are specialty clubs. You don't see the next generation of XYZ company;'s irons there and rarely see full sets of anything. AgainI I am really stretching the memory banks try to remember if Ping had full iron sets there at one point. It is extremely rare at any rate. You certainly don't see listing after listing of this year's club lineup. That was my point. They were pitched the same way that clubs are pitched in the Harrington catalog today.
 
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