Callaway Golf Company

Callaway Golf Company.

Callaway Golf is the leading designer, developer, manufacturer, and marketer of high quality, premium-priced, innovative golf clubs and balls. Some of its key products are: Big Bertha ERC II, Forged Titanium drivers, Big Bertha Hawkeye, and Stealhead X-14 irons. Golf clubs accounted for 64% of net sales in 2004; golf balls accounted for 24% and the rest in accessories. The company has about 3000 employees and its partially owned by Arrowhead Trust INC., 12.9%; Wellington Management, 10.6%; Officers & directors own 5.0% of common shares. Callaway Golf was founded in 1982 by CEO Emeritus Ely R. Callaway. Sales were relatively modest until the early 1990's when it introduced a radically improved club head design, eliminating the hosel and building a longer-hitting, more forgiving oversize club. In February, 1992, the company completed an initial public offering underwritten by Merrill Lynch. 2.6 million shares were sold to the public at $20 each. The stock has since undergone a three two-for-one splits.

The year 2001 was a really bad year for the company and its reputation. Nearly one month after CEO Emeritus Ely R. Callaway retired on May 16th 2001, value par share dropped from $27 to $16 and two months after that share volume dropped drastically from having 19,866,500 before the Emeritus retirement to having 245,300 shares. The VPS has been about one standard deviation from the mean value to date. Stockholders were selling their stock and inside trading was up and going. After that disastrous year, Callaway Golf has taken measures to improve its operations. The company announced last quarter that it is implementing several cost-saving initiatives that ought to improve operating leverage by enhancing efficiency and streamline its overall organization. Among the most important measures being taken is the company's plan to consolidate all gold balls manufacturing at the Top-Flite (Aerodynamic Golf Ball) facilities in Massachusetts and New York. Also, Callaway is integrating the sales efforts for all of the company's equipment brands. It is reorganizing the company's sales force to specialize and concentrate on the group of brand names as a whole, rather than as separate entities. This is likely to mean less sales representatives responsible for selling all of the company's products, which would translate to lower labor costs. However, reducing