Despite softer than expected market conditions, Callaway reported for the first half of 2014 a 9% increase in sales driven by growth in all product categories: woods (+8%), irons (+14%), putters (+9%), golf balls (+7%) and accessories and other (+5%).
Additionally, income from operations increased 40% to $72 million and fully diluted earnings per share increased 12% to $0.66. These increases were driven by the increased sales and improvements in gross margins of 170 basis points, which more than offset a planned increase of $9 million in operating expenses and a $14 million decrease in other income due to adverse changes in foreign currency contract values.
The 2014 results also benefitted from a $9 million decrease in pre-tax charges related to the cost reduction initiatives that were completed in 2013.
For the second quarter, the Company had previously provided guidance that its sales and earnings would show a decrease versus the second quarter of 2013 as a result of a late start to the 2014 golf season, high retail inventory industry wide, and anticipated promotional activity during the second quarter.
The Company's second quarter results reflect those market conditions with sales being down 7%, slightly more than the Company's prior guidance of flat to down 5%, and with earnings declining to $0.04 per diluted share compared to $0.12 per diluted share in 2013, which was slightly better than the Company's prior guidance of breakeven to slightly profitable.
These second quarter results were consistent with the Company's prior full year guidance and the Company today has confirmed its full year guidance, estimating full year net sales of $880 to $900 million and diluted earnings per share of $0.12 to $0.16.
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