Callaway Golf Company Releases Preliminary Full Year 2006 Results

Callaway Golf Company (NYSE:ELY) today announced preliminary
results for the year ended December 31, 2006. Based on current
information, net sales are expected to be approximately $1.018
billion, with corresponding fully diluted earnings per share ranging
from $0.33 to $0.35. This earnings estimate includes after-tax charges
of $0.08 for employee equity-based compensation associated with FAS
123R. It also includes after-tax charges of $0.04 associated with the
Top-Flite integration, $0.03 for the restructuring initiatives
announced in September 2005 and $0.02 for the gross margin improvement
initiatives announced in November 2006. Excluding these charges, pro
forma fully diluted earnings per share is expected to range from $0.50
to $0.52.

For the full year 2005, the Company reported net sales of $998
million, fully diluted earnings per share of $0.19, and pro forma
fully diluted earnings per share of $0.38. Pro forma results exclude
after-tax charges of $0.11 associated with the Top-Flite integration,
$0.07 related to the restructuring initiatives, and $0.01 related to
employee equity-based compensation.

Business Update

"We ended the year with positive momentum on several fronts,"
commented George Fellows, President and CEO of Callaway Golf. "Annual
sales increased 2% with our core Callaway Golf and Odyssey brands
increasing 9% compared to last year, the result of great products and
an increasing presence in the marketplace. Accordingly, our sales
growth translated into U.S. market share gains in woods, balls, and
accessories and we were able to maintain our #1 market position in
irons and putters. In terms of profitability, we were able to reduce
our pro forma operating expenses in 2006 by approximately $35 million,
in addition to the $8 million saved in the fourth quarter of 2005, due
to the restructuring initiatives we began implementing in September of
2005. We also made some very important additions to our management
team in the international, manufacturing, and marketing areas.
Overall, we are pleased with the progress we have made in 2006 and
believe we have positioned the Company for continued success in 2007.
In fact, in what is a clear testament to our investment in R&D, we
have recently received several awards from Golf Digest for our 2007
products including 'editor's choice' in five out of eleven categories,
including driver, fairway woods, game improvement irons, putters, and
balls.

"Looking forward," continued Mr. Fellows, "the Company is in the
process of re-launching the Top-Flite brand this year with a new
technology golf ball, the D2, along with several new marketing and
promotional programs. We are also continuing to focus on improving
gross margins across all our brands and saw improved gross margin
trends during the last quarter of 2006. In addition, we are on track
to execute our plan announced last quarter to improve gross margins by
$50 to $60 million over the next two years. With the momentum of our
core brands and these additional initiatives, we are optimistic about
2007."

Details of Full Year Results

Sales

The estimated increase in sales for the year of approximately 2%
is attributable to a 9% increase in the Callaway Golf/Odyssey brands,
which was offset by a 31% decline in the Top-Flite/Ben Hogan brands.

Gross Margins

Gross margins as a percentage of net sales for 2006 are estimated
to be approximately 39%. Excluding pre-tax charges of $6 million
related to equity-based compensation, the September 2005 restructuring
initiatives, the Top-Flite integration, and the recently announced
gross margin initiatives, it is estimated that pro forma gross margins
for 2006 will be approximately 40%. For the full year 2005, both the
reported and pro forma gross margins were 42%.

Operating Expenses

The Company estimates that its operating expenses for 2006 will be
approximately $361 million compared to $397 million in 2005. Excluding
pre-tax charges of $12 million related to equity-based compensation,
the September 2005 restructuring initiatives, and Top-Flite
integration, pro forma operating expenses are estimated to be
approximately $349 million in 2006 compared to $384 million in 2005.

Conference Call

The Company will release actual fourth quarter and full year 2006
financial results on February 8, 2007. A conference call and webcast
will also take place at that time. During the call, the Company will
provide guidance for full year 2007 and additional information on
fourth quarter and full year 2006 financial results.

Disclaimer: Investors should be aware that the Company has not yet
finalized its results for the fourth quarter and full year 2006 and
that the Company's "preliminary" estimates of net sales, gross
margins, operating expenses and earnings contained in this press
release reflect management's estimates based upon the information
available at the time made. These estimates could differ materially
from the Company's actual results if the information on which the
estimates were based ultimately proves to be incorrect or incomplete.
In addition, statements made in this press release that relate to
future plans, events, financial results, performance or prospects,
including statements relating to the Company's prospects for 2007, the
amount or timing of the anticipated improvement in gross margins and
the 2007 re-launch of the Top-Flite brand, are forward-looking
statements as defined under the Private Securities Litigation Reform
Act of 1995. These estimates and statements are based upon current
information and expectations. Actual results may differ materially
from those anticipated as a result of certain risks and uncertainties,
including but not limited to, delays, difficulties or increased costs
associated with the implementation of the Company's planned gross
margin initiatives, delays or difficulties related to the re-launch of
the Top-Flite brand, market acceptance of current and future products,
adverse market and economic conditions, adverse weather conditions and
seasonality, any rule changes or other actions taken by the USGA or
other golf association that could have an adverse impact upon demand
for the Company's products, a decrease in participation levels in golf
and the effect of terrorist activity, armed conflict, natural
disasters or pandemic diseases on the economy generally, on the level
of demand for the Company's products or on the Company's ability to
manage its supply and delivery logistics in such an environment. For
additional information concerning these and other risks and
uncertainties that could affect these statements and the Company's
business, see Part I, Item 1A of the Company's Annual Report on Form
10-K for the year ended December 31, 2005, as well as other risks and
uncertainties detailed from time to time in the Company's reports on
Forms 10-K, 10-Q and 8-K subsequently filed from time to time with the
Securities and Exchange Commission. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only
as of the date hereof. The Company undertakes no obligation to
republish revised forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

Regulation G: The preliminary financial results reported in this
press release have been prepared in accordance with accounting
principles generally accepted in the United States ("GAAP"). In
addition to the GAAP results, the Company has also provided additional
information concerning its preliminary results, which includes certain
financial measures not prepared in accordance with GAAP. The non-GAAP
financial measures included in this press release exclude charges
associated with employee equity based compensation, charges related to
the integration of the Callaway Golf Company and Top-Flite Golf
Company operations, charges related to the September 2005
restructuring initiatives as well as charges related to the Company's
gross margin initiatives. These non-GAAP financial measures should not
be considered a substitute for any measure derived in accordance with
GAAP. These non-GAAP financial measures may also be inconsistent with
the manner in which similar measures are derived or used by other
companies. Management believes that the presentation of such non-GAAP
financial measures, when considered in conjunction with the most
directly comparable GAAP financial measures, provides additional
useful information concerning the Company's operations without these
charges. The Company has provided reconciling information in the text
of this press release.

Through an unwavering commitment to innovation, Callaway Golf
Company creates products and services designed to make every golfer a
better golfer. Callaway Golf Company manufactures and sells golf clubs
and golf balls, and sells golf accessories, under the Callaway
Golf(R), Top-Flite(R), Odyssey(R) and Ben Hogan(R) brands. For more
information visit www.callawaygolf.com.