Callaway Golf Announces First Quarter 2007 Results

Callaway Golf Company (NYSE:ELY) today announced its financial
results for the first quarter ended March 31, 2007, reporting
significant improvements in sales and earnings over the same period a
year ago. Highlights for the quarter include:

-- Net sales of $334.6 million, an 11% increase as compared to
$302.4 million for the same period in 2006.

-- Fully diluted earnings per share of $0.48 on 68.3 million
shares as compared to $0.33 on 70.1 million shares in 2006.
This represents a 45% increase in diluted earnings per share.

-- Fully diluted earnings per share for the first quarter of 2007
include $0.01 of after-tax charges for gross margin
improvement initiatives announced in November, 2006. Also, the
first quarter of 2006 includes $0.01 of after-tax charges for
the integration of Top-Flite operations. Excluding these
charges, the Company's pro forma fully diluted earnings per
share for the first quarter of 2007 would have increased 44%
to $0.49, as compared to pro forma fully diluted earnings per
share of $0.34 for the first quarter of 2006.

"We are pleased with our results for the first quarter and the
initial consumer acceptance of our new products this year," commented
George Fellows, President and CEO. "Our efforts to improve our product
development process and supply chain along with gross margin
improvement initiatives are beginning to deliver positive operating
results."

"While cautiously optimistic given our first quarter results,"
continued Mr. Fellows, "it is important to remember that it is very
early in the year. In fact, the second quarter is the real start of
the golf season in many regions, and when consumer purchases hit their
peak. Accordingly, our focus is to support our retailers during the
peak season and deliver products to them and our consumers as quickly
as possible. Having said this, we are raising our full year estimates
to reflect the positive results of the first quarter, balanced with
the fact that a majority of the year still remains."

Business Outlook

The Company estimates that its full year 2007 net sales will be in
the range of $1.045 to $1.065 billion compared to the previous
estimate of $1.035 to $1.055 billion and that its 2007 full year pro
forma fully diluted earnings per share will be in the range of $0.72
to $0.82 on an estimated 70 million shares compared to $0.66 to $0.76
on 68 million shares. Pro forma earnings exclude charges related to
the Company's gross margin improvement initiatives, currently
estimated at $0.08 per share for 2007, but include charges related to
employee equity-based compensation under FAS 123R.

For more details, including pro forma reconciliations to assist in
year-over-year comparison, please see the attached "Supplemental
Financial Information."

The Company will be holding a conference call at 2:00 p.m. PDT
today. The call will be broadcast live over the Internet and can be
accessed at www.callawaygolf.com. To listen to the call, please go to
the website at least 15 minutes before the call to register and for
instructions on how to access the broadcast. A replay of the
conference call will be available approximately two hours after the
conclusion, and will remain available through 9:00 p.m. PDT on
Thursday, May 10, 2007. The replay may be accessed through the
Internet at www.callawaygolf.com or by telephone by calling
1-800-475-6701 toll free for calls originating within the United
States or 320-365-3844 for International calls. The replay pass code
is 871645.

Disclaimer: Statements used in this press release that relate to
future plans, events, financial results, performance or prospects,
including statements relating to estimated sales and earnings for
2007, 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.
Investors should understand that it is very difficult to forecast
sales of the Company's products as a substantial portion of the
Company's sales each year is derived from the sale of new products.
Accurately estimating the Company's sales (and therefore earnings)
each year is therefore based upon various unknowns including consumer
acceptance of the Company's new products as well as future consumer
discretionary purchasing behavior. Actual results may differ
materially from those estimated or anticipated as a result of these
unknowns or 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, the re-launch of the Top-Flite brand or the
implementation of future initiatives; 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 or supply of 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, 2006, 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 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 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 the
integration of the Callaway Golf Company and Top-Flite Golf Company
operations and charges related to the 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 and
in the supplemental financial information attached to this release.

About Callaway Golf

Through an unwavering commitment to innovation, Callaway Golf
Company creates products and services designed to make every golfer a
better golfer. Callaway Golf Company, which celebrates its 25th
Anniversary in 2007, manufactures and sells golf clubs and golf balls,
and sells golf accessories, under the Callaway Golf(R), Odyssey(R),
Top-Flite(R), and Ben Hogan(R) brands in more than 110 countries
worldwide. For more information please visit www.callawaygolf.com.

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Callaway Golf Company
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)

March 31, December 31,
2007 2006
----------- ------------

ASSETS
Current assets:
Cash and cash equivalents $34,594 $46,362
Accounts receivable, net 278,810 118,133
Inventories, net 270,646 265,110
Deferred taxes 34,601 32,813
Income taxes receivable - 9,094
Other current assets 21,762 21,688
----------- ------------
Total current assets 640,413 493,200

Property, plant and equipment, net 130,985 131,224
Intangible assets, net 174,475 175,159
Deferred taxes 33,006 18,821
Other assets 27,707 27,543
----------- ------------
$1,006,586 $845,947
=========== ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $130,865 $111,360
Accrued employee compensation and benefits 27,012 18,731
Accrued warranty expense 14,156 13,364
Bank line of credit 155,000 80,000
Other current liabilities 5,098 -
----------- ------------
Total current liabilities 332,131 223,455

Long-term liabilities 65,493 43,388

Minority interest 1,768 1,987

Shareholders' equity 607,194 577,117
----------- ------------
$1,006,586 $845,947
=========== ============
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Callaway Golf Company
Statements of Operations
(In thousands, except per share data)
(Unaudited)

Quarter Ended
March 31,
------------------------
2007 2006
--------- ---------

Net sales $334,607 100% $302,445 100%
Cost of sales 173,886 52% 170,933 57%
--------- ---------
Gross profit 160,721 48% 131,512 43%
Operating expenses:
Selling 75,291 23% 68,128 23%
General and administrative 21,558 6% 20,224 7%
Research and development 8,016 2% 6,804 2%
--------- ---------
Total operating expenses 104,865 31% 95,156 31%
Income from operations 55,856 17% 36,356 12%
Other income (expense), net (1,338) 302
--------- ---------
Income before income taxes 54,518 16% 36,658 12%
Income tax provision 21,682 13,797
--------- ---------
Net income $32,836 10% $22,861 8%
========= =========

Earnings per common share:
Basic $0.49 $0.33
Diluted $0.48 $0.33
Weighted-average shares outstanding:
Basic 67,272 69,166
Diluted 68,318 70,143
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Callaway Golf Company
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)

Quarter Ended
March 31,
-------------------
2007 2006
--------- ---------
Cash flows from operating activities:
Net income $32,836 $22,861
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,009 7,290
Non-cash compensation 3,127 4,401
Loss on disposal of assets 3 138
Deferred taxes (264) (227)
Changes in assets and liabilities (122,057) (129,560)
--------- ---------
Net cash used in operating activities (77,346) (95,097)
--------- ---------

Cash flows from investing activities:
Capital expenditures (7,987) (6,844)
Proceeds from sale of capital assets - 120
--------- ---------
Net cash used in investing activities (7,987) (6,724)
--------- ---------

Cash flows from financing activities:
Issuance of Common Stock 12,833 5,761
Acquisition of Treasury Stock (15,155) (14,788)
Net proceeds from line of credit 75,000 85,000
Other financing activities 677 406
--------- ---------
Net cash provided by financing activities 73,355 76,379
--------- ---------

Effect of exchange rate changes on cash and cash
equivalents 210 375
Net decrease in cash and cash equivalents (11,768) (25,067)
Cash and cash equivalents at beginning of period 46,362 49,481
--------- ---------
Cash and cash equivalents at end of period $34,594 $24,414
========= =========
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Callaway Golf Company
Consolidated Net Sales and Operating Segment Information
(In thousands)
(Unaudited)

Net Sales by Product Category
------------------------------------
Quarter Ended
March 31, Growth/(Decline)
------------------- ----------------
2007 2006 Dollars Percent
--------- --------- -------- -------
Net sales:
Woods $103,023 $97,120 $5,903 6%
Irons 100,037 86,560 13,477 16%
Putters 29,074 24,878 4,196 17%
Golf balls 53,546 55,730 (2,184) -4%
Accessories and other 48,927 38,157 10,770 28%
--------- --------- --------
$334,607 $302,445 $32,162 11%
========= ========= ========
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Net Sales by Region
------------------------------------
Quarter Ended
March 31, Growth/(Decline)
------------------- ----------------
2007 2006 Dollars Percent
--------- --------- -------- -------
Net sales:
United States $183,804 $181,283 $2,521 1%
Europe 56,023 50,085 5,938 12%
Japan 37,940 26,114 11,826 45%
Rest of Asia 22,821 16,988 5,833 34%
Other foreign countries 34,019 27,975 6,044 22%
--------- --------- --------
$334,607 $302,445 $32,162 11%
========= ========= ========
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Operating Segment Information
------------------------------------
Quarter Ended
March 31, Growth/(Decline)
------------------- ----------------
2007 2006 Dollars Percent
--------- --------- -------- -------
Net sales:
Golf clubs $281,061 $246,715 $34,346 14%
Golf balls 53,546 55,730 (2,184) -4%
--------- --------- --------
$334,607 $302,445 $32,162 11%
========= ========= ========
Income before provision for income
taxes:
Golf clubs $65,656 $45,067 $20,589 46%
Golf balls 5,415 6,356 (941) -15%
Reconciling items (1) (16,553) (14,765) (1,788) -12%
--------- --------- --------
$54,518 $36,658 $17,860 49%
========= ========= ========

(1) Represents corporate general and administrative expenses and other
income (expense) not utilized by management in determining segment
profitability.
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Callaway Golf Company
Supplemental Financial Information
(In thousands, except per share data)
(Unaudited)

Quarter Ended March 31,
--------------------------------
2007
--------------------------------

Pro Forma Gross Margin
Callaway Improvement Total as
Golf Initiatives Reported
--------- ------------ ---------
Net sales $334,607 $- $334,607
Gross profit 162,126 (1,405) 160,721
% of sales 48% n/a 48%
Operating expenses 104,865 - 104,865
--------- ------------ ---------
Income from operations 57,261 (1,405) 55,856
Other income (expense), net (1,338) - (1,338)
--------- ------------ ---------
Loss before income taxes 55,923 (1,405) 54,518
Income tax provision 22,236 (554) 21,682
--------- ------------ ---------
Net Income $33,687 $(851) $32,836
========= ============ =========

Diluted earnings (loss) per share: $0.49 $(0.01) $0.48
Weighted-average shares outstanding: 68,318 68,318 68,318

Quarter Ended March 31,
-------------------------------
2006
-------------------------------

Pro Forma
Callaway Integration Total as
Golf Charges Reported
---------- ----------- ---------
Net sales $302,445 $- $302,445
Gross profit 132,181 (669) 131,512
% of sales 44% n/a 43%
Operating expenses 94,805 351 95,156
--------- ----------- ---------
Income from operations 37,376 (1,020) 36,356
Other income (expense), net 302 - 302
--------- ----------- ---------
Loss before income taxes 37,678 (1,020) 36,658
Income tax provision 14,192 (395) 13,797
--------- ----------- ---------
Net Income $23,486 $(625) $22,861
========= =========== =========

Diluted earnings (loss) per share: $0.34 $(0.01) $0.33
Weighted-average shares outstanding: 70,143 70,143 70,143

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