Callaway Golf Announces Record Sales for Second Quarter and First Six Months of 2007

Callaway Golf Company (NYSE:ELY) today announced its financial
results for the second quarter ended June 30, 2007. Highlights for the
second quarter include:

-- Net sales of $380.0 million, an increase of 11% compared to
$341.8 million for the same period in 2006. These record sales are
primarily the result of strong sales of the Fusion FT-5 and FT-i
drivers and X-20 irons, as well as increases in sales of accessories
and golf balls.

-- Fully diluted earnings per share of $0.53 on 69.3 million
shares outstanding, an increase of 61% compared to $0.33 on 68.6
million shares outstanding in 2006.

-- Fully diluted earnings per share include $0.02 of after-tax
charges for gross margin improvement initiatives. The second quarter
of 2006 includes after-tax charges of $0.01 for the integration of
Top-Flite and $0.01 for the restructuring initiatives announced in
September 2005. Excluding these charges, the Company's pro forma fully
diluted earnings per share for the second quarter of 2007 would have
been $0.55, an increase of 57% compared to $0.35 for the second
quarter of 2006.

-- Gross profit for the second quarter of 2007 increased 25% to
$175.1 million (or 46% of net sales) compared to $140.1 million (or
41% of net sales) for the second quarter of 2006. The increase in
gross profit as a percent of sales is primarily the result of an
increased mix of higher margin woods and irons products and positive
results from the Company's gross margin improvement initiatives
announced in November, 2006.

-- Operating expenses for the second quarter of 2007 were $113.0
million (or 30% of net sales) compared to $101.3 million (or 30% of
net sales) in 2006. The dollar increase is primarily due to higher
selling expenses associated with increased sales, the negative impact
of the weaker dollar on international operating expenses, higher legal
expense associated with protecting the Company's intellectual
property, and increased annual incentive compensation associated with
the improved financial results compared to 2006.

Highlights for the first six months include:

-- Net sales increased 11% to $714.6 million, a new record for the
Company. Net Sales were $644.3 million for the same period in 2006.

-- Fully diluted earnings per share increased 55% to $1.01 on 68.8
million shares outstanding, as compared to $0.65 on 69.4 million
shares outstanding in 2006.

-- Fully diluted earnings per share include after-tax charges of
$0.03 associated with the Company's gross margin improvement
initiatives. Results for the first half of 2006 include after-tax
charges of $0.02 for the integration of Top-Flite and $0.01 for
restructuring. Excluding these charges, the Company's pro forma fully
diluted earnings per share for 2007 and 2006 would have been $1.04 and
$0.68 respectively, an increase of 53%.

-- Gross profit for 2007 was $335.8 million (or 47% of net sales)
compared to $271.6 million (or 42% of net sales) for 2006. The
increase in gross profit is primarily the result of an increase in mix
of higher margin products as well as positive results from the
Company's gross margin improvement initiatives.

-- Operating expenses for 2007 were $217.9 million (or 30% of net
sales), compared to $196.5 million (or 30% of net sales) for 2006. The
increase is primarily due to higher selling and marketing expenses
associated with the increase in sales, the negative impact of a weaker
dollar on international operating expenses, increased legal expense
associated with protecting the Company's intellectual property, and
increased annual incentive compensation associated with the improved
financial results.

"With the first half of 2007 behind us, we are pleased with our
progress on many fronts," commented George Fellows, President and CEO.
"Sales have increased 11% for the quarter and first half of the year,
the result of strong consumer acceptance of our new products. Great
technology in our Fusion line, particularly our driver products, an
improved product development process, and improved ability to ship our
products to market efficiently and on time are all contributing to
these strong results. We have also seen U.S. revenue market share
increase for the Top-Flite brand since December, 2006 driven by the
successful introduction of the new D2 golf ball and a cleaner retail
channel, resulting in improved profitability of this important brand."

"We are also making great progress on our gross margin
initiatives," continued Mr. Fellows. "In fact, we are ahead of our
internal targets, and are on track with the inventory reduction
initiatives we announced earlier this year. Because of these results,
we are increasing our full year outlook for the second time this
year."

Business Outlook

The Company estimates that its full year 2007 net sales will be in
the range of $1.070 to $1.080 billion compared to the previous
estimate of $1.035 to $1.055 billion. It is also estimated that the
2007 full year pro forma fully diluted earnings per share will be in
the range of $0.78 to $0.84 compared to the previous estimate of $0.72
to $0.82, both on 70 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.

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 three hours after the
call ends, and will remain available through 9:00 p.m. PDT on
Wednesday, August 8, 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 881407.

Disclaimer: Statements used in this press release that relate to
future plans, events, financial results, performance or prospects,
including statements relating to progress on the gross margin or
inventory reduction initiatives or 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 majority 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
and demand for 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 other risks and uncertainties, including delays,
difficulties or increased costs in the supply of components needed to
manufacture the Company's products, in manufacturing the Company's
products, or in connection 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.

Through an unwavering commitment to innovation, Callaway Golf
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.

-0-
*T
Callaway Golf Company
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)

June 30, December 31,
2007 2006
-------- ------------

ASSETS
Current assets:
Cash and cash equivalents $ 48,397 $ 46,362
Accounts receivable, net 281,538 118,133
Inventories, net 225,835 265,110
Deferred taxes 37,047 32,813
Income taxes receivable - 9,094
Other current assets 21,429 21,688
-------- ------------
Total current assets 614,246 493,200

Property, plant and equipment, net 133,052 131,224
Intangible assets, net 174,089 175,159
Deferred taxes 25,866 18,821
Other assets 27,866 27,543
-------- ------------
$975,119 $845,947
======== ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $141,358 $111,360
Accrued employee compensation and benefits 31,960 18,731
Accrued warranty expense 14,365 13,364
Bank line of credit 55,394 80,000
Other current liabilities 8,033 -
-------- ------------
Total current liabilities 251,110 223,455

Long-term liabilities 59,117 43,388

Minority interest 1,937 1,987

Shareholders' equity 662,955 577,117
-------- ------------
$975,119 $845,947
======== ============
*T

-0-
*T
Callaway Golf Company
Statements of Operations
(In thousands, except per share data)
(Unaudited)

Quarter Ended
June 30,
-----------------------
2007 2006
--------- ---------

Net sales $380,017 100% $341,815 100%
Cost of sales 204,892 54% 201,729 59%
--------- ---------
Gross profit 175,125 46% 140,086 41%
Operating expenses:
Selling 80,910 21% 77,045 23%
General and administrative 24,187 6% 18,101 5%
Research and development 7,907 2% 6,194 2%
--------- ---------
Total operating expenses 113,004 30% 101,340 30%
Income from operations 62,121 16% 38,746 11%
Other expense, net (1,891) (1,273)
--------- ---------
Income before income taxes 60,230 16% 37,473 11%
Income tax provision 23,591 14,934
--------- ---------
Net income $ 36,639 10% $ 22,539 7%
========= =========

Earnings per common share:
Basic $ 0.54 $ 0.33
Diluted $ 0.53 $ 0.33
Weighted-average shares outstanding:
Basic 67,970 67,799
Diluted 69,274 68,577

Six Months Ended
June 30,
-----------------------
2007 2006
--------- ---------

Net sales $714,624 100% $644,260 100%
Cost of sales 378,778 53% 372,662 58%
--------- ---------
Gross profit 335,846 47% 271,598 42%
Operating expenses:
Selling 156,201 22% 145,173 23%
General and administrative 45,745 6% 38,325 6%
Research and development 15,923 2% 12,998 2%
--------- ---------
Total operating expenses 217,869 30% 196,496 30%
Income from operations 117,977 17% 75,102 12%
Other expense, net (3,229) (971)
--------- ---------
Income before income taxes 114,748 16% 74,131 12%
Income tax provision 45,273 28,731
--------- ---------
Net income $ 69,475 10% $ 45,400 7%
========= =========

Earnings per common share:
Basic $ 1.03 $ 0.66
Diluted $ 1.01 $ 0.65
Weighted-average shares outstanding:
Basic 67,623 68,479
Diluted 68,798 69,356
*T

-0-
*T
Callaway Golf Company
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)

Six Months Ended
June 30,
--------------------
2007 2006
--------- ----------
Cash flows from operating activities:
Net income $ 69,475 $ 45,400
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 17,600 15,225
Non-cash compensation 6,527 6,331
Loss on disposal of assets 61 324
Deferred taxes 5,348 1,165
Changes in assets and liabilities, net of
effects from acquisition (66,208) (114,383)
--------- ----------
Net cash provided by (used in) operating
activities 32,803 (45,938)
--------- ----------

Cash flows from investing activities:
Capital expenditures (18,439) (20,463)
Business acquisition, net of cash acquired - (5,911)
Proceeds from sale of capital assets 9 120
--------- ----------
Net cash used in investing activities (18,430) (26,254)
--------- ----------

Cash flows from financing activities:
Issuance of Common Stock 42,108 6,519
Dividends paid, net (4,757) (4,901)
Acquisition of Treasury Stock (28,735) (42,894)
Tax benefit from exercise of stock option 3,013 481
(Payments on) proceeds from line of credit net (24,606) 110,300
Other financing activities (50) (20)
--------- ----------
Net cash (used in) provided by financing
activities (13,027) 69,485
--------- ----------

Effect of exchange rate changes on cash and
cash equivalents 689 1,339
--------- ----------
Net increase (decrease) in cash and cash
equivalents 2,035 (1,368)
Cash and cash equivalents at beginning of
period 46,362 49,481
--------- ----------
Cash and cash equivalents at end of period $ 48,397 $ 48,113
========= ==========
*T

-0-
*T
Callaway Golf Company
Consolidated Net Sales and Operating Segment Information
(In thousands)
(Unaudited)

Net Sales by Product Category
-------------------------------------------------------------------
Quarter Ended
June 30, Growth/(Decline)
----------------- ----------------
2007 2006 Dollars Percent
-------- -------- -------- -------
Net sales:
Woods $111,971 $ 86,319 $25,652 30%
Irons (1) 95,381 103,148 (7,767) -8%
Putters 37,458 37,313 145 0%
Golf balls 72,114 69,103 3,011 4%
Accessories and other (1) 63,093 45,932 17,161 37%
-------- -------- --------
$380,017 $341,815 $38,202 11%
======== ======== ========

Net Sales by Product Category
----------------------------------------------------------------
Six Months Ended
June 30, Growth/(Decline)
----------------- ----------------
2007 2006 Dollars Percent
-------- -------- -------- -------
Net sales:
Woods $214,994 $183,439 $31,555 17%
Irons (1) 195,418 189,708 5,710 3%
Putters 66,532 62,191 4,341 7%
Golf balls 125,660 124,833 827 1%
Accessories and other (1) 112,020 84,089 27,931 33%
-------- -------- --------
$714,624 $644,260 $70,364 11%
======== ======== ========

(1) Prior periods have been restated to reflect current period
classification.
*T

-0-
*T
Net Sales by Region
---------------------------------------------------------------------
Quarter Ended
June 30, Growth/(Decline)
----------------- ----------------
2007 2006 Dollars Percent
-------- -------- -------- -------
Net sales:
United States $204,391 $186,349 $18,042 10%
Europe 70,284 54,336 15,948 29%
Japan 33,847 34,042 (195) -1%
Rest of Asia 25,645 25,561 84 0%
Other foreign countries 45,850 41,527 4,323 10%
-------- -------- --------
$380,017 $341,815 $38,202 11%
======== ======== ========

Net Sales by Region
--------------------------------------------------------------------
Six Months Ended
June 30, Growth/(Decline)
----------------- ----------------
2007 2006 Dollars Percent
-------- -------- -------- -------
Net sales:
United States $388,195 $367,632 $20,563 6%
Europe 126,307 104,421 21,886 21%
Japan 71,787 60,156 11,631 19%
Rest of Asia 48,466 42,549 5,917 14%
Other foreign countries 79,869 69,502 10,367 15%
-------- -------- --------
$714,624 $644,260 $70,364 11%
======== ======== ========
*T

-0-
*T
Operating Segment Information
-------------------------------------------------------------------
Quarter Ended
June 30, Growth/(Decline)
------------------- ------------------------
2007 2006 Dollars Percent
--------- --------- ------------------------
Net sales:
Golf clubs $307,903 $272,713 $35,190 13%
Golf balls 72,114 69,102 3,012 4%
--------- --------- --------
$380,017 $341,815 $38,202 11%
========= ========= ========

Income before provision for income taxes:
Golf clubs $ 73,869 $ 50,328 $23,541 47%
Golf balls 5,584 544 5,040 926%
Reconciling items
(2) (19,223) (13,399) (5,824) -43%
--------- --------- --------
$ 60,230 $ 37,473 $22,757 61%
========= ========= ========

Operating Segment Information
--------------------------------------------------------------------
Six Months Ended
June 30, Growth/(Decline)
----------------------- ----------------
2007 2006 Dollars Percent
---------- ---------- ----------------
Net sales:
Golf clubs $ 588,964 $ 519,427 $ 69,537 13%
Golf balls 125,660 124,833 827 1%
---------- ---------- ---------
$ 714,624 $ 644,260 $ 70,364 11%
---------- ---------- ---------

Golf clubs $ 139,524 $ 95,395 $ 44,129 46%
Golf balls 11,001 6,902 4,099 59%
Reconciling items
(2) (35,777) (28,166) (7,611) -27%
---------- ---------- ---------
$ 114,748 $ 74,131 $ 40,617 55%
---------- ---------- ---------

(2) Represents corporate general and administrative expenses and
other income (expense) not utilized by management in determining
segment profitability.
*T

-0-
*T
Callaway Golf Company
Supplemental Financial Information
(In thousands, except per share data)
(Unaudited)

Quarter Ended June 30,
-------------------------------
2007
-------------------------------

Pro Forma Gross Margin Total as
Callaway Improvement Reported
Golf Initiatives
---------------------------------
Net sales $380,017 $ - $380,017
Gross profit 177,076 (1,951) 175,125
% of sales 47% n/a 46%
Operating expenses 113,004 - 113,004
--------- ----------- ---------
Income (loss) from operations 64,072 (1,951) 62,121
Other expense, net (1,891) - (1,891)
--------- ----------- ---------
Income (loss) before income taxes 62,181 (1,951) 60,230
Income tax provision 24,350 (759) 23,591
--------- ----------- ---------
Net income (loss) $ 37,831 $(1,192) $ 36,639
========= =========== =========

Diluted earnings (loss) per share: $ 0.55 $ (0.02) $ 0.53
Weighted-average shares
outstanding: 69,274 69,274 69,274

Quarter Ended June 30,
--------------------------------------------
2006
--------------------------------------------

Pro Forma IntegrationRestructuringTotal as
Callaway Charges Charges Reported
Golf
--------------------------------------------
Net sales $341,815 $ - $ - $341,815
Gross profit 141,698 (1,516) (96) 140,086
% of sales 41% n/a n/a 41%
Operating expenses 100,648 218 474 101,340
---------- ---------- ------------ ---------
Income (loss) from
operations 41,050 (1,734) (570) 38,746
Other expense, net (1,273) - - (1,273)
---------- ---------- ------------ ---------
Income (loss) before
income taxes 39,777 (1,734) (570) 37,473
Income tax provision 15,809 (662) (213) 14,934
---------- ---------- ------------ ---------
Net income (loss) $ 23,968 $(1,072) $ (357) $ 22,539
========== ========== ============ =========

Diluted earnings (loss)
per share: $ 0.35 $ (0.01) $ (0.01) $ 0.33
Weighted-average shares
outstanding: 68,577 68,577 68,577 68,577
*T

-0-
*T
Six Months Ended June 30,
--------------------------------
2007
--------------------------------

Pro Forma Gross Margin Total as
Callaway Improvement Reported
Golf Initiatives
----------------------------------
Net sales $714,624 $ - $714,624
Gross profit 339,202 (3,356) 335,846
% of sales 47% n/a 47%
Operating expenses 217,869 - 217,869
--------- ----------- ---------
Income (loss) from operations 121,333 (3,356) 117,977
Other expense, net (3,229) - (3,229)
--------- ----------- ---------
Income (loss) before income taxes 118,104 (3,356) 114,748
Income tax provision 46,586 (1,313) 45,273
--------- ----------- ---------
Net income (loss) $ 71,518 $(2,043) $ 69,475
========= =========== =========

Diluted earnings (loss) per share: $ 1.04 $ (0.03) $ 1.01
Weighted-average shares
outstanding: 68,798 68,798 68,798

Six Months Ended June 30,
---------------------------------------------
2006
---------------------------------------------

Pro Forma Integration Restructuring Total as
Callaway Charges Charges Reported
Golf
---------------------------------------------
Net sales $644,260 $ - $ - $644,260
Gross profit 273,879 (2,171) (110) 271,598
% of sales 43% n/a n/a 42%
Operating expenses 195,453 593 450 196,496
--------- ----------- ------------- ---------
Income (loss) from
operations 78,426 (2,764) (560) 75,102
Other expense, net (971) - - (971)
--------- ----------- ------------- ---------
Income (loss) before
income taxes 77,455 (2,764) (560) 74,131
Income tax provision 30,001 (1,061) (209) 28,731
--------- ----------- ------------- ---------
Net income (loss) $ 47,454 $(1,703) $ (351) $ 45,400
========= =========== ============= =========

Diluted earnings
(loss) per share: $ 0.68 $ (0.02) $ (0.01) $ 0.65
Weighted-average shares
outstanding: 69,356 69,356 69,356 69,356
*T

-0-
*T
Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA):

2007 Trailing Twelve Months EBITDA
--------------------------------------------
Quarter Ended
-----------------------------------
September December March June 30,
30, 31, 31,
2006 2006 2007 2007 Total
--------- --------- ------- ------- --------
Net income (loss) $(11,916) $(10,194) $32,836 $36,639 $47,365
Interest expense
(income), net 1,132 905 1,677 1,672 5,386
Income tax provision
(benefit) (6,075) (10,948) 21,682 23,591 28,250
Depreciation and
amortization expense 8,736 8,313 9,009 8,591 34,649
--------- --------- ------- ------- --------
EBITDA $(8,123) $(11,924) $65,204 $70,493 $115,650
========= ========= ======= ======= ========

2006 Trailing Twelve Months EBITDA
-------------------------------------------
Quarter Ended
-----------------------------------
September December March June 30,
30, 31, 31,
2005 2005 2006 2006 Total
-------- --------- ------- ------- -------
Net income (loss) $(4,804) $(18,664) $22,861 $22,539 $21,932
Interest expense (income),
net 332 (165) 533 1,522 2,222
Income tax provision
(benefit) (3,954) (14,361) 13,797 14,934 10,416
Depreciation and
amortization expense 8,283 7,318 7,290 7,935 30,826
-------- --------- ------- ------- -------
EBITDA $(143) $(25,872) $44,481 $46,930 $65,396
======== ========= ======= ======= =======
*T