Callaway Golf Company Releases Preliminary Third Quarter 2006 Results

Callaway Golf Company (NYSE:ELY) today announced preliminary
results for the third quarter ended September 30, 2006. Based on
current information, net sales are expected to range from $193 million
to $195 million, with a corresponding loss per diluted share ranging
from $0.17 to $0.19. This estimated loss includes after-tax charges of
$0.03 for employee equity-based compensation associated with FAS 123R.
It also includes after-tax charges of $0.01 per diluted share
associated with the Top-Flite integration and $0.01 per diluted share
for the restructuring initiatives announced in September 2005.
Excluding these charges, the pro forma loss per diluted share is
expected to range from $0.12 to $0.14.

For the third quarter of 2005, the Company reported net sales of
$221 million, a fully diluted loss per share of $0.07 and pro forma
fully diluted earnings per share of $0.01, which excludes after-tax
charges of $0.02 for the Top-Flite integration and $0.06 related to
the restructuring initiatives.

Business Update

"Sales of the Company's core brands, Callaway and Odyssey, have
gained market share and top-line momentum in 2006," commented George
Fellows, President and CEO of Callaway Golf. "Over the first nine
months of this year, sales of these products have increased 7% adding
to the double digit growth experienced in 2005. Sales of the Top-Flite
and Hogan products, however, have not performed to expectations and
have offset the gains in our core brands. As discussed last quarter,
we are in the process of restoring these brands, targeting a formal
re-launch of Top-Flite in 2007."

"In terms of profitability," Fellows continued, "the two-staged
approach we announced a year ago is well underway. The first stage,
which targeted a gross reduction of operating expenses of $50 to $60
million in the first year, or $25 to $30 million net of reinvestment,
has been more successful than initially expected. In fact, over the
last twelve months we have realized approximately $44 million in
savings net of reinvestment. The second stage will target gross
margins, which have been at unacceptable levels in recent years. This
margin performance was further impacted this year by some additional
factors related to the Top-Flite business, including an inventory
reduction initiative of older Top-Flite products in preparation for
the re-launch of the Top-Flite brand. We recognize the importance of
improving gross margins as it relates to our overall profitability,
and have already begun implementing initiatives which are expected to
significantly improve gross margins in 2007 and beyond, as we will
discuss in greater detail on our upcoming conference call."

Details of Third Quarter Results

Sales

The estimated reduction in sales for the third quarter is
attributable to several factors including:

-- The planned timing of new product launches adversely affected
third quarter 2006 sales by approximately $30 million as
compared to the third quarter of 2005. More specifically, the
third quarter of 2005 included the introductions of the FT-3
driver, Fusion fairway woods, X-18 driver in Japan, and HX-56
golf ball. This compares to no major introductions in the
third quarter of 2006.

-- The June 2006 free-product-offer was more successful than
originally anticipated. This resulted in higher market share
along with an increased level of retailer product
compensation, which in turn, impacted wholesale re-orders
during the third quarter.

-- Lower in-store traffic at key golf retailers during the June
through September season. This resulted in lower retail sales
and a related decrease in wholesale re-orders for the Company.
The decline is consistent with recent national retail trends.

Gross Margins

The Company also estimated that its gross margins as a percentage
of net sales would be approximately 35% for the third quarter.
Excluding charges related to equity-based compensation, the Top-Flite
integration and the September 29, 2005 restructuring initiatives, it
is estimated that pro forma gross margins would be approximately 36%.
In the third quarter of 2005, the Company's gross margins were 40% and
excluding integration and restructuring charges were 41%.

The third quarter decline in pro forma gross margins is primarily
attributable to the following:

-- Approximately -3 to -4 margin points due to a lower mix of
higher margin woods products sold during the quarter compared
to last year related to new product launches.

-- Approximately -1 to -2 margin points due to a lower margin
associated with this year's BB-06 iron model compared to last
year's higher margin iron models which included X-18 and
X-Tour models.

-- Approximately -2 to -3 margin points due to initiatives to
clear Top-Flite golf ball inventory as well as higher golf
ball costs associated with increased raw material and energy
costs. As previously noted, the timing of these cost increases
precluded any pricing actions during 2006, but will be
included in 2007 product pricing.

-- Approximately +1 to +3 margin points due to higher volumes and
margins of Odyssey putters, X-Tour wedges, and Callaway Golf
accessories.

Operating Expenses

The Company estimates that its operating expenses for the quarter
will be approximately $85 million. Excluding charges related to
equity-based compensation, the Top-Flite integration and the September
29, 2005 restructuring initiatives, pro forma operating expenses are
estimated to be approximately $81 million, a reduction of
approximately $10 million when compared to last year's third quarter.
The reduction is primarily due to the restructuring initiatives that
were announced on September 29, 2005.

Business Outlook

The Company estimates its full year 2006 pro forma earnings will
be over 20% higher than pro forma earnings in 2005. Pro forma earnings
exclude non-cash charges related to employee equity-based
compensation, as well as charges related to the Top-Flite integration
and the September 2005 restructuring initiatives. It would also
exclude any charges incurred related to the implementation of the
gross margin initiatives.

Conference Call

The Company will release actual third quarter financial results on
November 1, 2006. A conference call and webcast will also take place
at that time.

Disclaimer: Investors should be aware that the Company has not yet
finalized its results for the third quarter and that the Company's
"preliminary" estimates of net sales, gross margins, operating
expenses and earnings for the third quarter 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 used in this press
release that relate to future plans, events, financial results,
performance or prospects, including statements relating to estimated
earnings growth for 2006, anticipated improvement in gross margins in
2007 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 and charges related
to the integration of the Callaway Golf Company and Top-Flite Golf
Company operations as well as the September 2005 restructuring
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.