1. Callaway Golf Company
By: Seth Fraser, Megan Foreman, and Corey Daigle

2. Overview Brief History of Callaway Golf Where we are now
New Vision and Mission
External Analysis
CPM
EFE
Summary
Internal Analysis
IFE
Financial ratio analysis
Net Worth Analysis
Strategic Analysis
SWOT Matrix
SPACE
Grand Strategy Matrix
IE matrix
Possible strategies
QSPM
Recommendations
Strategic implementation and desired results
Annual objectives (goal) and polices
Evaluation Procedure

3. History of Callaway Golf
1981 Ely Callaway sells wine vineyard for 14 million dollars
83’ Ely renames the company Callaway Hickory Stick USA
85’ Company moves to Carlsbad, CA
86’ Callaway becomes first company to use computer controlled machines to insure flatness of the clubs, along with new and innovative designs
88’ Company renames its self Callaway Golf Company
89’ Introduce traditional sized steel clubs

4. History of Callaway Golf
90’ Callaway drivers are number one on senior PGA tour
92’ Callaway become publicly traded on NYSE under symbol ELY
95’ Callaway becomes number one manufacturer of sales in woods and irons
96’ Callaway becomes worlds largest manufacturer of clubs
97’ Callaway acquires Odyssey Sports
99’ Titanium drivers are introduced in Asia and Europe
02’ Callaway lunches HX Golf Balls

5. Callaway Golf Today
Callaway uses cutting edge technology to manufacture the world’s longest driver (the Big Bertha)
Along with men's golf accessories and apparel they offer a large selection to women
Callaway also offers a Fantasy Golf Challenge via the internet which offers Callaway products as prizes

6. Callaway Golf Today
Callaway offers a golf magazine which has details on the number one players, courses and tips on golf
Callaway also offers free donations to the under privileged and to better health benefits such the under insured along with employee volunteering
As well Callaway offers great benefits and services to their employees

7. One good shot is not enough.
Vision Statement
One good shot is not enough.

8. Mission Statement
At Callaway Golf, we make golf equipment for players world wide who think that hitting just one great shot is not enough. We believe technology is a powerful tool for creating user-friendly equipment that can help golfers of all styles and skill levels enjoy the game- and maybe a few more great shots along the way.

9. External Analysis
Opportunities 1. Market in Europe expected to grow by 3-3.5%
2. 35% -43% Cheaper Labor in Eastern Europe and Asia 3. Euro-Zone, no currency fluctuations 4. More open to western culture in the Middle East 5. Attitude towards leisure time 6. Internet as distribution channel 7. High school sport, 2.8 mill Juniors, 2-3%
increase

10. External Analysis Threats
1. Price decline in golf club equipment 1.3% 2. Less rounds played by 2.9%
3. Mergers make former competitors stronger
4. Patent/Trademark infringement, $ mill/year
5. Increase coverage of Golf on TV
6. Short production life-cycle
7. Weather conditions

11. EFE Matrix

12. CPM

13. External Analysis Summary
At what point does market saturation occur in domestic and foreign markets
Cheaper labor in Asia and Eastern Europe
Short production life-cycle
Mergers make former competitors stronger
Internet as distribution channel
Marketing channels
Attitude towards leisure time
Consumer interest is getting younger and younger (high school)

14. Internal Analysis Strengths 1. Financial ratios
2. Strong management team
3. Profit margin of 50%, low cost production
4. High brand equity
5. Diverse product line (width)
6. Technology and innovative skills
7. Net working capital( 2.8% increase)

15. Internal Analysis Weaknesses 1. Customer service
2. Production process, golf ball company
3. Employment contracts
4. Distribution
5. Only view specified suppliers
6. Only production facility in USA
7. Marketing

16. IFE Matrix

17. Financial Ratio Analysis
Company
Industry
Sector
S&P 500
Valuation Ratios
P/E Ratio (TTM)
25.36
20.11
20.86
24.01
P/E High - Last 5 Yrs
26.90
43.52
37.56
45.41
P/E Low - Last 5 Yrs
10.82
14.06
10.28
16.26
Beta
1.45
0.84
1.05
1.00
Price to Sales (TTM)
1.44
2.21
1.19
3.33
Price to Book (MRQ)
2.00
3.94
3.21
4.29
Price to Tangible Book (MRQ)
2.81
6.67
6.04
7.56
Price to Cash Flow (TTM)
12.98
14.31
11.18
17.32
Price to Free Cash Flow (TTM)
12.65
24.93
24.73
28.97
% Owned Institutions
87.07
56.96
51.37
64.19
Dividends
Dividend Yield
1.59
1.32
2.30
2.04
Dividend Yield - 5 Yr Avg
1.70
0.96
2.38
1.48
Dividend 5 Yr Growth Rate
0.00
7.13
-3.77
6.48
Payout Ratio (TTM)
40.06
16.59
25.54
26.78

18. Financial Ratio Analysis
Growth Rates %
Sales (MRQ) vs Qtr 1 Yr Ago
19.40
12.91
10.85
13.40
Sales (TTM) vs TTM 1 Yr Ago
2.62
10.99
7.63
11.90
Sales - 5 Yr Growth Rate
2.98
12.18
6.94
9.30
EPS (MRQ) vs Qtr 1 Yr Ago
N/A
30.16
26.58
28.69
EPS (TTM) vs TTM 1 Yr Ago
-31.76
29.80
18.81
21.92
EPS - 5 Yr Growth Rate
-3.10
21.20
5.91
12.15
Capital Spending - 5 Yr Growth Rate
-35.10
1.04
-1.52
4.06
Financial Strength
Quick Ratio (MRQ)
1.14
1.85
1.47
1.26
Current Ratio (MRQ)
2.95
2.49
2.24
1.76
LT Debt to Equity (MRQ)
0.00
0.25
2.65
0.68
Total Debt to Equity (MRQ)
0.32
2.80
0.85
Interest Coverage (TTM) NM
8.64
8.14
11.86

19. Financial Ratio Analysis
Profitability Ratios %
Gross Margin (TTM)
45.28
40.70
28.55
47.32
Gross Margin - 5 Yr Avg
47.89
38.59
28.17
47.01
EBITD Margin (TTM)
13.56
20.07
11.46
20.79
EBITD - 5 Yr Avg
17.38
16.55
10.32
20.82
Operating Margin (TTM)
8.09
16.76
7.23
20.33
Operating Margin - 5 Yr Avg
12.35
12.63
6.72
18.35
Pre-Tax Margin (TTM)
8.34
16.29
7.38
17.27
Pre-Tax Margin - 5 Yr Avg
11.51
6.20
17.54
Net Profit Margin (TTM)
5.59
11.53
4.34
13.12
Net Profit Margin - 5 Yr Avg
7.79
7.41
3.83
11.59
Effective Tax Rate (TTM)
32.94
32.48
30.43
31.31
Effective Tax Rate - 5 Yr Avg
36.64
34.25
38.14
34.20
Management Effectiveness %
Return on Assets (TTM)
6.02
12.67
6.06
6.40
Return on Assets - 5 Yr Avg
9.56
9.82
5.57
6.79
Return on Investment (TTM)
7.35
17.50
8.45
9.97

20. Financial Ratio Analysis
Return on Investment - 5 Yr Avg
11.63
13.84
8.00
10.93
Return on Equity (TTM)
7.71
23.40
13.72
18.71
Return on Equity - 5 Yr Avg
12.07
16.29
13.87
19.22
Efficiency
Revenue/Employee (TTM)
246,676
482,389
369,451
622,866
Net Income/Employee (TTM)
13,795
79,982
27,449
81,707
Receivable Turnover (TTM)
5.86
7.46
6.44
9.76
Inventory Turnover (TTM)
3.09
8.29
9.16
10.46
Asset Turnover (TTM
1.08
1.23
1.18
0.92
March 2004

21. Net Worth Analysis

22. Stock Performance

23. Internal Analysis Summary
Strong Financials
New Working Capital Increasing
Profit Margin of 50%
Weak marketing campaign
Weak Distribution Channels

24. SWOT Matrix W-O Strategies S-O Strategies Start Callaway Online shop
Callaway Golf Camps
S-O Strategies
Expand production into Eastern Europe
2. Open selected Callaway shops around the world

25. Move Marketing Channels Select personalities for endorsements
W-T Strategies
Move Marketing Channels
Select personalities for endorsements
Buy golf ball manufacturer
Backward integration
S-T Strategies
Improve Production
Callaway Golf Camps
3. Acquire competitors like Mizuno

26. Space Matrix

27. Y axis
Financial strength worst to + 6 best Y axis: 5 + (-2) = 3
Environmental stability worst to +6 best
X axis
Industry strength best to 1 worst X axis: 3+(-2)=1
Competitive advantage worst to –1 best

28. Grand Strategy Matrix

29. The Internal-External
IE Matrix

30. IE Information
Clubs
Balls
Accessories
Revenues
84% 8%

31. Balls Strong Average Weak 3.0 to 4.0 2.0 to 2.99 1.0 to 1.99 HighII
III
3.0 to 3.99
Clubs
Medium IV V VI
Callaway
Accessories
Low
VII
VIII IX
Balls

32. Possible Strategies Expand into East Europe
Open Selected Callaway shops around the world
Start Callaway online shopping
Move marketing channels
Select personalities for endorsements
Improve Production
Acquire competitors like Mizuno
Callaway Golf camps
Backward integration

33. QSPM

36. Recommendations Primary Strategies Secondary Strategy
Improve production
Acquire competitors
Recommendations
Secondary Strategy
Expand into Eastern Europe
Open worldwide stores
Online shop
Special Credit cards…
Special low air fair flights…
Offer younger customers (high school students) discounts on goods
Set up web site for local golf courses (offer arranged tee time)
Get in on Frisbee golf
Offer competitions for free weekend golf resort

37. Strategic Implementation and desired results
Expand into European market and help increase the popular western culture on golf
Domestic & International sales
81.4 to 82.4 (3% increase)
Decrease cost of manufacturing to keep up with cheaper countries
30.2 (37%) to 29.3 (-3%)
Over the next 3-5 years
(Numbers in Millions)

38. $Amount Needed $500 Million Shares Outstanding 66 Million
EPS/EBIT Analysis
$Amount Needed $500 Million
Interest Rate %
Tax Rate %
Shares Outstanding Million
Stock Price $15.00

39. EPS/EBIT Analysis

40. Evaluations Qtr & Annual financial reports
Yearly examination by firms head analysts of the company

41. Callaway in the News