CARLSBAD, Calif -- Callaway Golf Company (NYSE:ELY) reported significant improvements in first quarter sales and earnings over the same period a year ago.

Highlights for the quarter include:

--Record net sales of $366.5 million, a 10 percent increase as compared to $334.6 million for the same period in 2007.

--Fully diluted earnings per share of $0.61 on 64.8 million shares as compared to $0.48 on 68.3 million shares in 2007. This represents a 27% increase in diluted earnings per share.

Fully diluted earnings per share for the first quarter of 2008 and 2007 include $0.01 of after-tax charges for gross margin improvement initiatives announced in November, 2006.

"We are pleased with our results for the first quarter," said President and CEO George Fellows. "The improvements made in our product development process and supply chain have positively contributed to our ability to achieve record first quarter sales.

"While cautiously optimistic given our first-quarter results, it is important to remember that the second quarter is generally when the consumer purchase cycle begins and it is a critical quarter for us in achieving our targets," he added. "We remain optimistic that we can achieve our full-year guidance range, although given current macroeconomic and market conditions, we believe our results will most likely be at the lower end of our original range."

The increase in sales for the first quarter is primarily attributable to: increased fairway wood sales associated with its FT and FT-I product launches; increased sales of Odyssey putters driven by its Black Series, Divine Line, and sell-in of new products increased sales of golf balls driven by HX Hot Bite and HX Tour ix products; and increased accessories sales associated with packaged club sets and headwear.

Gross margins as a percentage of net sales were 48 percent for the first quarter, the same as for the first quarter of 2007. Operating expenses for the quarter were $111 million, an increase of $6 million when compared to 2007. The increase is primarily due to higher advertising and promotion expense, officials said, an increase in costs due to the effect of foreign exchange rates on non-U.S. expense, and general inflation. As a percentage of sales, operating expenses declined to 30 percent compared to 31 percent in 2007.

The company estimated in January that its full year 2008 net sales would be in the range of $1.145 to $1.165 billion and that its full year pro forma fully diluted earnings per share would be in the range of $1.08 to $1.18 on an estimated 67 million shares. While Callaway officials still estimate their financial results will fall within this range, given uncertainties surrounding the economy, second quarter sell-through, and competitive actions, these results are projected at this time to be at the lower end of this range on a base of 66 million shares.

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