Equipment makers returning to profit

TaylorMade-adidas Golf Wednesday became the third major golf equipment company to post positive results in the second quarter of 2005.

TMaG parent adidas-Salomon reported that its golf division's operating income improved 185 percent compared to the second quarter of '04 to $36.3 million on sales of $244 million compared to $223.6 million in the second quarter of 2004.

The positive report for TMaG follows those of the Acushnet Company (Titleist, FootJoy, Cobra, Pinnacle), which reported second quarter earnings of $92.6 million on sales of $443 million, and Callaway Golf Company (NYSE: ELY), which reported second quarter earnings of $18.4 million on sales of $323 million.

Those strong second quarter numbers could mean the equipment industry might be coming out of the doldrums of the past few years, or more likely that the gap between the larger companies and the mid-size and smaller companies is widening.

TMaG's six-month sales of $424 million was the company's highest since 2002. TMaG's earnings in the second quarter of '05 were $35 million.

Adidas-Salomon did not break out sales by equipment category, but rather by its four worldwide sales territories -- North America, Europe, Latin America and Asia. The North America market reported the largest sales growth, from $193 million in the first six months of '04 to $243 million in the first six months of this year.

TMaG's second quarter numbers come on the heels of adidas-Salomon's announcement that it has acquired rival Reebok International Ltd. (NYSE: RBK) for $59 per share in cash. The offer price represents a premium of 34.2 percent over the closing price of Reebok's stock on Aug. 2. The transaction value is approximately $3.8 billion, including the assumption of net cash of $84 million. The deal is subject to the approval of Reebok's shareholders as well as to the regulatory approvals and customary closing conditions.

The transaction, which is expected to close in the first half of 2006, probably won't have any immediate or near-term impact on TMaG. Reebok, however, was a significant player in golf footwear and outerwear in the early 1990s, with such names as Greg Norman and John Daly, on its professional staff.

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