Callaway 2003 Annual Report Download - page 74

CALLAWAY GOLF COMPANY 71
The Company’s net sales by product category are as follows:
Year Ended December 31,
(In thousands) 2003 2002 2001
Net sales
Drivers and Fairway Woods $ 252,420 $ 309,972 $ 392,945
Irons 271,684 243,454 248,872
Putters 142,814 111,523 67,471
Golf Balls 78,378 66,023 54,853
Accessories and Other
(*)
68,736 62,247 53,931
$ 814,032 $ 793,219 $ 818,072
(*) Beginning with the first quarter of 2003, the Company records royalty revenue in net
sales. Previously, royalty revenue was recorded as a component of other income and
prior periods have been reclassified to conform with the current period presentation.
Note 15. Licensing Arrangements
The Company from time to time licenses its trademarks and
service marks to third parties for use on products such as golf
apparel, golf shoes and other golf related products, such as
headwear, travel bags, golf towels and umbrellas. The
Company has a current licensing arrangement with Ashworth,
Inc. for the creation of a complete line of Callaway Golf men’s
and women’s apparel for distribution in the United States,
Canada, Europe, Australia, New Zealand and South Africa.
The first full year in which the Company received royalty
revenue under these licensing arrangements was 2003. The
Company also has a current licensing arrangement with Sanei
International Co., Ltd. (“Sanei”) for the creation of a complete
line of Callaway Golf men’s and women’s apparel for distribution
in Asian Pacific markets including Japan, Korea, Hong Kong,
Taiwan, Singapore, Indonesia, Malaysia, Thailand, Vietnam,
Philippines, Brunei, Myanmar and Shenzhen in China.
In addition to apparel, the Company has also entered into
licensing arrangements with (i) Tour Golf Group Inc. for the
creation of a Callaway Golf footwear collection, (ii) Fossil Inc.
for a line of Callaway Golf watches and clocks and (iii) TRG
Accessories, LLC for the creation of a collection consisting of
luggage, personal leather products and skin protection products.
Also in 2003, as part of the Top-Flite Acquisition, the Company
assumed certain license agreements Top-Flite had previously
entered into with third parties to license the use of its Top-Flite,
Ben Hogan and Strata brands on apparel, souvenirs and gifts.
Note 16. Transactions with Related Parties
A director of the Company is also a retired partner of a law firm
that performs legal services for the Company. Legal fees
incurred with this law firm totaled $2,971,000, $1,095,000 and
$351,000 for the years ended December 31, 2003, 2002 and
2001, respectively. The director receives no benefit as a result
of the Callaway Golf fees paid to the law firm. A former director
of the Company is also a senior managing director of an
investment bank which performed services for the Company.
Investment banking fees incurred with this investment bank in
2003 and 2001 totaled $3,563,000 and $557,000, respectively.
There were no fees paid in 2002.
The Company markets its products in the United States and
internationally, with its principal international markets being
Japan and Europe. The tables below contain information about
the geographical areas in which the Company operates.
Revenues are attributed to the location to which the product
was shipped. Long-lived assets are based on location of domicile.
(In thousands) Sales Long-Lived Assets
2003
United States $ 449,424 $ 305,176
Europe 145,148 16,995
Japan 101,259 3,590
Rest of Asia 58,327 846
Other foreign countries 59,874 8,007
$ 814,032 $ 334,614
2002
United States
(*)
$439,847 $ 263,706
Europe 136,941 16,477
Japan 102,624 3,791
Rest of Asia 58,040 1,000
Other foreign countries 55,767 3,683
$ 793,219 $ 288,657
2001
United States
(*)
$446,000 $ 234,281
Europe 118,417 13,261
Japan 130,706 3,415
Rest of Asia 63,928 729
Other foreign countries 59,021 2,877
$ 818,072 $ 254,563
(*) Beginning with the first quarter of 2003, the Company records royalty revenue in net
sales. Previously, royalty revenue was recorded as a component of other income and
prior periods have been reclassified to conform with the current period presentation.