Callaway 1999 Annual Report Download - page 47

45CALLAWAY GOLF COMPANY
NOTE 15
SEGMENT INFORMATION
The Company’s operating segments are organized on the basis of products and include golf clubs and golf balls. The Golf Clubs seg-
ment consists of Callaway Golf®titanium and stainless steel metal woods and irons, Callaway Golf®and Odyssey®putters and
wedges, and sales of related accessories. The Golf Balls segment consists of golf balls that are designed and manufactured, and will
be marketed and distributed by the Company’s wholly-owned subsidiary, Callaway Golf Ball Company. All Other segments, includ-
ing interactive golf sites, golf book publishing, new player development and a driving range venture, are aggregated as they do not
meet requirements for separate disclosure set forth in SFAS No. 131. In accordance with its restructuring plan, the Company is no
longer pursuing these initiatives (Note 12). There are no significant intersegment transactions. The table below contains informa-
tion utilized by management to evaluate its operating segments.
(in thousands)
1999 Golf Clubs Golf Balls All Other Consolidated
Net sales $714,471 $714,471
Income (loss) before tax 123,922 ($38,425)85,497
Interest income 5,463 5,463
Interest expense (2,222)(1,372)(3,594)
Depreciation and amortization 36,151 3,726 39,877
Additions to long-lived assets 10,210 46,912(1)57,122
1998 Golf Clubs Golf Balls All Other Consolidated
Net sales $697,621 $697,621
Income (loss) before tax 9,182 ($22,426)($25,655)(38,899)
Interest income 1,564 7 1,571
Interest expense (2,252)(419)(2,671)
Depreciation and amortization 34,121 1,072 692 35,885
Additions to long-lived assets 39,854 47,721(1)1,408 88,983
1997 Golf Clubs Golf Balls All Other Consolidated
Net sales $842,927 $842,927
Income (loss) before tax 222,771 ($9,013)$7 213,765
Interest income 4,703 4,703
Interest expense (10)(10)
Depreciation and amortization 19,219 84 105 19,408
Additions to long-lived assets 166,461 10,263 823 177,547
(1) Includes an aggregate of $50,000,000 converted to an operating lease in 1999 (Note 4).
The Company markets its products domestically and internationally, with its principal international markets being Asia and
Europe. The table below contains information about the geographical areas in which the Company operates. Revenues are attrib-
uted to the location to which the product was shipped. Long-lived assets are based on location of domicile.
The Company, through a distribution agreement, had appointed Sumitomo as the sole distributor of Callaway Golf®clubs in
Japan. The distribution agreement, which began in February 1993 and ended on December 31, 1999, required Sumitomo to purchase
specified minimum quantities. In 1999, 1998, and 1997, sales to Sumitomo accounted for 7%, 8% and 10%, respectively, of the
Company’s net sales. In the fourth quarter of 1999, the Company successfully completed negotiations with Sumitomo to provide a
smooth transition of its business. As a result of this transition agreement, the Company recorded a net charge of $8.6million in the
fourth quarter of 1999 for buying certain current inventory, payments for non-current inventory and other transition expenses,
including foreign currency transaction losses. Odyssey®brand products are sold through the Company’s wholly-owned Japanese
subsidiary, Callaway Golf K.K., and beginning January 1,2000, Callaway Golf®brand products also will be sold through this
subsidiary.