Callaway 2003 Annual Report Download - page 8

Finally, two other accomplishments for 2003 were the recogni-
tion by the San Diego Better Business Bureau and receipt of their
Torch Award for marketplace ethics; and a continuation of our
community involvement with charitable giving through the
Callaway Golf Foundation and our wholly-owned subsidiaries of
$1.1 million, bringing our cumulative giving to the communities
where we work and live to nearly $6 million.
But that was last year. What about 2004?
I told you earlier in this letter that we had two major disap-
pointments in 2003: a decline in Callaway Golf top-line revenues
for the third year in a row, and a drop in our U.S. market share in
drivers and woods. Although we will have plenty to do in 2004,
including the integration of the global operations of Top-Flite, you
can rely on the fact that we are focused on reversing these two
trends. Without telling our competitors too much, let me share
with you some of our plans for achieving this goal.
The two problems are directly linked. Because woods are our
highest priced products, when wood sales drop our revenues suffer.
In the past few years we have seen our wood sales decline for sev-
eral reasons. First, our super premium priced product, the ERC II
Driver, could not be sold in the United States due to the USGA’s
actions. The technology in this wonderful driver had been years in
the making, but the new driver “COR” rules precluded U.S. golfers
from using that technology. Second, our wood product line at the
moderate price point, consisting of Steelhead stainless steel drivers
and fairway woods, lagged behind a market shift to low-cost cast
titanium drivers. This permitted some competitors to take away
business in this segment. As I noted above, in the premium price
point, which lies between the super premium and moderate price
points, we have held our ground with the Great Big Bertha II mod-
els. So the action item is clear: get after the business we have lost
in the super premium and moderate price categories and recapture
some of the old glory.
This is what we plan to do in 2004. The ERC Fusion Driver,
announced in late 2003 but not shipped in any significant quanti-
ties until 2004, is a whole new category of drivers that is worthy of
the position at the top of the Callaway Golf wood line. It is the com-
bination of cup faced, forged titanium, variable face thickness tech-
nology developed for the original ERC line of drivers fused to a
lightweight compression cured carbon composite body developed
for the Big Bertha C4 Driver. This provides our scientists and engi-
neers with the explosive power and sound of the world’s best tita-
nium driver plus 50 grams (25% of a driver’s total club head
weight) of discretionary mass, permitting them to customize the
center of gravity by loft to perfect launch parameters for golfers of
all skill levels. The result: more great shots and more enjoyment of
the game. ERC Fusion Driver prototypes were launched on tour in
2003, and were received with great excitement. This product epit-
omizes the Callaway Golf mission of developing demonstrably
superior and pleasingly different products that deliver consumer
satisfaction even at super premium price points. There will be many
that try to follow with look-a-likes and copies, but there is and will
be only one true leader of this new Fusion platform. The driver is
accompanied by companion fairway woods that we introduced in
January at the PGA Merchandise Show. And did I mention that all
of this innovation and technology fully conforms to the Rules of
Golf everywhere in the world?
Great Big Bertha II Drivers and Fairway Woods continue in 2004
with a 415cc size clubhead line extension and new shaft options.
We have great confidence in this product going forward.
...incorporate
breakthrough
technologies