Callaway 2004 Annual Report Download - page 35

Download and view the complete annual report

Please find page 35 of the 2004 Callaway annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 106

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106

Net sales information by region is summarized as follows:
Year Ended
December 31, Growth/(Decline)
2003 2002 Dollars Percent
(In millions)
Net Sales:
United States* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $449.4 $439.8 $ 9.6 2%
Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 145.1 136.9 8.2 6%
JapanÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 101.3 102.6 (1.3) (1)%
Rest of Asia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 58.3 58.0 0.3 1%
Other foreign countries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 59.9 55.9 4.0 7%
$814.0 $793.2 $20.8 3%
* Beginning with the Ñrst 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 reclassiÑed to
conform with the current period presentation.
Net sales in the United States increased $9.6 million (2%) to $449.4 million during 2003 versus 2002.
Overall, the Company's sales in regions outside of the United States increased $11.2 million (3%) to
$364.6 million during 2003 versus 2002. This increase in international sales is primarily attributable to an
$8.2 million (6%) increase in sales in Europe, a $0.3 million (1%) increase in sales in the Rest of Asia, which
includes Korea, and a $4.0 million (7%) increase in sales in other regions outside of the United States. These
increases were partially oÅset by a $1.3 million (1%) decrease in sales in Japan.
For the year ended December 31, 2003, gross proÑt decreased to $368.6 million from $400.2 million in
the comparable period of 2002. Gross proÑt as a percentage of net sales decreased 5 percentage points to 45%
in 2003 as compared to 2002. The Company's gross proÑt percentage in 2003 was unfavorably impacted by the
$24.1 million non-cash charge associated with the integration of Top-Flite (see above ""Top-Flite Acquisi-
tion''). The Company's gross proÑt percentage for 2002 was favorably impacted by the $17.0 million reduction
in the Company's warranty accrual during the third quarter of 2002 (see above ""Change in Accounting
Estimate''). Excluding the eÅects of the integration charges and the warranty reserve adjustment, gross proÑt
in 2003 increased 2% to $392.7 million from $383.2 million in 2002 and gross proÑt as a percentage of net sales
remained Öat at 48% in 2003 as compared to 2002.
Year Ended
December 31, Growth/(Decline)
2003 2002 Dollars Percent
(In millions, except per share data)
Reported gross proÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $368.6 $400.2 $(31.6) (8)%
Non-cash integration charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24.1 Ì
Non-cash warranty reserve adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (17.0)
Pro forma gross proÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $392.7 $383.2 $ 9.5 2%
The Company's gross proÑt percentage (excluding the 2003 integration charges and the 2002 warranty
accrual reduction) was positively impacted by a more favorable sales mix in 2003 combined with the
additional inventory obsolescence reserves established in 2002 on ERC II Drivers and Big Bertha C4 Drivers.
These favorable impacts were oÅset by a decline in golf ball margins and overall lower average selling prices
on golf club and ball products.
Selling expenses increased $7.5 million (4%) in 2003 to $207.8 million from $200.3 million in 2002, and
were 26% and 25% of net sales, respectively. This increase was primarily due to the Top-Flite selling expenses
incurred in 2003 of $13.9 million. Excluding these Top-Flite selling expenses, selling expenses in 2003
decreased $6.4 million as compared to 2002. This decrease was primarily due to a decrease in employee costs
26