Callaway 2005 Annual Report Download - page 45

The $57.4 million (22%) increase in net sales of irons to $316.5 million for the year ended December 31,
2005 resulted from higher sales volumes as well as higher average selling prices during 2005 compared to 2004.
The increase in sales volumes is primarily attributable to the Company offering more new irons models in its
2005 product line than its 2004 product line, including multi-material irons products which were not introduced
until the fourth quarter of 2004. The increase in average selling prices is due to a shift in product mix to higher
priced multi-material and steel irons products. These sales increases were partially offset by a decrease in the
Company’s older irons products which were in the second and third years of their product life cycles.
The $8.8 million (9%) increase in net sales of putters to $109.3 million for the year ended December 31,
2005 is attributable to the current year introduction of the Odyssey White Steel and Dual Force 2 putters and the
Callaway Golf I-Trax Putter partially offset by decreased sales of the Company’s older putter models which were
in the second and third years of their product life cycles.
The $16.6 million (7%) decrease in net sales of golf balls to $214.7 million for the year ended December 31,
2005 resulted from decreased Top-Flite golf ball sales partially offset by an increase in Callaway Golf ball sales.
The decrease in Top-Flite golf ball sales resulted from lower sales volumes and lower average selling prices. The
decrease is due in part to the planned reduction in the number of Top-Flite golf ball models in the 2005 product
line as a result of the Company’s discontinuance of certain less profitable golf ball models. The increase in
Callaway golf ball sales is primarily due to the expansion of the Callaway golf ball product line as a result of the
successful launch of two new Callaway Golf ball models during 2005.
The $11.2 million (11%) increase in net sales of accessories and other products to $116.3 million for the
year ended December 31, 2005 is primarily attributable to a $10.4 million increase in sales of pre-owned
products through the FrogTrader business resulting from the inclusion of FrogTrader sales for a full year in 2005
compared to seven months in 2004, as well as an increase in sales of Callaway Golf bags and royalty revenue
from other licensed merchandise.
Net sales information by region is summarized as follows:
Year Ended
December 31, Growth (Decline)
2005 2004 Dollars Percent
(In millions)
Net Sales:
United States ............................................... $563.0 $546.2 $16.8 3%
Europe .................................................... 166.2 169.5 (3.3) (2)%
Japan ..................................................... 103.4 70.5 32.9 47%
RestofAsia................................................ 66.9 51.7 15.2 29%
Other foreign countries ....................................... 98.6 96.7 1.9 2%
$998.1 $934.6 $63.5 7%
Net sales in the United States increased $16.8 million (3%) to $563.0 million during 2005 compared to
2004. In addition, the Company’s sales in regions outside of the United States increased $46.7 million (12%) to
$435.1 million during 2005 compared to 2004. This increase in international sales is primarily attributable to a
$48.1 million (39%) increase in sales in Japan and the rest of Asia due to favorable consumer acceptance of the
Company’s new products launched in those regions during 2005. These increases were partially offset by a
$3.3 million (2%) decrease in sales in Europe, primarily attributable to the Company’s failure to supply sufficient
product to satisfy demand in that region during the first half of 2005 which was tempered by the increase in sales
experienced during the third quarter of 2005. The Company’s net sales were also positively affected by changes
in foreign currency rates. See above, “Certain Factors Affecting Callaway Golf Company—Foreign Currency
Risk” contained in Item 1A.
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