Callaway 2005 Annual Report Download - page 47

Years Ended December 31, 2004 and 2003
Net sales increased 15% to $934.6 million for the year ended December 31, 2004 as compared to
$814.0 million for the year ended December 31, 2003. The overall increase in net sales is primarily due to a
$153.0 million (195%) increase in the sales of golf balls and a $45.5 million (76%) increase in the sales of
accessories and other products as compared to 2003. The increase in golf ball sales resulted from the inclusion of
Top-Flite ball sales for a full year in 2004 compared to 15 weeks in 2003 as well as a $42.1 million increase in
Callaway Golf brand golf ball sales. The increase in accessories and other products sales is primarily due to the
inclusion of Top-Flite accessories and other product sales for a full year in 2004 compared to 15 weeks in 2003.
These increases were partially offset by a $42.3 million (30%) decrease in sales of putters, a $21.6 million (8%)
decrease in sales of irons and a $13.9 million (5%) decrease in sales of woods in 2004 as compared to 2003.
The Company’s net sales were significantly affected by the $171.3 million increase in sales of Top-Flite and
Ben Hogan branded products due to the inclusion of these sales for a full year in 2004 compared to 15 weeks in
2003. Excluding sales of Top-Flite and Ben Hogan branded products, sales of Callaway Golf and Odyssey
branded products were $722.8 million in 2004, a $50.8 million (7%) decrease as compared to 2003. This
decrease is primarily due to a decline in sales of products that were in their second and third year of their product
life cycles as well as a decline in average selling prices.
The Company believes that its overall net sales in 2004 were adversely affected by continued competitive
pressures (which had a negative impact upon average selling prices), limited market acceptance of certain of the
Company’s 2004 products, continued economic uncertainty in many of the Company’s key markets, as well as
the military actions in the Middle East. The Company’s net sales are also affected by changes in foreign currency
rates. See above, “Certain Factors Affecting Callaway Golf Company—Foreign Currency Risk” contained in
Item 1A.
Net sales information by product category is summarized as follows:
Year Ended
December 31, Growth (Decline)
2004 2003 Dollars Percent
(In millions)
Net Sales:
Driver and fairway woods .................................... $238.6 $252.4 $ (13.8) (5)%
Irons* .................................................... 259.1 280.7 (21.6) (8)%
Putters ................................................... 100.5 142.8 (42.3) (30)%
Golf balls ................................................. 231.3 78.4 152.9 195%
Accessories and other* ...................................... 105.1 59.7 45.4 76%
$934.6 $814.0 $120.6 15%
* Beginning with the year ended December 31, 2004, the Company includes wedge sales within the iron sales
product category. Previously, wedge sales were included as a component of the accessories and other category.
Prior periods have been reclassified to conform with the current basis of presentation.
The $13.8 million (5%) decrease in net sales of drivers and fairway woods to $238.6 million for the year
ended December 31, 2004 resulted from lower average selling prices, partially offset by higher sales volumes in
2004 compared to the prior year. The majority of this decrease in sales related to a decline in sales of titanium
fairway woods products. This decline in fairway woods sales was expected as the titanium fairway woods
products were introduced in 2003 and 2002 and were considered closeout products in 2004. Also contributing to
the decline in woods sales were the credits given to retailers in connection with sales programs to reduce
inventory levels at retail. These declines were partially offset by an increase in sales of the Company’s steel
fairway woods products and sales of the Company’s new hybrid woods products and new fusion fairway woods
products which were introduced during 2004.
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