Callaway 2006 Annual Report Download - page 21

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The Company maintains various sales programs including a Preferred Retailer Program. The Preferred
Retailer Program offers longer payment terms during the initial sell in period, as well as potential rebates and
discounts, for participating retailers in exchange for providing certain benefits to the Company, including the
maintenance of agreed upon inventory levels, prime product placement and retailer staff training.
Sales Outside of the United States
Approximately 44% of the Company’s net sales were derived from sales for distribution outside of the
United States in both 2006 and 2005 and 42% in 2004. The Company does business (either directly or through its
subsidiaries and distributors) in more than 100 countries around the world. The Company’s management believes
that controlling the distribution of its products in certain major markets in the world has been and will continue to
be an important element in the future growth and success of the Company.
The majority of the Company’s international sales are made through its wholly-owned subsidiaries located
in Europe, Japan, Canada, Korea and Australia. In addition to sales through its subsidiaries, the Company also
sells through distributors in over 60 foreign countries, including Singapore, Hong Kong, Taiwan, China, the
Philippines, India, South Africa and various countries in South America. Prices of golf clubs and balls for sales
by distributors outside of the United States generally reflect an export pricing discount to compensate
international distributors for selling and distribution costs. A change in the Company’s relationship with
significant distributors could negatively impact the volume of the Company’s international sales.
The Company’s sales programs in foreign countries are specifically designed based upon local laws and
competitive conditions. Some of the sales programs utilized include the custom club fitting experiences and the
Preferred Retailer Program or variations of those programs employed in the United States as described above.
Conducting business outside of the United States subjects the Company to increased risks inherent in
international business. See below, “Certain Factors Affecting Callaway Golf Company” contained in Item 1A.
Sales of Pre-Owned and Outlet Golf Clubs
The Company sells certified pre-owned Callaway Golf products through its websites,
www.callawaygolfpreowned.com and www.callawaygolfoutlet.com. The Company generally acquires the
pre-owned products through the Company’s Trade In! Trade Up! program. The website for this program is
www.tradeintradeup.com. The Trade In! Trade Up! program gives golfers the opportunity to trade in their used
Callaway Golf clubs and certain competitor golf clubs at authorized Callaway Golf retailers or through the
Callaway Golf Pre-Owned website for credit toward the purchase of new or pre-owned Callaway Golf
equipment.
On-Line Store
In November of 2006, the Company announced Shop.CallawayGolf.com, an alliance between Callaway
Golf and its network of authorized U.S. retailers that provides a new level of service, security and convenience to
online consumers. This online shopping experience links consumers and golf retailers by permitting the
consumer to place an order through Callaway Golf’s website and have it fulfilled by a local participating retailer,
or in limited circumstances by the Company. This new website is also accessible via the Company’s main
website, www.CallawayGolf.com. The website offers the full line of official Callaway Golf and Odyssey
products, including drivers, fairway woods, hybrids, irons, golf balls, footwear, eyewear, apparel and accessories.
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