Callaway 2007 Annual Report Download - page 44

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sold during the first quarter. The Company’s third quarter sales are generally dependent on re-order business but
are generally less than the second quarter as many retailers begin decreasing their inventory levels in anticipation
of the end of the golf season. The Company’s fourth quarter sales are generally less than the other quarters due to
the end of the golf season in many of the Company’s key markets. This seasonality, and therefore quarter to
quarter fluctuations, can be affected by many factors, including the timing of new product introductions. In
general, however, because of this seasonality, a majority of the Company’s sales and most, if not all, of its
profitability generally occurs during the first half of the year.
Years Ended December 31, 2007 and 2006
Net sales increased $106.7 million (10%) to $1,124.6 million for the year ended December 31, 2007 as
compared to $1,017.9 million for the year ended December 31, 2006. The overall increase in net sales is
primarily due to the Company’s strong 2007 product line and improvements to the Company’s supply chain
during the current year, which improvements allowed the Company to make the necessary adjustments to supply
the products for the increased demand. On an operating segment basis, net sales increased as result of a $108.4
million (13%) increase in net sales from the Company’s golf clubs segment, offset by a decrease of $1.7 million
(1%) in net sales from the Company’s golf balls segment. The Company’s net sales by operating segment is set
forth below (dollars in millions):
Years Ended
December 31, Growth (Decline)
2007 2006 Dollars Percent
Net sales
Golf clubs ............................................ $ 911.5 $ 803.1 $108.4 13%
Golf balls ............................................ 213.1 214.8 (1.7) (1)%
$1,124.6 $1,017.9 $106.7 10%
For further discussion of each operating segment’s results, see “Golf Club and Golf Ball Segments Results”
below.
Net sales information by region is summarized as follows (dollars in millions):
Years Ended
December 31, Growth (Decline)
2007 2006 Dollars Percent
Net sales:
United States ......................................... $ 597.6 $ 566.6 $ 31.0 5%
Europe .............................................. 193.3 159.9 33.4 21%
Japan ............................................... 120.1 105.7 14.4 14%
Rest of Asia .......................................... 86.1 75.6 10.5 14%
Other foreign countries ................................. 127.5 110.1 17.4 16%
$1,124.6 $1,017.9 $106.7 10%
Net sales in the United States increased $31.0 million (5%) to $597.6 million during the year ended
December 31, 2007 compared to 2006. The Company’s sales in regions outside of the United States increased
$75.7 million (17%) to $527.0 million during the year ended December 31, 2007 compared to 2006. This
increase in U.S. and international sales is attributable to increased sales in all regions primarily due to favorable
consumer acceptance of the Company’s new products. The Company’s net sales were positively affected during
2007 by changes in foreign currency rates, primarily in Europe, Australia, Canada and Korea partially offset by
unfavorable foreign currency rate changes in Japan.
For the year ended December 31, 2007, gross profit increased $95.1 million (24%) to $493.2 million from
$398.1 million in 2006. Gross profit as a percentage of net sales improved to 44% during the year ended
31