Callaway 2007 Annual Report Download - page 46

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$0.34 in 2006. In 2007, net income was positively impacted by after-tax gains of $3.3 million ($0.05 per share)
that were recognized in connection with the sale of two buildings in August and December of 2007. Net income
in 2007 was negatively impacted by after-tax charges of $5.5 million ($0.08 per share) related to costs associated
with the Company’s Gross Margin Improvement Initiatives. Net income in 2006 was negatively impacted by
after-tax charges of $2.5 million ($0.04 per share) related to the Top-Flite Integration Initiatives, after-tax
charges of $1.9 million ($0.03 per share) in connection with the Company’s 2005 Restructuring Initiatives and
after-tax charges of $1.1 million ($0.02 per share) related to costs associated with the Gross Margin Improvement
Initiatives.
Golf Clubs and Golf Balls Segments Results for the Years Ended December 31, 2007 and 2006
Golf Clubs Segment
Net sales for the golf clubs segment increased $108.4 million (13%) to $911.5 million for the year ended
December 31, 2007 as compared to $803.1 million for the year ended December 31, 2006. This increase is
primarily attributable to a $39.4 million (15%) increase in net sales of woods, a $41.0 million (28%) increase in
net sales of accessories and other products and a $21.6 million (8%) increase in net sales of irons compared to the
prior year.
Net sales information for the golf clubs segment by product category is summarized as follows (dollars in
millions):
Years Ended
December 31, Growth (Decline)
2007 2006 Dollars Percent
Net sales:
Woods ................................................. $305.9 $266.5 $ 39.4 15%
Irons ................................................... 309.6 288.0 21.6 8%
Putters ................................................. 109.1 102.7 6.4 6%
Accessories and other ..................................... 186.9 145.9 41.0 28%
$911.5 $803.1 $108.4 13%
The $39.4 million (15%) increase in net sales of woods to $305.9 million for the year ended December 31,
2007 is primarily attributable to an increase in average selling prices partially offset by lower unit volume. The
increase in average selling prices is primarily attributable to a favorable shift in product mix as a result of the
launch of two premium multi-material drivers, the FT-i and FT-5, and one titanium driver, the Big Bertha 460,
which were introduced during the first quarter of 2007. These products sold at higher price points than the prior
generation FT-3 driver, which was in the third year of its product lifecycle and the titanium X460 driver, which
was introduced during the first quarter of 2006. The decline in unit volume primarily resulted from a decrease in
unit volume of older fairway wood products, which were in the second and third years of their product lifecycles,
partially offset by an increase in unit volume of the new driver products discussed above.
The $21.6 million (8%) increase in net sales of irons to $309.6 million for the year ended December 31,
2007 resulted primarily from higher unit volume combined with an increase in average selling prices. The
increase in unit volume is primarily attributable to an increase in sales of X-20 irons products that were launched
during the first quarter of 2007 partially offset by a decrease in sales of the Company’s older irons products,
primarily Big Bertha irons and prior generation X-18 irons, which were in the second and third years of their
product lifecycles. The increase in average selling prices is attributable to a more favorable mix of higher priced
irons products during 2007 compared to 2006. This shift in product mix primarily resulted from the current year
introduction of more premium multi-material irons products compared to the prior year introduction of steel irons
products which generally have lower average selling prices.
The $6.4 million (6%) increase in net sales of putters to $109.1 million for the year ended December 31,
2007 resulted primarily from an increase in average selling prices offset by lower unit volume. The increase in
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