Callaway 2007 Annual Report Download - page 47

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average selling prices is attributable to the current year introduction of the White Hot XG and Black Series putter
product lines. The decrease in unit volume is primarily due to decreases in sales of the Company’s older White
Hot, White Steel, Tri-ball and 2-ball SRT putter products, which were in the second and third years of their
product lifecycles.
The $41.0 million (28%) increase in sales of accessories and other products to $186.9 million is primarily
attributable to an increase in sales of Callaway Golf footwear and other accessories (primarily bags and gloves).
The increase in sales of Callaway Golf footwear was primarily due to an increase in unit volume as well as the
fact that golf footwear was sold primarily through a licensing arrangement until April of 2006 whereas the
Company sold golf footwear directly to retailers during the full year in 2007.
Golf Balls Segment
Net sales information for the golf balls segment is summarized as follows (dollars in millions):
Years Ended
December 31, Growth (Decline)
2007 2006 Dollars Percent
Net sales:
Golf balls ................................................ $213.1 $214.8 $(1.7) (1)%
The $1.7 million (1%) decrease in net sales of golf balls to $213.1 million for the year ended December 31,
2007 is primarily due to a decrease in unit volume of Top-Flite golf balls, partially offset by an increase in unit
volume of Callaway Golf balls. The decrease in unit volume for Top-Flite golf balls is primarily due to a planned
30% reduction in product SKUs combined with a decline in sales of the Company’s older Top-Flite brand golf
ball products that were in the second and third years of their product lifecycles, partially offset by net sales of the
D2 golf ball introduced in the current year. The increase in unit volume for the Callaway Golf balls is attributable
to favorable consumer acceptance of the Company’s current year product introductions, including the new 2007
HX Hot, Big Bertha and Warbird golf ball product lines.
Segment Profitability
Profitability by operating segment is summarized as follows (dollars in millions):
Years Ended
December 31, Growth (Decline)
2007 2006 Dollars Percent
Income (loss) before provision for income taxes(1)
Golf clubs ............................................... $151.8 $101.8 $50.0 49%
Golf balls ................................................ 0.9 (6.4) 7.3 114%
$152.7(1) $ 95.4(1) $57.3 60%
(1) Amounts shown are before the deduction of corporate general and administration expenses and other
income (expenses) of $64.4 million and $60.4 million for the years ended December 31, 2007 and 2006,
respectively, which are not utilized by management in determining segment profitability. For further
information on segment reporting see Note 15 to the Consolidated Condensed Financial Statements—
”Segment Information” in this Form 10-K.
Pre-tax income (loss) in the Company’s golf clubs and golf balls operating segments improved to $151.8
million and $0.9 million, respectively, for the year ended December 31, 2007 compared to income of $101.8
million and a loss of $6.4 million, respectively, for the same period in 2006. The increase in the golf clubs
operating segment pre-tax income is primarily attributable to improved net sales as well as improved gross
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