Callaway 2007 Annual Report Download - page 51

compared to 2005. The decrease in average selling prices is primarily due to a higher mix of lower priced irons
products during 2006 compared to 2005. This shift in product mix primarily resulted from the current year
introduction of lower priced steel irons products compared to the prior year introduction of multi-material irons
products which generally have higher average selling prices. The decrease in units sold is primarily attributable
to the Company offering fewer new irons models in its 2006 product line than its 2005 product line, as well as a
decline in sales of the Company’s older irons products which were in the second and third years of their product
life cycles.
The $6.6 million (6%) decrease in net sales of putters to $102.7 million for the year ended December 31,
2006 resulted primarily from supply issues experienced by the Company during the first half of 2006 on the SRT
line of putters combined with a reduction in units sold of the Company’s older Odyssey White Steel and White
Hot putter lines (which were in the second and third years of their product lifecycles, respectively). This decrease
was partially offset by the current year introduction of the Odyssey White Hot XG and XG 2-ball, Odyssey
White Steel SRT 2-ball and 3-ball and Dual Force 2 putter models. The decrease in net putter sales was further
impacted by a decline in average selling prices primarily as a result of a higher mix of lower priced putter
products during the year ended December 31, 2006.
The $29.6 million (26%) increase in net sales of accessories and other products to $145.9 million for the
year ended December 31, 2006 is primarily attributable to an increase in sales of Callaway Golf brand golf bag
and accessories and other products as well as an increase in licensing revenue and revenue from the Company’s
Trade In! Trade Up! pre-owned golf club program. These increases were partially offset by a decrease in sales of
Top-Flite and Ben Hogan brand golf bags and accessories and other products
Golf Balls Segment
Net sales information for the golf balls segment is summarized as follows (dollars in millions):
Years Ended
December 31, Growth (Decline)
2006 2005 Dollars Percent
Net sales:
Golf balls ................................................ $214.8 $214.7 $0.1 0%
The Company’s net sales of golf balls remained flat at $214.8 million for the year ended December 31, 2006
compared to $214.7 million for the year ended December 31, 2005. Although total net sales remained flat, the
Company experienced a decrease in Top-Flite golf ball sales, offset by an increase in sales of Callaway Golf
brand golf balls. The decrease in Top-Flite golf ball sales is primarily attributable to a decline in average selling
prices resulting from an unfavorable shift in product mix to lower priced golf ball products (including range
balls), as well as a reduction in selling prices of certain products related to initiatives to clear Top-Flite golf ball
inventory in preparation for the 2007 re-launch of the Top-Flite brand. The increase in Callaway Golf brand golf
ball sales is primarily due to the introduction of the Callaway Golf new HX Tour model in the second quarter of
2006 combined with higher sales of the HX Tour 56, which was launched during the third quarter of 2005.
Segment Profitability
Profitability by operating segment is summarized as follows (dollars in millions):
Years Ended
December 31, Growth (Decline)
2006 2005 Dollars Percent
Income before provision for income taxes(1)
Golf clubs .............................................. $101.8 $68.3 $33.5 49%
Golf balls ............................................... (6.4) (3.6) (2.8) (78)%
$ 95.4(1) $64.7(1) $30.7 47%
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