Callaway 2008 Annual Report Download - page 14

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PART I
Item 1. Business
Callaway Golf Company (the “Company” or “Callaway Golf”) was incorporated in California in 1982 and
reincorporated in Delaware on July 1, 1999 with the main purpose of designing, manufacturing and selling high
quality golf equipment. In 1997, the Company acquired substantially all of the assets of Odyssey Sports, Inc.,
which manufactured and marketed the Odyssey brand of putters and wedges. In 1998, the Company began a
reorganization of its international operations by acquiring the distribution rights in certain key international
markets. As a result, during 1998 through 2001, the Company acquired distribution rights and substantially all of
the assets from its distributors in Japan, France, Belgium, Norway, Denmark, Germany, Ireland, Spain, Canada,
Korea and Australia. In 2000, the Company entered the golf ball business with the release of its first golf ball
product. In 2003, the Company acquired through a court-approved sale substantially all of the golf-related assets
of the TFGC Estate Inc. (f/k/a The Top-Flite Golf Company, f/k/a Spalding Sports Worldwide, Inc.), which
included golf ball manufacturing facilities, the Top-Flite and Ben Hogan brands, and all golf-related patents and
trademarks (the “Top-Flite Acquisition”). Beginning in 2001, the Company and its participating retailers
partnered with FrogTrader, Inc. to develop the Trade In! Trade Up! program. In 2004, the Company acquired all
of the issued and outstanding shares of stock of FrogTrader, Inc. (which subsequently changed its name to
Callaway Golf Interactive, Inc.). The Company acquired FrogTrader, Inc. to stimulate purchases of new clubs by
growing its Trade In! Trade Up! program and to enable the Company to better manage the distribution of
pre-owned golf clubs. In 2008, the Company acquired certain assets and liabilities of uPlay, LLC, a developer
and marketer of global positioning system (“GPS”) devices. The Company acquired uPlay, LLC to expand its
accessories business by adding satellite-based range finders and for the potential application for other products as
well. The Company currently has the following wholly-owned operating subsidiaries: Callaway Golf Sales
Company, Callaway Golf Ball Operations, Inc. (f/k/a The Top-Flite Golf Company), Callaway Golf Interactive,
Inc., Callaway Golf Europe Ltd., Callaway Golf K.K., Callaway Golf Korea Ltd., Callaway Golf Canada Ltd.,
Callaway Golf South Pacific PTY Ltd., Callaway Golf (Shanghai) Trading Company, Ltd., Callaway Golf
Malaysia Sdn. Bhd. (834371-X) (formerly known as Titanium Winners Sdn. Bhd.), and Callaway Golf
(Thailand) Ltd.
The Company, together with its subsidiaries, designs, manufactures and sells high quality golf clubs
(drivers, fairway woods, hybrids, irons, wedges and putters) and golf balls. The Company also sells golf
accessories such as golf bags, golf gloves, golf footwear, golf and lifestyle apparel, golf headwear, eyewear, golf
towels and golf umbrellas. The Company generally sells its products to golf retailers (including pro shops at golf
courses as well as off-course retailers), sporting goods retailers and mass merchants, directly and through its
wholly-owned subsidiaries, and to third-party distributors. The Company also sells pre-owned golf products
through its website, www.callawaygolfpreowned.com. In addition, in November of 2006, the Company launched
an online store, where consumers can place an order for Callaway Golf, Top-Flite, Ben Hogan and Odyssey
products through its website Shop.CallawayGolf.com and have the order fulfilled by a local participating retailer
or in certain circumstances, by the Company. The Company’s products are sold in the United States and in over
100 countries around the world. The Company’s products are designed for the enjoyment of both amateur and
professional golfers. Golfers generally purchase the Company’s products on the basis of performance, ease of
use, brand recognition and appearance. In addition, the Company licenses its trademarks and service marks in
exchange for a royalty fee to third parties for use on products such as golf and lifestyle apparel, watches,
rangefinders, practice aids and travel gear. The Company’s business is seasonal and as a result approximately
two-thirds of its sales and most, if not all, of its profitability occur during the first half of its fiscal year (see
below “Certain Factors Affecting Callaway Golf Company” contained in Item 1A).
Financial Information about Segments and Geographic Areas
Information regarding the Company’s segments and geographic areas in which the Company operates is
contained in Note 17 to the Company’s Consolidated Financial Statements for the years ended December 31,
2008, 2007 and 2006 (“Consolidated Financial Statements”), which note is incorporated herein by this reference
and is included as part of Item 8—“Financial Statements and Supplementary Data.”
1