Callaway 2009 Annual Report Download - page 16

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designs that have been commonly used by the Company and other golf club manufacturers in irons and wedges.
While models introduced prior to 2010 will still be deemed to conform to the Rules of Golf until at least 2024 so
long as they are made and sold prior to 2011, models introduced in 2010 or thereafter will be required to meet the
new groove standards. For further discussion on certain risks associated with product design and development,
see below, “Certain Factors Affecting Callaway Golf Company” contained in Item 1A.
Putters. This product category includes sales of the Company’s putters, which are sold under the Odyssey
and Top-Flite brands. The Company’s products compete at multiple price levels in the putters’ category. The
Company’s putters are available in a variety of styles, shafts and other specifications to accommodate the
preferences and skill levels of all golfers. All of the Company’s current putter products conform to the current
rules of the USGA and the R&A.
Golf Balls. This product category includes sales of the Company’s golf balls, which are primarily sold under
the Callaway Golf and Top-Flite brands. The Company’s golf balls are generally either a 2-piece golf ball
(consisting of a core and cover) or a multilayer golf ball (consisting of two or more components in addition to the
cover). The Company’s golf ball products include covers that incorporate a traditional dimple pattern as well as
covers that incorporate innovative designs, including the Company’s proprietary HEX Aerodynamics (i.e., a
lattice of tubes that form hexagons and pentagons), dimple-in-dimple, sub-hex and deep dimple technologies.
The Company’s products compete at all price levels in the golf ball category. In general, the Company’s
multilayer golf balls sell at higher price points than its 2-piece golf balls. All of the Company’s current golf ball
products conform to the current rules of the USGA and the R&A.
Accessories and Other. This product category includes sales of golf bags, golf gloves, golf footwear, GPS
on-course range finders, golf and lifestyle apparel, recreational club sets, headwear, towels, umbrellas, eyewear
and other accessories, as well as sales of pre-owned products through Callaway Golf Interactive, Inc.
Additionally, this product category includes royalties from licensing of the Company’s trademarks and service
marks on products such as golf and lifestyle apparel, watches, travel gear, rangefinders and practice aids.
Product Design and Development
Product design at the Company is a result of the integrated efforts of its brand management, research and
development, manufacturing and sales departments, all of which work together to generate new ideas for golf
equipment. The Company has not limited itself in its research efforts by trying to duplicate designs that are
traditional or conventional and believes it has created a work environment in which new ideas are valued and
explored. In 2009, 2008 and 2007, the Company invested $32.2 million, $29.4 million and $32.0 million,
respectively, in research and development. The Company intends to continue to invest substantial amounts in its
research and development activities in connection with its development of new products.
The Company has the ability to create and modify product designs by using computer aided design (“CAD”)
software, computer aided manufacturing (“CAM”) software and computer numerical control milling equipment.
CAD software enables designers to develop computer models of new product designs. CAM software is then
used by engineers to translate the digital output from CAD computer models so that physical prototypes can be
produced. Further, the Company utilizes a variety of testing equipment and computer software, including golf
robots, launch monitors, a proprietary virtual test center, a proprietary performance analysis system, an indoor
test range and other methods to develop and test its products. Through the use of these technologies, the
Company has been able to accelerate and make more efficient the design, development and testing of new golf
clubs and golf balls.
For certain risks associated with product design and development, see below, “Certain Factors Affecting
Callaway Golf Company” contained in Item 1A.
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