Callaway 2009 Annual Report Download - page 18

Download and view the complete annual report

Please find page 18 of the 2009 Callaway annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 120

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120

All performance centers are also equipped with the Optifit Fitting System, which is a custom fitting system that
enables golfers to experiment with an extensive variety of clubhead and shaft combinations based on the golfers’
individual swing in order to find the set of golf clubs that fits their personal specifications. The Optifit Fitting
System is also utilized by participating on-and off-course retail stores. In addition, the Company utilizes iron and
wood fitting carts as well as tour fitting vans with club fitting and building capabilities. Club fittings are
performed by golf professionals who are specifically trained to fit golfers of all abilities into custom-fitted clubs.
The Company believes that offering golfers the opportunity to increase performance with custom club
specifications increases sales and promotes brand loyalty.
The Company maintains various sales programs including a Preferred Retailer Program. The Preferred
Retailer Program offers longer payment terms during the initial sell-in period, as well as potential rebates and
discounts, for participating retailers in exchange for providing certain benefits to the Company, including the
maintenance of agreed upon inventory levels, prime product placement and retailer staff training.
Sales Outside of the United States
Approximately 50% of the Company’s net sales were derived from sales for distribution outside of the
United States in both 2009 and 2008, and approximately 47% in 2007. The Company does business (either
directly or through its subsidiaries and distributors) in more than 100 countries around the world. The Company’s
management believes that controlling the distribution of its products in certain major markets in the world has
been and will continue to be an important element in the future growth and success of the Company.
The majority of the Company’s international sales are made through its wholly-owned subsidiaries located
in Europe, Japan, Canada, Korea, Australia, China, Malaysia and Thailand. In addition to sales through its
subsidiaries, the Company also sells through distributors in over 60 foreign countries, including Singapore,
Taiwan, the Philippines, South Africa, Argentina and various countries in South America. Prices of golf clubs
and balls for sales by distributors outside of the United States generally reflect an export pricing discount to
compensate international distributors for selling and distribution costs. A change in the Company’s relationship
with significant distributors could negatively impact the volume of the Company’s international sales.
The Company’s sales programs in foreign countries are specifically designed based upon local laws and
competitive conditions. Some of the sales programs utilized include the custom club fitting experiences and the
Preferred Retailer Program or variations of those programs employed in the United States as described above.
Conducting business outside of the United States subjects the Company to increased risks inherent in
international business. These risks include but are not limited to foreign currency risks, increased difficulty in
protecting the Company’s intellectual property rights and trade secrets, unexpected government action or changes
in legal or regulatory requirements, and social, economic or political instability. For a complete discussion of
these risk factors, see “Certain Factors Affecting Callaway Golf Company” contained in Item 1A below.
Sales of Pre-Owned and Outlet Golf Clubs
The Company sells certified pre-owned Callaway Golf products in addition to golf and lifestyle apparel and
golf-related accessories through its websites, www.callawaygolfpreowned.com and www.callawaygolfoutlet.com.
The Company generally acquires the pre-owned products through the Company’s Trade In! Trade Up! program,
which gives golfers the opportunity to trade in their used Callaway Golf clubs and certain competitor golf clubs at
authorized Callaway Golf retailers or through the Callaway Golf Pre-Owned website for credit toward the purchase
of new or pre-owned Callaway Golf equipment. The website for this program is www.tradeintradeup.com.
Online Store
The Company has a relationship with its network of authorized U.S. retailers in which consumers are linked
to golf retailers through the Company’s website, Shop.CallawayGolf.com. The website allows consumers to
5