Callaway 2009 Annual Report Download - page 48

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Years Ended December 31, 2009 and 2008
The adverse effects of the weak global economy experienced during 2009 had a significant negative impact
on the golf industry in general and on consumer confidence and retailer demand. These conditions were further
exacerbated by the impact of unfavorable foreign currency exchange rates. These factors contributed to a decline
in net sales of $166.4 million (15%) to $950.8 million for the year ended December 31, 2009, compared to
$1,117.2 million for the year ended December 31, 2008. This decrease reflects a $124.2 million decline in net
sales of the Company’s golf club segment and a $42.2 million decline in net sales of the Company’s golf balls
segment as indicated below (dollars in millions):
Years Ended
December 31, Decline
2009 2008 Dollars Percent
Net sales
Golf clubs .............................................. $769.9 $ 894.1 $(124.2) (14)%
Golf balls ............................................... 180.9 223.1 (42.2) (19)%
$950.8 $1,117.2 $(166.4) (15)%
For further discussion of each operating segment’s results, see “Golf Club and Golf Ball Segments Results”
below.
Net sales information by region is summarized as follows (dollars in millions):
Years Ended
December 31, Decline
2009 2008 Dollars Percent
Net sales:
United States ............................................ $475.4 $ 554.0 $ (78.6) (14)%
Europe ................................................. 134.5 191.1 (56.6) (30)%
Japan .................................................. 162.7 166.5 (3.8) (2)%
Rest of Asia ............................................. 77.0 80.0 (3.0) (4)%
Other foreign countries .................................... 101.2 125.6 (24.4) (19)%
$950.8 $1,117.2 $(166.4) (15)%
Net sales in the United States decreased $78.6 million (14%) to $475.4 million for the year ended
December 31, 2009, compared to the year ended December 31, 2008. The Company’s sales in regions outside of
the United States decreased $87.8 million (16%) to $475.4 million for the year ended December 31, 2009
compared to the same period in 2008. The decrease in net sales in the United States and internationally was
primarily attributable to the unfavorable economic conditions experienced in 2009, and a $36.0 million decline in
net sales internationally as a result of unfavorable changes in foreign currency rates, primarily in Europe.
For the year ended December 31, 2009, gross profit decreased $143.0 million to $343.8 million from $486.8
million for the year ended December 31, 2008. Gross profit as a percentage of net sales (“gross margin”)
decreased to 36% for the twelve months ended December 31, 2009 compared to 44% for the comparable period
in 2008. The decrease in gross margin was primarily attributable to the unfavorable economic conditions and the
resulting reduction in sales volume during 2009, as well as the impact of sales promotions, price reductions, and
unfavorable changes in foreign currency rates. These declines were partially offset by cost reductions on golf
club component costs as well as an overall improvement in manufacturing efficiencies for both golf clubs and
golf balls as a result of the Company’s gross margin improvement initiatives. See “Segment Profitability” below
for further discussion of gross margins. Gross profit for 2009 was negatively affected by charges of $6.2 million
related to the Company’s gross margin improvement initiatives compared to $12.5 million in 2008.
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