Callaway 2009 Annual Report Download - page 52

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an overall decline in net sales as discussed above as well as a decline in gross margin, which was largely due to
various sales promotions initiated during 2009, price reductions taken on older golf ball models as well as
increases in the cost of golf ball raw materials. These decreases were partially offset by cost savings resulting
from the Company’s gross margin improvement initiatives, including a shift in golf ball production to more cost
efficient regions outside the U.S.
Operating expenses related to both the golf club and golf ball segments decreased during the twelve months
ended December 31, 2009, compared to the same period in 2008 as a result of cost reductions taken by the
Company, primarily related to advertising and promotional activities, employee costs, and travel and
entertainment expenses as well as a decrease in employee costs.
The Company has been actively implementing the Company’s gross margin improvement initiatives, which
were announced during the fourth quarter of 2006. As a result of these initiatives, the Company’s golf clubs and
golf balls operating segments absorbed charges of $4.6 million and $1.5 million, respectively, during the year
ended December 31, 2009, compared to $6.0 million and $6.7 million, respectively, during the year ended
December 31, 2008. In addition, in connection with the workforce reductions announced in April 2009, the
Company recorded pre-tax charges of $5.2 million, of which $4.0 million and $1.2 million were absorbed by the
Company’s golf clubs and golf balls operating segments, respectively, during the twelve months ended
December 31, 2009.
Years Ended December 31, 2008 and 2007
Net sales decreased $7.4 million (1%) to $1,117.2 million for the year ended December 31, 2008, compared
to $1,124.6 million for the year ended December 31, 2007. This decrease reflects a $17.4 million decrease in net
sales of the Company’s golf clubs segment partially offset by a $10.0 million increase in net sales of the
Company’s golf balls segment as set forth below (dollars in millions):
Years Ended
December 31, Growth (Decline)
2008 2007 Dollars Percent
Net sales
Golf clubs .............................................. $ 894.1 $ 911.5 $(17.4) (2)%
Golf balls .............................................. 223.1 213.1 10.0 5%
$1,117.2 $1,124.6 $ (7.4) (1)%
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, Growth (Decline)
2008 2007 Dollars Percent
Net sales:
United States ............................................ $ 554.0 $ 597.6 $(43.6) (7)%
Europe ................................................. 191.1 193.3 (2.2) (1)%
Japan .................................................. 166.5 120.1 46.4 39%
Rest of Asia ............................................ 80.0 86.1 (6.1) (7)%
Other foreign countries .................................... 125.6 127.5 (1.9) (1)%
$1,117.2 $1,124.6 $ (7.4) (1)%
39