Callaway 2010 Annual Report Download - page 48

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While the Company’s overall net operating results discussed above benefited during 2010 from changes in
foreign currency rates related to the translation of the Company’s international results into U.S. dollars for
reporting purposes, these benefits were partially offset by the effect that foreign currency exchange rates had on
the Company’s other income (expense) for 2010. As a result of the net effect the relatively weak U.S. dollar had
on the mark-to-market adjustments on the Company’s accounts payable and accounts receivable denominated in
foreign currencies and foreign currency exchange contracts, the Company’s other income (expense) was
adversely affected by $11.7 million in 2010 compared to $0.5 million in 2009.
The Company’s net loss increased by $3.5 million to $18.8 million in 2010 compared to $15.3 million in
2009 and loss per share increased to $0.46 in 2010 compared to $0.33 in 2009. Compared to 2009, the net loss
and loss per share for 2010 was adversely affected by (i) the $7.5 million ($0.08 per share) non-cash impairment
charge for the Top-Flite intangible assets, (ii) an incremental $5.4 million ($0.09 per share) of charges related to
the Company’s global operations strategy initiatives, and (iii) by an $11.2 million increase in other expense,
primarily resulting from foreign currency exchange rates as discussed above. In addition, as compared to 2009,
the Company’s loss per share was adversely affected by an incremental $0.07 per share as a result of the
Company’s June 2009 preferred stock offering, which only affected 2009 results for approximately six months.
While the Company’s financial performance in 2011 will ultimately depend on the degree to which
consumers return to purchasing golf equipment in general, and the Company’s new 2011 products in particular,
the Company is encouraged by some positive early indicators. Economic and market conditions appear generally
to be improving, the price discounting that was pervasive in 2009 appears to have lessened in 2010, the
Company’s retail inventory levels are at reasonable levels, and the Company received more gold medals than any
other manufacturer in Golf Digest’s 2011 product review. The Company also expects to realize in 2011
additional benefits from its investments in its new and emerging markets, technology, accessories and apparel
businesses and global operations strategy. As a result, the Company expects that in 2011 its underlying
operational performance and financial results will continue to improve compared to 2010.
Years Ended December 31, 2010 and 2009
Net sales in 2010 increased by $16.9 million (2%) to $967.7 million compared to $950.8 million in 2009.
Global economic conditions continued to be challenging during the current year and the golf industry overall did
not recover in 2010 as the Company’s management had anticipated at the beginning of the year. Although the
unfavorable economic and industry conditions significantly affected sales volumes in 2010, favorable foreign
currency rates and an overall increase in average selling prices, as a result of less promotional activity, were able
to offset the volume decline. Net sales were favorably impacted by $29.0 million due to changes in foreign
currency rates used to translate sales in foreign currencies into U.S. dollars. This increase in net sales consists of
a $18.9 million increase in net sales of the Company’s golf clubs segment partially offset by a $2.0 million
decrease in net sales of the Company’s golf balls segment as presented below (dollars in millions):
Years Ended
December 31, Growth (Decline)
2010 2009(1) Dollars Percent
Net sales
Golf clubs ................................................. $791.2 $772.3 $18.9 2%
Golf balls .................................................. 176.5 178.5 (2.0) (1)%
$967.7 $950.8 $16.9 2%
(1) Certain prior period costs associated with gift card promotions have been reclassified from accessories and
other into the applicable product categories to conform with the current year presentation.
For further discussion of each operating segment’s results, see “Golf Club and Golf Ball Segments Results”
below.
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