Callaway 2010 Annual Report Download - page 49

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Net sales information by region is summarized as follows (dollars in millions):
Years Ended
December 31, Growth (Decline)
2010 2009 Dollars Percent
Net sales:
United States ............................................... $468.2 $475.4 $ (7.2) (2)%
Europe .................................................... 130.1 134.5 (4.4) (3)%
Japan ..................................................... 164.8 162.7 2.1 1%
Rest of Asia ................................................ 89.5 77.0 12.5 16%
Other foreign countries ....................................... 115.1 101.2 13.9 14%
$967.7 $950.8 $16.9 2%
Net sales in the United States decreased $7.2 million (2%) to $468.2 million for the year ended
December 31, 2010 compared to the year ended December 31, 2009. The Company’s sales in regions outside of
the United States increased $24.1 million (5%) to $499.5 million for the year ended December 31, 2010
compared to the same period in 2009. The Company’s reported net sales in regions outside the United States in
2010 were favorably affected by the translation of foreign currency sales into U.S. dollars based upon 2010
exchange rates. If 2009 exchange rates were applied to 2010 reported sales in regions outside the United States
and all other factors were held constant, net sales in such regions would have been $29.0 million less than the net
sales reported during the twelve months ended December 31, 2010.
For the year ended December 31, 2010, gross profit increased $21.7 million to $365.5 million from $343.8
million for the comparable period of 2009. Gross profit as a percentage of net sales (“gross margin”) increased to
38% for the year ended December 31, 2010 compared to 36% for the same period in 2009. The increase in gross
margin was primarily attributable to: (i) net favorable changes in foreign currency rates; (ii) cost reductions on
golf club components costs; (iii) a favorable shift in sales mix; (iv) lower promotional activity on in-line products
in 2010 compared to 2009; and (v) a favorable shift in golf ball production to more cost efficient regions outside
the United States. These increases were partially offset by price reductions taken on older golf club products,
charges related to the Company’s Global Operations Strategy Initiatives and an increase in excess and obsolete
inventory related charges. See “Segment Profitability” below for further discussion of gross margins.
Selling expenses decreased $3.3 million to $257.3 million for the year ended December 31, 2010 from
$260.6 million in the comparable period of 2009. As a percentage of net sales, selling expenses were consistent at
27% in both 2010 and 2009. The dollar decrease was primarily due to a $6.9 million reduction in advertising and
promotional activities, partially offset by increases of $2.0 million and $1.6 million in consulting and employee
related costs, respectively, which include the restoration of employee benefits in 2010 that had been temporarily
suspended in 2009.
General and administrative expenses increased $9.4 million to $90.9 million for the year ended
December 31, 2010 from $81.5 million in the comparable period of 2009. As a percentage of net sales, general
and administrative expenses remained constant at 9% in both 2010 and 2009. The dollar increase was primarily
due to a $7.9 million increase in employee related costs, including the restoration of employee benefits in 2010,
as well as $2.0 million in costs associated with the Company’s Global Operations Strategy.
Research and development expenses increased $4.2 million to $36.4 million for the year ended
December 31, 2010 from $32.2 million in the comparable period of 2009. As a percentage of sales, research and
development expenses increased to 4% in 2010 from 3% in 2009. The dollar increase was primarily due to a $1.9
million increase in employee related costs, which includes the restoration of employee benefits in 2010, as well
as a $1.9 million increase in the allocation of corporate shared building expenses due to an expansion in square
footage occupied by the research and development department.
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