Callaway 2010 Annual Report Download - page 55

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costs incurred in connection with the Company’s gross margin initiatives and $3.1 million ($0.05 per share) as a
result of the workforce reductions announced in April 2009. In addition, net loss allocable to common
shareholders and loss per share for 2009 were negatively affected by dividends on convertible preferred stock of
$5.7 million ($0.09 per share). In 2008, net income and earnings per share were favorably affected by the
reversal of a $19.9 million energy derivative valuation account, as mentioned above, which resulted in an
after-tax benefit of $14.1 million ($0.22 per share). In 2008, net income and earnings per share were negatively
affected by after-tax charges of $7.8 million ($0.12 per share) related to costs associated with the implementation
of the Company’s gross margin improvement initiatives.
Golf Clubs and Golf Balls Segments Results for the Years Ended December 31, 2009 and 2008
The overall decrease in net sales in 2009 was primarily due to the weak global economy as discussed above
and its continued adverse effects on consumer confidence and retailer demand, which negatively affected sales
volumes and average selling prices as further discussed below. This decline in net sales was further exacerbated
by an unfavorable shift in foreign currency rates as a result of the overall strengthening of the U.S. dollar against
the foreign currencies in which the Company conducts its business during 2009 compared to 2008.
Golf Clubs Segment
Net sales information for the golf clubs segment by product category is summarized as follows (dollars in
millions):
Years Ended
December 31, Growth (Decline)
2009(1) 2008 Dollars Percent
Net sales:
Woods ................................................... $222.6 $268.3 $ (45.7) (17)%
Irons .................................................... 232.9 308.5 (75.6) (25)%
Putters ................................................... 98.1 101.7 (3.6) (4)%
Accessories and other ....................................... 218.7 215.6 3.1 1%
$772.3 $894.1 $(121.8) (14)%
(1) Certain costs associated with gift card promotions have been reclassified from accessories and other into the
applicable product categories to conform with the presentation as of December 31, 2010. The Company’s
gift card promotions during 2008 did not have a material impact to the Company’s results of operations and
therefore, the amounts presented for 2008 were not impacted by this reclassification.
The $45.7 million (17%) decrease in net sales of woods to $222.6 million for the year ended December 31,
2009, was primarily attributable to a decrease in average selling prices partially offset by an increase in sales
volume. The decrease in average selling prices was primarily due to sales promotions initiated during 2009 and
price reductions taken on Fusion Technology drivers and fairway woods during 2009. In addition, average selling
prices were negatively affected by sales of FT-iQ drivers in the current year, which were offered at a lower price
point compared to their predecessor, FT-i drivers, in the prior year. The increase in sales volume was primarily
due to the success of the sales promotions during 2009.
The $75.6 million (25%) decrease in net sales of irons to $232.9 million for the year ended December 31,
2009, resulted from a decrease in both average selling prices and sales volume. The decrease in average selling
prices was primarily due to price reductions taken on the Company’s older irons products that were in the second
year of their product lifecycles, primarily X-20 and Big Bertha irons combined with an unfavorable shift in
product mix from sales of the more premium Fusion irons during 2008 to sales of lower priced X-series irons
during 2009. The decrease in sales volume was primarily due to fewer irons products offered in 2009 compared
to 2008.
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