Callaway 2011 Annual Report Download - page 16

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For a discussion regarding the changes in net sales for each product group from 2011 to 2010 and from 2010
to 2009, see below, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Results of Operations” contained in Item 7.
The Company’s current principal products by product group are described below:
Drivers, Fairway Woods and hybrids. This product category includes sales of the Company’s drivers,
fairway woods and hybrid products, which are sold under the Callaway Golf and Top-Flite brands. These
products are generally made of metal (either titanium or steel) or a combination of metal and a composite
material. The Company’s products compete at various price levels in the woods category. The Company’s
drivers, fairway woods and hybrid products are available in a variety of lofts, shafts and other specifications to
accommodate the preferences and skill levels of all golfers.
Irons. This product category includes sales of the Company’s irons and wedges, which are sold under the
Callaway Golf and Top-Flite brands. The Company’s irons are generally made of metal (either titanium, steel or
special alloy) or a composite material (a combination of metal and polymer materials). The Company’s products
compete at various price levels in the irons category. The Company’s irons are available in a variety of designs,
shafts and other specifications to accommodate the preferences and skill levels of all golfers.
Putters. This product category includes sales of the Company’s putters, which are sold under the Odyssey
and Top-Flite brands. The Company’s products compete at multiple price levels in the putters category. The
Company’s putters are available in a variety of styles, shafts and other specifications to accommodate the
preferences and skill levels of all golfers.
Golf Balls. This product category includes sales of the Company’s golf balls, which are primarily sold under
the Callaway Golf and Top-Flite brands. The Company’s golf balls are generally either a 2-piece golf ball
(consisting of a core and cover) or a multilayer golf ball (consisting of two or more components in addition to the
cover). The Company’s golf ball products include covers that incorporate a traditional dimple pattern as well as
covers that incorporate innovative designs, including the Company’s proprietary HEX Aerodynamics (i.e., a
lattice of tubes that form hexagons and pentagons), dimple-in-dimple, sub-hex and deep dimple technologies.
The Company’s products compete at all price levels in the golf ball category.
Accessories and Other. This product category includes sales of golf bags, golf gloves, golf footwear, GPS
on-course range finders, golf apparel, packaged club sets, headwear, towels, umbrellas, eyewear and other
accessories, as well as sales of pre-owned products through www.callawaygolfpreowned.com Additionally, this
product category includes royalties from licensing of the Company’s trademarks and service marks on products
such as golf apparel, travel gear, rangefinders and practice aids.
Product Design and Development
Product design at the Company is a result of the integrated efforts of its brand management, research and
development, manufacturing and sales departments, all of which work together to generate new ideas for golf
equipment. The Company has not limited itself in its research efforts by trying to duplicate designs that are
traditional or conventional and believes it has created a work environment in which new ideas are valued and
explored. In 2011, 2010 and 2009, the Company invested $34.3 million, $36.4 million and $32.2 million,
respectively, in research and development. The Company intends to continue to invest substantial amounts in its
research and development activities in connection with its development of new products.
The Company has the ability to create and modify product designs by using computer aided design (“CAD”)
software, computer aided manufacturing (“CAM”) software and computer numerical control milling equipment.
CAD software enables designers to develop computer models of new product designs. CAM software is then
used by engineers to translate the digital output from CAD computer models so that physical prototypes can be
produced. Further, the Company utilizes a variety of testing equipment and computer software, including golf
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