Callaway 2011 Annual Report Download - page 18

Sales of the Company’s products in the United States are made and supported by full-time regional field
representatives and in-house sales and customer service representatives. Most regions in the United States are
covered by both a field representative and a dedicated in-house sales representative who work together to initiate
and maintain relationships with customers through frequent telephone calls and in-person visits. In addition to
these sales representatives, the Company also has dedicated in-house customer service representatives.
In addition, other dedicated sales representatives provide service to corporate customers who want their
corporate logo imprinted on the Company’s golf balls, putters or golf bags. The Company imprints the logos on
the majority of these corporate products, thereby retaining control over the quality of the process and final
product. The Company also pays a commission to certain on-and off-course professionals and retailers with
whom it has a relationship for corporate sales that originate through such professionals and retailers.
The Company also has a separate team of club fitting specialists who focus on the Company’s custom club
sales. Custom club sales are generated primarily from the utilization of the Company’s club fitting programs such
as performance centers, which utilize high speed cameras and precision software to capture relevant swing data.
All performance centers and participating on-and-off course retail stores are equipped with custom fitting
systems that incorporate the use of an extensive variety of clubhead and shaft combinations in order to find a set
of golf clubs that fits a golfer’s personal specifications. In addition, the Company utilizes tour fitting vans with
club fitting and building capabilities. Club fittings are performed by golf professionals who are specifically
trained to fit golfers of all abilities into custom-fitted clubs. The Company believes that offering golfers the
opportunity to increase performance with custom club specifications increases sales and promotes brand loyalty.
The Company maintains various sales programs including a Preferred Retailer Program. The Preferred
Retailer Program offers longer payment terms during the initial sell-in period, as well as potential rebates and
discounts, for participating retailers in exchange for providing certain benefits to the Company, including the
maintenance of agreed upon inventory levels, prime product placement and retailer staff training.
Sales Outside of the United States
Of the Company’s total net sales, approximately 53%, 52% and 50% of the Company’s net sales were
derived from sales for distribution outside of the United States in 2011, 2010 and 2009, respectively. The
Company does business (either directly or through its subsidiaries and distributors) in more than 100 countries
around the world. The Company’s management believes that controlling the distribution of its products in certain
major markets in the world has been and will continue to be an important element in the future growth and
success of the Company.
The majority of the Company’s international sales are made through its wholly-owned subsidiaries located
in Europe, Japan, Canada, Korea, Australia, China, India, Malaysia and Thailand. In addition to sales through its
subsidiaries, the Company also sells through its distribution network in over 60 foreign countries, including
Singapore, Indonesia, the Philippines, South Africa, and in numerous countries in Central and South America.
Prices of golf clubs and balls for sales by distributors outside of the United States generally reflect an export
pricing discount to compensate international distributors for selling and distribution costs. A change in the
Company’s relationship with significant distributors could negatively impact the volume of the Company’s
international sales.
The Company’s sales programs in foreign countries are specifically designed based upon local laws and
competitive conditions. Some of the sales programs utilized include the custom club fitting experiences and the
Preferred Retailer Program or variations of those programs employed in the United States as described above.
Conducting business outside of the United States subjects the Company to increased risks inherent in
international business. These risks include but are not limited to foreign currency risks, increased difficulty in
protecting the Company’s intellectual property rights and trade secrets, unexpected government action or changes
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