Callaway 2011 Annual Report Download - page 54

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Company’s new distribution agreement with Perry Ellis International compared to licensing revenues recognized
during the twelve months ended December 31, 2009 under the former agreement with the Company’s prior
licensee; and (iii) increased sales of golf bags. These increases were partially offset by a decline in sales of GPS
on-course range finders, golf gloves and golf footwear.
Golf Balls Segment
Net sales information for the golf balls segment is summarized as follows (dollars in millions):
Years Ended
December 31, Decline
2010(1) 2009(1) Dollars Percent
Net sales:
Golf balls ................................................. $176.6 $178.7 $(2.1) (1)%
(1) Certain prior period amounts have been reclassified to conform to the current year presentation.
The $2.1 million (1%) decrease in net sales of golf balls to $176.6 million for the year ended December 31,
2010 was primarily due to a decrease in sales volume partially offset by an increase in average selling prices. The
decrease in sales volume was driven by a decline in sales of TopFlite ball product lines partially offset by an
increase in sales of the Callaway Golf product lines (primarily the premium Tour-i series) as well as the
introduction of the new Solaire women’s line of golf balls. The increase in average selling prices was generated
by a shift in product mix to sales of more premium lines of golf balls in 2010 compared to 2009.
Segment Profitability
Profitability by operating segment is summarized as follows (dollars in millions):
Years Ended
December 31, Growth (Decline)
2010(1) 2009(1) Dollars Percent
Income (loss) before income taxes
Golf clubs(2)(3) ............................................... $39.2 $ 34.5 $ 4.7 14%
Golf balls(2)(3) ............................................... 2.6 (9.4) 12.0 128%
Reconciling items(4) .......................................... (77.4) (54.7) (22.7) (41)%
$(35.6) $(29.6) $ (6.0) (20)%
(1) Certain prior period amounts have been reclassified to conform to the current year presentation.
(2) As a result of the Global Operations Strategy implemented in 2010, during the year ended December 31,
2010, the Company incurred total pre-tax charges of $14.8 million, of which $12.1 million and $0.8 million
were absorbed by the Company’s golf clubs and golf balls operating segments, respectively. During the year
ended December 31, 2009, the Company incurred total pre-tax charges of $6.2 million in connection with
initiatives targeted at improving gross margins, of which $4.7 million and $1.5 million were absorbed by the
Company’s golf clubs and golf balls segments, respectively (see Note 3 “Restructuring Initiatives” in the
Notes to Consolidated Financial Statements included in this Form 10-K).
(3) During the year ended December 31, 2010, the Company incurred pre-tax charges of $4.0 million related to
the workforce reductions announced in the fourth quarter in 2010, of which $1.3 million and $0.2 million
were absorbed by the Company’s golf clubs and golf balls operating segments, respectively. During the year
ended December 31, 2009, the Company incurred pre-tax charges of $5.2 million in connection with the
workforce reductions announced in April 2009, of which $3.1 million and $0.9 million were absorbed by the
Company’s golf clubs and golf balls operating segments, respectively.
(4) Reconciling items represent the deduction of corporate general and administration expenses and other
income (expenses), which are not utilized by management in determining segment profitability. The
reconciling items for 2010 include a pre-tax impairment charge of $7.5 million that was recognized in the
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