Callaway 2012 Annual Report Download - page 16

Download and view the complete annual report

Please find page 16 of the 2012 Callaway annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 122

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122

For a discussion regarding the changes in net sales for each product group from 2012 to 2011 and from 2011
to 2010, 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 brand. 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 brand. 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
brand. 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 sold under the
Callaway Golf and Strata 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). The Company’s products compete at all price levels in the golf ball category.
Accessories, Softgoods and Other. This product category includes sales of golf bags, golf gloves, golf
footwear, rangefinders, 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, golf footwear, 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 2012, 2011 and 2010, the Company invested $29.5 million, $34.3 million, and $36.4 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
2