Callaway 2012 Annual Report Download - page 18

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. A portion of the Company’s custom club sales are generated from the utilization of 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. 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% was derived from sales for distribution outside of the
United States in both 2012 and 2011, and approximately 52% in 2010. The Company does business (either
directly or through its subsidiaries and distributors) in approximately 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 Japan, Europe, Korea, Canada, Australia, China, Malaysia, Thailand and India. In addition to sales through its
subsidiaries, the Company also sells through its distribution network in over 50 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
in legal or regulatory requirements, and social, economic or political instability. For a complete discussion of
these risk factors, see “Risk Factors” contained in Item 1A.
Sales of Pre-Owned/Outlet Golf Clubs and Online Store
The Company sells certified pre-owned golf products in addition to golf-related accessories through its
website www.callawaygolfpreowned.com. The Company generally acquires the pre-owned products through the
Company’s Trade In! Trade Up! program, which gives golfers the opportunity to trade in their used Callaway
Golf clubs and certain competitor golf clubs at authorized Callaway Golf retailers or through the Callaway Golf
Pre-Owned website for credit toward the purchase of new or pre-owned Callaway Golf equipment. The website
for this program is www.tradeintradeup.com.
4