Callaway 2012 Annual Report Download - page 48

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Years Ended December 31, 2012 and 2011
Net sales for the year ended December 31, 2012 decreased $52.4 million (6%) to $834.1 million compared
to $886.5 million for the year ended December 31, 2011. This decrease was due to a decline in sales in both the
golf clubs and golf balls segments. The decline in sales in the golf clubs operating segment was primarily due to
a decline in sales of irons and woods. The decline in sales in the golf balls operating segment was primarily due
to the Company’s sale of its Top-Flite brand earlier this year. These decreases were partially offset by an increase
in putter sales due to the current year launch of the Company’s new Metal X putter platform as well as an
increase in sales of the Company’s accessories and other products due to increased sales of packaged sets,
apparel and GPS devices. The Company’s net sales by operating segment are presented below (dollars in
millions):
Years Ended
December 31, Decline
2012 2011 Dollars Percent
Net sales:
Golf clubs ................................................. $694.5 $726.1 $(31.6) (4)%
Golf balls ................................................. 139.6 160.4 (20.8) (13)%
$834.1 $886.5 $(52.4) (6)%
For further discussion of each operating segment’s results, see “Golf Clubs Segment” and “Golf Balls
Segment” results below.
Net sales information by region is summarized as follows (dollars in millions):
Years Ended
December 31,
Growth/
(Decline)
2012 2011 Dollars Percent
Net sales:
United States ............................................... $392.1 $419.4 $(27.3) (7)%
Europe .................................................... 120.2 133.6 (13.4) (10)%
Japan ..................................................... 157.3 149.8 7.5 5%
Rest of Asia ............................................... 75.0 82.7 (7.7) (9)%
Other foreign countries ....................................... 89.5 101.0 (11.5) (11)%
$834.1 $886.5 $(52.4) (6)%
Net sales in the United States decreased $27.3 million (7%) to $392.1 million during 2012 compared to
$419.4 million in 2011. The Company’s sales in regions outside of the United States decreased $25.1 million to
$442.0 million in 2012 compared to $467.1 million in 2011 due largely to a decline in sales in Europe and the
Company’s Rest of Asia region. This decline was partially offset by an increase in sales in Japan. In 2011, sales
in Japan were negatively affected by the March 2011 earthquake and tsunami. Additionally, the Company’s
reported net sales in regions outside the United States in 2012 were unfavorably affected by the translation of
foreign currency sales into U.S. dollars based upon 2012 exchange rates. If 2011 exchange rates were applied to
2012 reported sales in regions outside the U.S. and all other factors were held constant, net sales in such regions
would have been $4.9 million higher than reported during the year ended December 31, 2012.
Gross profit decreased $63.1 million to $248.2 million in 2012 from $311.3 million in 2011. Gross margin
as a percent of net sales decreased to 30% in 2012 compared to 35% in 2011. The decrease in gross margin was
primarily attributable to charges that were recognized in connection with the Company’s Cost Reduction
Initiatives that were announced in July 2012. These initiatives were designed to streamline and simplify the
Company’s organizational structure as well as change the manner in which the Company approaches and
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