Callaway 2013 Annual Report Download - page 18

Download and view the complete annual report

Please find page 18 of the 2013 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 114

  • 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

4
Sales Outside of the United States
Of the Company’s total net sales, approximately 52% was derived from sales for distribution outside of the United
States in 2013, and approximately 53% in both 2012 and 2011. The Company does business (either directly or through
its subsidiaries and distributors) in over 100 countries around the world.
The majority of the Company’s international sales are made through its wholly-owned subsidiaries located in Japan,
Europe, Korea, Canada, Australia, China, Thailand and India. In addition to sales through its subsidiaries, the Company
also sells through its network of distributors 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 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 Company also offers the full line of Callaway Golf and Odyssey products, including drivers, fairway woods,
hybrids, irons, putters, golf balls, and golf-related accessories, through its websites www.callawaygolf.com and
www.odysseygolf.com.
Advertising and Promotion
The Company develops and executes its advertising and promotional campaigns for its products based on the
Company’s global brand principles. Within the United States, the Company has focused its advertising efforts mainly on
web-based advertising and in-store advertising, along with a combination of printed advertisements in national magazines,
such as Golf Magazine, Sports Illustrated and Golf Digest, and television commercials, primarily on The Golf Channel,
ESPN and on network television during golf telecasts. Advertising of the Company’s products outside of the United States
is generally handled by the Company’s subsidiaries, and while it is based on the Company’s global brand principles, the
local execution is tailored to each region based on its unique consumer market and lifestyles.
In addition, the Company establishes relationships with professional golfers in order to promote the Company’s
products. The Company has entered into endorsement arrangements with members of the various professional golf tours
to promote the Company’s golf club and golf ball products as well as golf bags and various golf accessories. For certain
risks associated with such endorsements, see “Risk Factors” contained in Item 1A.
Competition
The golf club markets in which the Company competes are highly competitive and are served by a number of well-
established and well-financed companies with recognized brand names. With respect to drivers, fairway woods and irons,
the Company’s major competitors are TaylorMade, Ping, Acushnet (Titleist brand), Puma (Cobra brand), SRI Sports
Limited (Cleveland and Srixon brands), Mizuno, Bridgestone and Nike. For putters, the Company’s major competitors