Callaway 2013 Annual Report Download - page 50

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36
Other income (expense), net improved by $11.3 million to income of $3.2 million for the year ended December 31,
2012 compared to expense of $8.1 million in the comparable period of 2011. This increase in income was primarily
attributable to an increase in net foreign currency gains.
The Company’s provision for income taxes decreased to $4.9 million for the year ended December 31, 2012,
compared to $81.6 million in the comparable period of 2011. In 2011, the Company recorded tax expense of $52.5 million
in order to establish a valuation allowance against its U.S. deferred tax assets, which also resulted in the recognition of
certain prepaid tax expenses of $21.6 million related to intercompany profits. Due to the effects of its deferred tax asset
valuation allowance, the Company’s effective tax rate for the year ended December 31, 2012 is not comparable to the
effective tax rate for the year ended December 31, 2011, as the Company’s provision for income taxes is not directly
correlated to the amount of its pretax losses.
Net loss for the year ended December 31, 2012 decreased to $122.9 million compared to $171.8 million in the
comparable period of 2011. Diluted loss per share decreased to $1.96 in 2012 compared to $2.82 in 2011. The Company’s
net loss for the years ended December 31, 2012 and 2011 include the following charges (in millions):
2012 2011
Pre-tax charges related to the Cost Reduction Initiatives ................................................................ $(32.2)$ —
Pre-tax impairment charges ............................................................................................................. (21.9)(6.5)
Pre-tax charges related to the Reorganization and Reinvestment Initiatives................................... (1.0)(16.3)
Pre-tax gain on the sale of Top-Flite and Ben Hogan brands.......................................................... 6.6 —
Pre-tax GOS charges........................................................................................................................ — (24.7)
Pre-tax gain on the sale of buildings................................................................................................ — 6.2
Income tax provision(1) .................................................................................................................... (4.9)(81.6)
Total charges.................................................................................................................................... $(53.4)$
(122.9)
(1) The Company’s income tax provision for 2012 and 2011 is affected by a valuation allowance against the Company’s
U.S. deferred tax assets and is therefore not directly correlated to the amount of its pretax loss. See Note 12 “Income
Taxes” to the Notes to Consolidated Financial Statements included in this Form 10-K.
Golf Clubs Segment
Net sales information for the golf clubs segment by product category is summarized as follows (dollars in
millions):
Years Ended
December 31, Growth/(Decline)
2012 2011 Dollars Percent
Net sales:
Woods .................................................................................................. $ 200.6 $ 211.2 $ (10.6)(5)%
Irons ..................................................................................................... 170.8 206.8 (36.0) (17)%
Putters .................................................................................................. 93.3 88.1 5.2 6 %
Accessories and other .......................................................................... 229.8 220.0 9.8 4 %
$ 694.5 $ 726.1 $ (31.6)(4)%
The $10.6 million (5%) decrease in net sales of woods to $200.6 million for the year ended December 31, 2012 was
primarily due to a decrease in average selling prices combined with a slight decline in sales volume. The decrease in
average selling prices resulted primarily from increased promotional activity during 2012 of certain in-line drivers
compared to predecessor products during 2011. In addition, net sales were negatively impacted by the later planned launch
timing of the Company’s premium Legacy drivers which were launched during the third quarter of 2012 compared to the
first quarter in 2011. This decline in average selling prices was partially offset by a favorable shift in sales mix resulting
from fewer sales of lower priced hybrids in 2012. The slight decrease in sales volume was primarily due to a decline in
hybrid club sales.