Callaway 2015 Annual Report Download - page 17

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1
PART I
Item 1. Business
Callaway Golf Company (the “Company” or “Callaway Golf”) was incorporated in California in 1982 with the main
purpose of designing, manufacturing and selling high quality golf clubs. The Company became a publicly traded corporation
in 1992, and in 1999, reincorporated in the State of Delaware. The Company has evolved over time from a manufacturer of
golf clubs to one of the leading manufacturers and distributors of a full line of golf equipment and accessories.
The Company designs, manufactures and sells high quality golf clubs, golf balls, golf bags and other golf-related
accessories. The Company designs its products to be technologically advanced and in this regard invests a considerable amount
in research and development each year. The Company’s golf products are designed for golfers of all skill levels, both amateur
and professional, and are generally designed to conform to the Rules of Golf as published by the United States Golf Association
("USGA") and the ruling authority known as The R&A. The Company has two reportable operating segments that are organized
on the basis of products, namely the golf clubs segment and golf balls segment. The golf clubs segment consists of Callaway
Golf woods, hybrids, irons and wedges and Odyssey putters. This segment also includes other golf-related accessories, royalties
from licensing of the Company’s trademarks and service marks and sales of pre-owned golf clubs. The golf balls segment
consists of Callaway Golf and Strata balls that are designed, manufactured and sold by the Company.
The Company generally sells its products to retailers, directly and through its wholly-owned subsidiaries, and to third-
party distributors. The Company sells pre-owned golf products through its website, www.callawaygolfpreowned.com. In
addition, the Company sells Callaway Golf and Odyssey products direct to consumers through its websites
www.callawaygolf.com and www.odysseygolf.com. The Company also licenses its trademarks and service marks in exchange
for a royalty fee to third parties for use on golf related accessories, including golf apparel and footwear, golf gloves, prescription
eyewear and practice aids. The Company’s products are sold in the United States and in over 100 countries around the world.
Financial Information about Segments and Geographic Areas
Information regarding the Company’s segments and geographic areas in which the Company operates is contained in
Note 18 in the Notes to the Company’s Consolidated Financial Statements for the years ended December 31, 2015, 2014 and
2013, and is included as part of Item 8—“Financial Statements and Supplementary Data.”
Products
The Company designs, manufactures and sells high quality golf clubs, golf balls, golf bags and other golf-related
accessories. The following table sets forth the contribution to net sales attributable to the Company's principal product groups
for the periods indicated:
Years Ended December 31,
2015 2014 2013
(Dollars in millions)
Woods...................................................................................... $ 222.2 27% $ 269.5 31% $ 249.8 30%
Irons ........................................................................................ 205.5 24% 200.2 23% 178.8 21%
Putters...................................................................................... 86.3 10% 81.1 9% 87.8 10%
Golf balls................................................................................. 143.1 17% 137.0 15% 131.1 16%
Accessories and other.............................................................. 186.7 22% 199.1 22% 195.3 23%
Net sales ............................................................................. $ 843.8 100% $ 886.9 100% $ 842.8 100%
The changes in foreign currency rates from 2013 through 2015 have had a significant negative impact on the Company's
net sales. For a more detailed discussion regarding the changes in net sales for each product group from 2015 to 2014 and
from 2014 to 2013, 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:
Woods. 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