Callaway 2015 Annual Report Download - page 20

Download and view the complete annual report

Please find page 20 of the 2015 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 118

  • 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
  • 115
  • 116
  • 117
  • 118

4
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 the risks associated with conducting business outside
of the United States, see “Risk Factors” contained in Item 1A.
Sales of Pre-Owned 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 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 are Acushnet
(Titleist brand), Ping and TaylorMade. The Company believes that it is a technological leader in every golf club market in
which it competes.
The golf ball business is also highly competitive. There are a number of well-established and well-financed competitors,
including Acushnet (Titleist and Pinnacle brands), SRI Sports Limited (Dunlop and Srixon brands), Bridgestone (Bridgestone
and Precept brands), Nike, TaylorMade and others. These competitors compete for market share in the golf ball business, with
Acushnet having a market share of over 50% of the golf ball business in the United States and a leading position in certain
other regions outside the United States. The Company believes that it is a technological leader in the golf ball market.
For both golf clubs and golf balls, the Company generally competes on the basis of technology, quality, performance,
customer service and price. In order to gauge the effectiveness of the Company’s response to such factors, management receives
and evaluates Company-generated market trends for U.S. and foreign markets, as well as periodic public and customized