Callaway 2015 Annual Report Download - page 46

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30
Net sales information by region is summarized as follows (dollars in millions):
Years Ended
December 31, Growth / (Decline)
Constant Currency
Growth/(Decline)
vs. 2014
2015 2014 Dollars Percent Percent
Net sales:
United States ...................................................................... $ 446.5 $ 421.8 $ 24.7 6 % 6 %
Europe ................................................................................ 125.1 134.4 (9.3)(7)% 7%
Japan................................................................................... 138.0 166.1 (28.1) (17)% (5)%
Rest of Asia ........................................................................ 70.3 89.6 (19.3) (22)% (17)%
Other foreign countries....................................................... 63.9 75.0 (11.1) (15)% (2)%
$ 843.8 $ 886.9 $ (43.1)(5)% 1%
Net sales in the United States increased $24.7 million (6%) to $446.5 million during 2015 compared to $421.8 million
in 2014, primarily as a result of increased brand momentum and market share improvement in most product categories. The
Company’s sales in regions outside of the United States decreased $67.8 million (15%) to $397.3 million in 2015 compared
to $465.1 million in 2014, primarily due to unfavorable changes in foreign currency exchange rates combined with softer than
expected market conditions, particularly in Asia. On a constant currency basis, net sales in regions outside the United States
would have decreased by $14.6 million (3%) to $450.5 million for the year ended December 31, 2015 compared to $465.1
million in the prior year. Net sales in the U.S. and in regions outside the U.S. were both negatively impacted by the shift in
product launch timing as mentioned above.
Gross profit decreased $0.3 million to $357.6 million in 2015 from $357.9 million in 2014. Gross profit as a percent of
net sales ("gross margin") increased 200 basis points to 42.4% in 2015 from 40.4% in 2014. This increase in gross margin
was primarily due to (i) a favorable shift in product mix within the irons, putters and golf ball categories; (ii) an increase in
average selling prices, primarily within the woods category; (iii) a decrease in closeouts and promotional activity; and (iv)
improved operational efficiencies. These increases were partially offset by the decrease in net sales as discussed above,
unfavorable changes in foreign currency exchange rates period over period, and an increase in club component costs due to
higher cost materials and technology incorporated into certain hybrid and putter product models. On a constant currency basis,
gross margin would have increased by 510 basis points in 2015 compared to the gross margin reported in 2014. For a further
discussion of gross margin, see "Segment Profitability" below.
Selling expenses decreased by $5.3 million to $228.9 million (27.1% of net sales) for the year ended December 31, 2015
compared to $234.2 million (26.4% of net sales) in the comparable period of 2014, primarily due to decreases of $2.2 million
in salaries and wages due to fluctuations in foreign currency rates, $2.0 million in depreciation expense, $1.5 million in
marketing and tour expenses and $0.7 million in consulting expenses. These decreases were partially offset by a $0.9 million
increase in stock compensation expense primarily due to fluctuations in the Company's stock price.
General and administrative expenses increased by $6.9 million to $68.6 million (8.1% of net sales) for the year ended
December 31, 2015 compared to $61.7 million (7.0% of net sales) in the comparable period of 2014, primarily due to a $4.1
million increase in stock compensation expense due to an increase in the Company's stock price and a $2.0 million increase
in professional fees.
Research and development expenses increased by $1.9 million to $33.2 million (3.9% of net sales) for the year ended
December 31, 2015 compared to $31.3 million (3.5% of net sales) in the comparable period of 2014, primarily due to an
increase in employee costs as a result of higher employee incentive compensation in 2015.
Interest expense decreased by $0.8 million to $8.7 million for the year ended December 31, 2015 compared to $9.5
million in the comparable period of 2014. This decrease was primarily due to lower average outstanding borrowings in 2015,
partially offset by the recognition of $2.0 million of expense from the acceleration of debt issuance costs in connection with
the exchange of the Company's convertible notes into shares of common stock during the current year (see Note 3 "Financing
Arrangements" to the Notes to Consolidated Financial Statements in this Form 10-K).
Other income (expense) increased by $1.6 million to income of $1.5 million for the year ended December 31, 2015
compared to expense of $0.1 million in the comparable period of 2014. The increase was primarily due to a $1.1 million
increase in net foreign currency gains in 2015.