Callaway 2015 Annual Report Download - page 49

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33
Years Ended December 31, 2014 and 2013
Net sales for the year ended December 31, 2014 increased $44.1 million (5%) to $886.9 million compared to $842.8
million for the year ended December 31, 2013. This increase was due to increased sales in both the golf club and golf ball
operating segments resulting primarily from continued brand momentum and the strong performance of the Big Bertha family
of woods, APEX irons, and Speed Regime and Supersoft golf balls launched during 2014, which resulted in market share
gains across all product categories. In addition, net sales were positively impacted by a strategic change in product launch
timing. These increases were partially offset by challenging market conditions combined with $11.1 million of unfavorable
fluctuations in foreign currency rates. The Company’s net sales by operating segment are presented below (dollars in millions):
Years Ended
December 31, Growth
2014 2013 Dollars Percent
Net sales:
Golf clubs .......................................................................................................... $ 749.9 $ 711.7 $ 38.2 5%
Golf balls ........................................................................................................... 137.0 131.1 5.9 5%
$ 886.9 $ 842.8 $ 44.1 5%
For further discussion of each operating segment’s results, see “Golf Clubs Segment” and “Golf Balls Segment” results
below.
Net sales information by region is summarized as follows (dollars in millions):
Years Ended
December 31, Growth
2014 2013 Dollars Percent
Net sales:
United States...................................................................................................... $ 421.8 $ 401.5 $ 20.3 5%
Europe................................................................................................................ 134.4 121.5 12.9 11%
Japan .................................................................................................................. 166.1 161.6 4.5 3%
Rest of Asia........................................................................................................ 89.6 84.1 5.5 7%
Other foreign countries...................................................................................... 75.0 74.1 0.9 1%
$ 886.9 $ 842.8 $ 44.1 5%
Net sales in the United States increased $20.3 million (5%) to $421.8 million during 2014 compared to $401.5 million
in 2013. The Company’s sales in regions outside of the United States increased $23.8 million (5%) to $465.1 million in 2014
compared to $441.3 million in 2013. This overall 5% increase in net sales in all regions was due to the continued improvement
in brand momentum as a result of the strong performance of 2014 product introductions, which resulted in market share gains
across all product categories primarily in the United States and Europe. This increase was partially offset by continued industry
softness as well as the unfavorable impact of the translation of foreign currency sales into U.S. dollars based upon 2014
exchange rates. If 2013 exchange rates were applied to 2014 reported sales in regions outside the United States and all other
factors were held constant, net sales in such regions would have been $11.1 million higher than reported during the year ended
December 31, 2014.
Gross profit increased $43.1 million to $357.9 million in 2014 from $314.8 million in 2013. Gross profit as a percent
of net sales increased to 40.4% in 2014 compared to 37.3% in 2013. This increase in gross margin was primarily due to (i) a
favorable shift in sales mix to higher margin woods, irons and golf balls products in 2014 compared to 2013, combined with
an increase in average selling prices of certain woods and irons products in 2014 compared to 2013; (ii) cost savings from
improved manufacturing and distribution efficiencies; and (iii) charges incurred in 2013 in connection with the Company's
Cost Reduction Initiatives. These improvements were partially offset by (i) an increase in club component costs due to more
expensive materials and technology incorporated into certain putters and woods products launched in 2014, and (ii) the net
unfavorable impact of changes in foreign currency rates.
Selling expenses increased by $7.7 million to $234.2 million (26.4% of net sales) for the year ended December 31, 2014
compared to $226.5 million (26.9% of net sales) in the comparable period of 2013, primarily due to a $6.2 million increase
in marketing and tour expenses.