Callaway 2015 Annual Report Download - page 50

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34
General and administrative expenses decreased by $6.4 million to $61.7 million (7.0% of net sales) for the year ended
December 31, 2014 compared to $68.1 million (8.1% of net sales) in the comparable period of 2013. This decrease was
primarily due to a $5.4 million decrease in bad debt expense as a result of additional reserves taken in 2013 related to specific
accounts, in addition to a $2.2 million decrease in stock compensation expense as a result of a 9% decrease in the Company's
stock price in 2014. These decreases were partially offset by a $2.0 million increase in accrued employee bonus and
compensation.
Research and development expenses increased by $0.4 million to $31.3 million (3.5% of net sales) for the year ended
December 31, 2014 compared to $30.9 million (3.7% of net sales) in the comparable period of 2013, primarily due to an
increase in employee costs as a result of accrued employee incentive compensation in 2014.
Interest expense increased by $0.4 million to $9.5 million for the year ended December 31, 2014 compared to $9.1
million in the comparable period of 2013. This increase was primarily due to higher average outstanding borrowings in 2014.
Other income (expense) decreased by $6.1 million to expense of $0.1 million for the year ended December 31, 2014
compared to income of $6.0 million in the comparable period of 2013. This decrease was primarily due to a net decrease in
foreign currency contract gains in 2014.
The Company’s provision for income taxes was flat at $5.6 million for the year ended December 31, 2014, compared
to the comparable period of 2013. Due to the effects of the Company’s valuation allowance against its U.S. deferred tax assets,
the Company’s income tax provision for 2014 and 2013 is primarily attributable to earnings generated by its foreign subsidiaries.
Net income for the year ended December 31, 2014 increased to $16.0 million compared to a net loss of $18.9 million
in the comparable period of 2013. Diluted earnings per share improved to $0.20 in 2014 compared to a diluted loss per share
of $0.31 in 2013. The Company’s net loss for the year ended December 31, 2013 includes $16.6 million related to the Cost
Reduction Initiatives. There were no charges related to these initiatives recognized in 2014.
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)
2014 2013 Dollars Percent
Net sales:
Woods................................................................................................................ $ 269.5 $ 249.8 $ 19.7 8 %
Irons................................................................................................................... 200.2 178.8 21.4 12 %
Putters ................................................................................................................ 81.1 87.8 (6.7)(8)%
Accessories and other ........................................................................................ 199.1 195.3 3.8 2 %
$ 749.9 $ 711.7 $ 38.2 5 %
The $19.7 million (8%) increase in net sales of woods to $269.5 million for the year ended December 31, 2014 resulted
from an increase in average selling prices combined with a slight increase in sales volume. The increase in average selling
prices was primarily due to the strong performance of the 2014 product line, including the more premium Big Bertha family
of woods compared to the same period in the prior year.
The $21.4 million (12%) increase in net sales of irons to $200.2 million for the year ended December 31, 2014 was
primarily attributable to an increase in average selling prices due to a favorable shift in product mix due to the success of the
more premium APEX and Big Bertha irons during 2014.
The $6.7 million (8%) decrease in net sales of putters to $81.1 million for the year December 31, 2014 was primarily
attributable to a decline in sales volume partially offset by an increase in average selling prices. The decline in sales volume
was due to a shift in product launches to more premium models launched in 2014 compared to core (higher volume) putter
models launched in 2013. The increase in average selling prices was primarily due to a favorable shift in product mix due to
increased sales of the Company's new counterbalanced technology putters (Tank and Tank Cruiser) as well as the introduction
of the Company's new elite Metal X Milled putter during 2014, with no comparable elite putter launch in 2013.