Callaway 2015 Annual Report Download - page 51

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35
The $3.8 million (2%) increase in net sales of accessories and other products to $199.1 million for the year ended
December 31, 2014 was primarily due to an increase in net sales of packaged sets and headwear. These increases were partially
offset by a decline in apparel and footwear sales primarily due to the transition of the Company's European apparel business
to a licensing model at the beginning of 2014.
Golf Balls Segment
Net sales information for the golf balls segment is summarized as follows (dollars in millions):
Years Ended
December 31, Growth
2014 2013 Dollars Percent
Net sales:
Golf balls ........................................................................................................... $ 137.0 $ 131.1 $ 5.9 5%
The $5.9 million (5%) increase in net sales of golf balls to $137.0 million for the year ended December 31, 2014 was
primarily due to an increase in average selling prices with flat sales volume. The increase in average selling prices resulted
from a favorable shift in product mix to sales of higher priced Speed Regime golf balls with no comparable premium ball
launch in the prior year.
Segment Profitability
Profitability by operating segment is summarized as follows (dollars in millions):
Years Ended
December 31, Growth/(Decline)
2014 2013 Dollars Percent
Income (loss) before income taxes:
Golf clubs(1) ...................................................................................................... $ 50.9 $ 32.7 $ 18.2 56%
Golf balls(1) ....................................................................................................... 15.2 (3.4) 18.6 N/M
Reconciling items(2) .......................................................................................... (44.5)(42.6)(1.9)4%
$ 21.6 $ (13.3) $ 34.9 N/M
(1) Included in the Company’s golf clubs and golf balls segments are pre-tax charges of $6.4 million and $7.0 million,
respectively, for the year ended December 31, 2013, in connection with the Company's Cost Reduction Initiatives (see
Note 17 “Restructuring Initiatives” in the Notes to Consolidated Financial Statements in this Form 10-K for details
regarding this initiative).
(2) Reconciling items represent corporate general and administrative expenses and other income (expense) not included by
management in determining segment profitability. The reconciling items include:
• Pre-tax charges of $3.2 million in connection with the Cost Reduction Initiatives for the year ended December 31,
2013; and
• Net gains of $5.9 million for the year ended December 31, 2013 related to foreign currency hedging contracts offset
by foreign currency transaction losses. Net gains related to foreign currency were nominal for the year ended
December 31, 2014.
Pre-tax income in the Company’s golf clubs operating segment improved to $50.9 million for 2014 from $32.7 million
for 2013. This increase was driven by an increase in net sales as discussed above combined with an increase in gross margin,
offset by an increase in operating expenses. The increase in gross margin was primarily driven by (i) a favorable shift in sales
mix to the higher margin Big Bertha family of drivers and irons in 2014 compared to the X Hot family of drivers and irons
in 2013; (ii) an increase in average selling prices on the X2 Hot family of drivers, fairway woods and irons in 2014 compared
to the X Hot golf club products in 2013; (iii) cost savings from improved manufacturing and distribution efficiencies; and (iv)
charges incurred in 2013 in connection with the Company's Cost Reduction Initiatives. These increases were partially offset
by (i) an increase in club component costs due to more expensive materials and technology incorporated into certain woods