Segment Information

12 Months Ended

Dec. 31, 2011

Segment Information

Note 19. Segment Information

The Company’s operating segments are organized on the basis of products and include golf clubs and golf balls. The golf clubs segment consists primarily of Callaway Golf and Top-Flite woods, hybrids, irons, wedges and putters as well as Odyssey putters, pre-owned clubs, GPS on-course range finders, other golf-related accessories and royalties from licensing of the Company’s trademarks and service marks. The golf balls segment consists primarily of Callaway Golf and Top-Flite golf balls that are designed, manufactured and sold by the Company. There are no significant intersegment transactions.

The table below contains information utilized by management to evaluate its operating segments.

	2011			2010			2009
	(In thousands)
Net sales
Golf Clubs(1)	$	726,169		$	791,066		$	772,084
Golf Balls(1)		160,359			176,590			178,715
	$	886,528		$	967,656		$	950,799
Loss before income tax
Golf Clubs(1),(2),(3)	$	(3,899	)	$	39,176		$	34,502
Golf Balls(1),(2),(3)		(12,655	)		2,559			(9,427	)
Reconciling items(4)		(73,707	)		(77,297	)		(54,678	)
	$	(90,261	)	$	(35,562	)	$	(29,603	)
Identifiable assets(5)(7)
Golf Clubs	$	409,074		$	438,002		$	406,835
Golf Balls(6)		92,280			122,147			129,796
Reconciling items(5)(7)		225,758			315,863			330,332
	$	727,112		$	876,012		$	866,963
Additions to long-lived assets
Golf Clubs	$	23,087		$	20,548		$	33,892
Golf Balls		6,680			2,023			3,315
	$	29,767		$	22,571		$	37,207
Goodwill
Golf Clubs	$	29,203		$	30,630		$	31,113
Golf Balls		—			—			—
	$	29,203		$	30,630		$	31,113
Depreciation and amortization
Golf Clubs	$	26,695		$	26,582		$	26,644
Golf Balls		11,941			14,367			14,104
	$	38,636		$	40,949		$	40,748

(1) Certain prior period amounts have been reclassified to conform to the current year presentation.

(2) The Company has been actively implementing certain initiatives targeted at improving gross margins (see Note 3). In connection with these initiatives, for the years ended December 31, 2011, 2010 and 2009, the Company incurred total pre-tax charges of $24,680,000, $14,816,000 and $6,156,000, respectively. Of these total charges, the Company’s golf clubs segment absorbed $15,552,000, $12,065,000 and $4,644,000, respectively, and the Company’s golf balls segment absorbed $5,038,000, $762,000 and $1,512,000, respectively.

(3) In connection with the Company’s Reorganization and Reinvestment Initiatives (see Note 3), in 2011, the Company recognized pre-tax charges of $16,329,000, of which $5,642,000 and $1,329,000 were absorbed by the Company’s golf clubs and golf balls operating segments, respectively. In 2010 and 2009, the Company recognized total pre-tax charges of $3,973,000 and $5,174,000, respectively, in connection with certain workforce reductions. In connection with these reductions, the Company’s golf clubs segment absorbed pre-tax charges of $1,261,000 and $3,104,000 in 2010 and 2009, respectively, and the Company’s golf balls segment absorbed pre-tax charges of $243,000 and $894,000 in 2010 and 2009, respectively. Amounts included in corporate general and administrative expenses not allocated to the segments for the aforementioned initiatives totaled $9,358,000, $2,469,000 and $1,176,000 in 2011, 2010 and 2009, respectively.

(4) Reconciling items represent the deduction of corporate general and administration expenses and other income (expenses), which are not utilized by management in determining segment profitability. These reconciling items include the following: (i) pre-tax impairment charges of $6,533,000 and $7,547,000 for 2011 and 2010, respectively, primarily related to certain trademarks and trade names (see Note 9), (ii) net losses of $8,153,000, $11,674,000, and $482,000 for 2011, 2010 and 2009, respectively, related to net realized and unrealized foreign currency hedging losses, offset by net foreign currency transaction gains included in other income (expense), and (iii) a pre-tax gain of $6,170,000 recognized in 2011 in connection with the sale of certain buildings (see Note 7).

(5) Identifiable assets are comprised of net inventory, certain property, plant and equipment, intangible assets and goodwill. Reconciling items represent unallocated corporate assets not segregated between the two segments.

(6) Includes property classified as available for sale in the amount of $1,500,000 in 2010 and $1,890,000 in 2009. Property held for sale represents the net book value of the golf ball manufacturing facility in Gloversville, New York. Property was sold in 2011 (see Note 7).

(7) Total identifiable assets for 2010 and 2009 have been corrected from the amounts previously reported to reflect a decrease in net deferred tax assets relating to periods previously reported. This correction resulted in a $879,000 decrease to short-term net deferred tax assets, a $8,088,000 decrease to long-term net deferred tax assets and a decrease to shareholders’ equity of $8,967,000 (see Note 16).

The Company’s net sales by product category are as follows:

	Year Ended December 31,
	2011		2010(1)		2009(1)
	(In thousands)
Net sales
Drivers and Fairway Woods	$	212,901	$	225,227	$	223,168
Irons		207,790		223,875		232,684
Putters		88,831		106,246		98,305
Golf Balls		160,359		176,590		178,715
Accessories and Other		216,647		235,718		217,927
	$	886,528	$	967,656	$	950,799

(1) Certain prior period amounts were reclassified to conform with the current year presentation.

The Company markets its products in the United States and internationally, with its principal international markets being Japan and Europe. The tables below contain information about the geographical areas in which the Company operates. Revenues are attributed to the location to which the product was shipped. Long-lived assets are based on location of domicile.

	Sales		Long-Lived Assets (excluding goodwill, intangible assets and deferred tax assets)
	(In thousands)
2011
United States	$	419,448	$	127,965
Europe		133,572		2,163
Japan		149,768		8,386
Rest of Asia		82,746		4,308
Other foreign countries		100,994		8,414
	$	886,528	$	151,236
2010
United States	$	468,214	$	140,623
Europe		130,106		1,633
Japan		164,810		8,635
Rest of Asia		89,455		4,231
Other foreign countries		115,071		7,416
	$	967,656	$	162,538
2009
United States	$	475,383	$	155,031
Europe		134,508		2,051
Japan		162,695		7,471
Rest of Asia		76,963		3,040
Other foreign countries		101,250		4,607
	$	950,799	$	172,200