Segment Information

9 Months Ended

Sep. 30, 2012

Segment Information

17. Segment Information

The Company has two operating segments that are organized on the basis of products, which are segregated between golf clubs and golf balls. The golf clubs segment consists primarily of Callaway Golf woods, hybrids, irons, wedges and putters as well as Odyssey putters, other golf-related accessories, including uPro GPS on-course measurement devices, royalties from licensing of the Company’s trademarks and service marks as well as sales of pre-owned golf clubs. The golf balls segment consists primarily of Callaway Golf balls and Top-Flite golf balls until the sale of the Top-Flite brand in March 2012 (see Note 8). There are no significant intersegment transactions.

The table below contains information utilized by management to evaluate its operating segments for the interim periods presented (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net sales:
Golf clubs	$	121,286		$	140,503		$	595,123		$	600,570
Golf balls		26,620			32,740			119,004			132,086
	$	147,906		$	173,243		$	714,127		$	732,656
Income (loss) before provision for income taxes:
Golf clubs(1)(2)	$	(57,840	)	$	(23,941	)	$	(7,247	)	$	19,058
Golf balls(1)(2)		(13,789	)		(6,637	)		(8,047	)		(4,638	)
Reconciling items(3)		(14,419	)		(17,155	)		(34,249	)		(54,138	)
	$	(86,048	)	$	(47,733	)	$	(49,543	)	$	(39,718	)
Additions to long-lived assets:
Golf clubs	$	2,242		$	4,583		$	14,956		$	15,807
Golf balls		83			2,509			323			5,930
	$	2,325		$	7,092		$	15,279		$	21,737

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

(2) The table below includes total charges absorbed by the Company’s operating segments from the restructuring initiatives discussed in Note 2 (in thousands).

	Three Months Ended September 30, 2012									Nine Months Ended September 30, 2012
	Golf Clubs		Golf Balls		Corporate G&A(3)			Total		Golf Clubs		Golf Balls		Corporate G&A(3)			Total
Cost Reduction Initiatives	$	23,603	$	9,317	$	2,164		$	35,084	$	25,290	$	9,650	$	4,815		$	39,755
Reorganization and Reinvestment Initiatives		262		141		(112	)		291		816		249		(54	)		1,011
Total	$	23,865	$	9,458	$	2,052		$	35,375	$	26,106	$	9,899	$	4,761		$	40,766
	Three Months Ended September 30, 2011									Nine Months Ended September 30, 2011
	Golf Clubs		Golf Balls		Corporate G&A(3)			Total		Golf Clubs		Golf Balls		Corporate G&A(3)			Total
Reorganization and Reinvestment Initiatives	$	4,177	$	952	$	2,266		$	7,395	$	4,167	$	958	$	7,432		$	12,557
GOS Initiatives		3,923		1,268		38			5,229		12,279		5,061		231			17,571
Total	$	8,100	$	2,220	$	2,304		$	12,624	$	16,446	$	6,019	$	7,663		$	30,128

(3) Reconciling items represent corporate general and administrative expenses and other income (expense) not included by management in determining segment profitability. Reconciling items also include the following pre-tax items:

• A pre-tax gain of $6,602,000 in connection with the sale of the Top-Flite and Ben Hogan brands during the nine months ended September 30, 2012 (Note 8);

• A pre-tax impairment charge of $5,413,000 in connection with certain trademarks and trade names in the nine months ended September 30, 2011 (Note 8); and

• A pre-tax gain of $6,170,000 in connection with the sale of certain buildings during the nine months ended September 30, 2011 (Note 7).