strategic-management

The company acquired FrogTrader to stimulate purchases of new clubs by growing its
Trade In! Trade Up! program and to enable the company to better manage the distribution
of preowned golf clubs. In 2008, the company acquired certain assets and liabilities of
uPlay, LLC, a developer and marketer of global positioning system (GPS) devices. The
company acquired uPlay to expand its accessories business by adding satellite-based range
finders and for the potential application for other products as well.
Callaway won the bidding war in 2003 for Top-Flite Golf, with a $174 million offer
that ended a struggle with rival Adidas-Salomon, owner of Taylor Made Golf. Top-Flite is
a leading manufacturer of golf balls and has a high reputation among professionals and
recreational players. Top-Flite, the nation’s second-largest golf ball maker behind industry
leader Titleist, had $250 million in 2002 golf ball sales. The company’s $530 million in
debt and the highly competitive market forced it into bankruptcy. Under the deal, Callaway
assumed Top-Flite’s debt.
Vision and Mission
CGC does not have a vision statement published on its Web site, but it does have a mission
statement, as follows:
Callaway Golf Company is driven to be a world class organization that designs, develop,
makes and delivers demonstrably superior and pleasing different golf products that
incorporate breakthrough technologies, backs those products with noticeably superior
customer service, and generates a return to the shareholders in excess of the cost of
capital. We share every golfer’s passion for the game, and commit our talents and our
technology to increasing the satisfaction and enjoyment all golfers derive from pursuing
that passion.
Current Operations
CGC boosted its net income to $66 million in 2008 as indicated in Exhibit 1.
Despite the challenging and unfavorable global economic conditions, CGC posted 2008
net sales of $1.117 billion, which was the second highest sales level in the company’s history
and only slightly less than the record sales of $1.125 billion in 2007. Callaway has also
delivered a proforma earnings per share of $1.04, an increase of approximately 6 percent.
EXHIBIT 1 Callaway Golf Company Five-Year Statement of Operations
CASE 28 • CALLAWAY GOLF COMPANY — 2009 273
Year Ended December 31
2008 2007 2006 2005 2004
(in thousands, except per share data)
Net sales $1,117,204 $1,124,591 $1,017,907 $998,093 $934,564
Cost of sales 630,371 631,368 619,832 583,679 575,742
Gross profit 486,833 493,223 398,075 414,414 358,822
Selling, general and
administrative expenses 373,275 371,020 334,235 370,219 352,967
Research and development expenses 29,370 32,020 26,785 26,989 30,557
Income (loss) from operations 84,188 90,183 37,055 17,206 (24,702)
Interest and other income, net 1,863 3,455 3,364 (390) 1,934
Interest expense (4,666) (5,363) (5,421) (2,279) (945)
Unrealized energy derivative losses 19,922 — — — —
Income (loss) before income taxes 101,307 88,275 34,998 14,537 (23,713)
Income tax provision (benefit) 35,131 33,688 11,708 1,253 (13,610)
Net income 66,176 54,587 23,290 13,284 (10,103)
Source: Callaway Golf Company, Annual Report/Form 10K (2008).