Profile: Callaway Golf Company (ELY)

Callaway Golf Company (Callaway Golf), incorporated in 1982, together with its subsidiaries, designs, manufactures and sells golf clubs (drivers, fairway woods, hybrids, irons, wedges and putters) and golf balls. The Company also sells golf accessories, such as golf bags, golf gloves, golf footwear, golf and lifestyle apparel, golf headwear, eyewear, golf towels and golf umbrellas. The Company generally sells its products to golf retailers (including pro shops at golf courses, as well as off-course retailers), sporting goods retailers and mass merchants, directly and through its wholly-owned subsidiaries, and to third-party distributors. The Company also sells pre-owned golf products through its Website, www.callawaygolfpreowned.com. In addition, in November 2006, the Company launched an online store, where consumers can place an order for Callaway Golf, Top-Flite, Ben Hogan and Odyssey products through its Website, Shop.CallawayGolf.com and have the order fulfilled by a local participating retailer or in certain circumstances, by the Company. The Company’s products are sold in the United States and in over 100 countries worldwide. The Company’s products are designed for the enjoyment of both amateur and professional golfers. On December 31, 2008, the Company acquired uPlay, LLC (uPlay), a developer and marketer of global positioning system (GPS) devices that provide measurements utilizing aerial imagery of each golf hole.

Approximately 50% of the Company’s net sales were derived from sales within the United States, during the year ended December 31, 2008. The Company primarily sells to both on- and off-course golf retailers and sporting goods retailers, who sell quality golf products and provide a level of customer service appropriate for the sale of such products. The Company also sells to mass merchants. On a consolidated basis, no one customer that distributes golf clubs or golf balls in the United States accounted for more than 5% of the Company’s consolidated revenues during 2008. On a segment basis, the golf ball customer base is much more concentrated than the golf club customer base. In 2008, the top five golf ball customers accounted for approximately 20% of the Company’s total consolidated golf ball sales.

Approximately 50% of the Company’s net sales were derived from sales for distribution outside of the United States in 2008. The majority of the Company’s international sales are made through its wholly owned subsidiaries located in Europe, Japan, Canada, Korea, Australia and China. In addition to sales through its subsidiaries, the Company also sells through distributors in over 60 foreign countries, including Singapore, Taiwan, the Philippines, South Africa, Argentina and various countries in South America.

Callaway Golf sells certified pre-owned Callaway Golf products through its Websites, www.callawaygolfpreowned.com and www.callawaygolfoutlet.com. The Company generally acquires the pre-owned products through the Company’s Trade In! Trade Up! program. The Website for this program is www.tradeintradeup.com. The Trade In! Trade Up! program gives golfers the opportunity to trade in their used Callaway Golf clubs and certain golf clubs at authorized Callaway Golf retailers or through the Callaway Golf Pre-Owned Website for credit toward the purchase of new or pre-owned Callaway Golf equipment.

Drivers and Fairway Woods

This product category includes sales of the Company’s drivers, fairway woods and hybrid products, which are sold under the Callaway Golf, Top-Flite and Ben Hogan brands. These products are generally made of metal (either titanium or steel) or a combination of metal and a composite material. In general, composite/metal drivers, fairway woods and hybrids sell at higher price points than titanium drivers and fairway woods, and titanium products sell at higher price points than steel products. Callaway Golf’s drivers, fairway woods and hybrid products are available in a variety of lofts, shafts and other specifications to accommodate the preferences and skill levels of all golfers.

Irons

This product category includes sales of the Company’s irons and wedges, which are sold under the Callaway Golf, Top-Flite and Ben Hogan brands. The Company’s irons are generally made of metal (either titanium, steel or special alloy) or a composite material (a combination of metal and polymer materials). Callaway Golf’s products compete at various price levels in the irons category. In general, the Company’s composite metal irons and titanium irons sell at higher price points than its steel irons. The Company’s irons are available in a variety of lofts, shafts and other specifications to accommodate the preferences and skill levels of all golfers.

Putters

This product category includes sales of the Company’s putters, which are sold under the Odyssey, Callaway Golf and Top-Flite brands. The Company’s products compete at multiple price levels in the putters category. The Company’s putters are available in a variety of styles, shafts and other specifications to accommodate the preferences and skill levels of all golfers.

Golf Balls

This product category includes sales of the Company’s golf balls, which are primarily sold under the Callaway Golf and Top-Flite brands. The Company’s golf balls are generally either a two-piece golf ball (consisting of a core and cover) or a multi-layer golf ball (consisting of two or more components in addition to the cover). Its golf ball products include covers that incorporate a traditional dimple pattern, as well as covers that incorporate designs, including the Company’s HEX Aerodynamics (a series of hexagons and pentagons separated by tubular ridges), dimple-in-dimple and deep dimple technologies. In general, the Company’s multi-layer golf balls sell at higher price points than its two-piece golf balls.

Accessories and Other

This product category includes sales of golf bags, golf gloves, golf footwear, recreational club sets, headwear, towels, umbrellas, eyewear and other accessories, as well as sales of pre-owned products through Callaway Golf Interactive, Inc. Additionally, this product category includes royalties from licensing of the Company’s trademarks and service marks on products, such as golf and lifestyle apparel, watches, travel gear, rangefinders and practice aids.

The Company competes with TaylorMade, Titleist, Cobra, Cleveland (Srixon), Ping, Mizuno, Bridgestone, Nike, Ping, Dunlop, Acushnet, Dick’s Sporting Goods and Sumitomo Rubber Industries.