Callaway 2004 Annual Report Download - page 41

SuÇciency of Liquidity
Based upon its current operating plan, analysis of its consolidated Ñnancial position and projected future
results of operations, the Company believes that its operating cash Öows, together with its credit facility, will
be suÇcient to Ñnance current operating requirements, planned capital expenditures, contractual obligations
and commercial commitments, for the next twelve months. There can be no assurance, however, that future
industry speciÑc or other developments, general economic trends or other matters will not adversely aÅect the
Company's operations or its ability to meet its future cash requirements (see below ""Certain Factors AÅecting
Callaway Golf Company'').
Capital Resources
The Company does not currently have any material commitments for capital expenditures.
OÅ-Balance Sheet Arrangements
At December 31, 2004 and 2003, the Company did not have any relationships with unconsolidated
entities or Ñnancial partnerships, such as entities often referred to as structured Ñnance or special purpose
entities, which would have been established for the purpose of facilitating oÅ-balance sheet arrangements or
other contractually narrow or limited purposes.
Certain Factors AÅecting Callaway Golf Company
The Ñnancial statements contained in this report and the related discussion describe and analyze the
Company's Ñnancial performance and condition for the periods presented. For the most part, this information
is historical. The Company's prior results, however, are not necessarily indicative of the Company's future
performance or Ñnancial condition. The Company has also included certain forward-looking statements
concerning the Company's future performance or Ñnancial condition. These forward-looking statements are
based upon current information and expectations and actual results could diÅer materially. The Company
therefore has included the following discussion of certain factors that could cause the Company's future
performance or Ñnancial condition to diÅer materially from its prior performance or Ñnancial condition or from
management's expectations or estimates of the Company's future performance or Ñnancial condition. These
factors, among others, should be considered in assessing the Company's future prospects and prior to making
an investment decision with respect to the Company's stock.
Market Acceptance of Products
A golf equipment manufacturer's ability to compete is in part dependent upon its ability to satisfy the
various subjective requirements of golfers, including a golf club's and golf ball's look and ""feel,'' and the level
of acceptance that a golf club and ball has among professional and recreational golfers. The subjective
preferences of golf club and golf ball purchasers are diÇcult to predict and may be subject to rapid and
unanticipated changes. In addition, the Company's products have tended to incorporate signiÑcant innovations
in design and manufacture, which have often, but not always, resulted in higher prices for the Company's
products relative to other products in the marketplace. There can be no assurance that a signiÑcant percentage
of the public will always be willing to pay premium prices for golf equipment or that the Company will be able
to design and manufacture products that achieve market acceptance. In general, there can be no assurance as
to whether or how long the Company's golf clubs and golf balls will achieve and maintain market acceptance
and therefore there can be no assurance that the demand for the Company's products will permit the
Company to experience growth in sales, or maintain historical levels of sales, in the future.
New Product Introduction and Product Cyclicality
The Company believes that the introduction of new, innovative golf clubs and golf balls is important to its
future success. A major portion of the Company's revenues is generated by products that are less than two
years old. The Company faces certain risks associated with such a strategy. For example, in the golf industry,
new models and basic design changes in golf equipment are frequently met with consumer rejection. In
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