Callaway 2005 Annual Report Download - page 22

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The golf ball business is also highly competitive. There are a number of well-established and well-financed
competitors, including Acushnet (Titleist and Pinnacle), Sumitomo Rubber Industries (Dunlop and Srixon),
Bridgestone (Bridgestone and Precept), Nike, TaylorMade (MaxFli) and others. These competitors have
established market share in the golf ball business, with Acushnet having a market share of over 50% of the golf
ball business in the United States. The Company’s golf ball products have been well received by both
professional and amateur golfers alike. The Company’s golf ball products continue to receive a significant degree
of usage on the major professional golf tours and maintained the number two position on the PGA tour in 2005.
In addition, the Company’s golf ball products remained number two in U.S. dollar market share in 2005.
For both golf clubs and golf balls, the Company generally competes on the basis of technology, quality,
performance, customer service and price. In order to gauge the effectiveness of the Company’s response to such
factors, its management receives and evaluates Company-generated market research for U.S. and foreign
markets, as well as periodic public, as well as customized, market research for U.S. markets from Golf Datatech.
For risks relating to competition, see below, “Certain Factors Affecting Callaway Golf Company—Competition”
contained in Item 1A.
Environmental Matters
The Company’s operations are subject to federal, state and local environmental laws and regulations that
impose limitations on the discharge of pollutants into the environment and establish standards for the handling,
generation, emission, release, discharge, treatment, storage and disposal of certain materials, substances and
wastes and the remediation of environmental contaminants (“Environmental Laws”). In the ordinary course of its
manufacturing processes, the Company uses paints, chemical solvents and other materials, and generates waste
by-products, that are subject to these Environmental Laws. In addition, in connection with the Top-Flite
Acquisition, the Company assumed certain monitoring and remediation obligations at the Top-Flite facilities in
Chicopee, Massachusetts and Gloversville, New York.
The Company adheres to all applicable Environmental Laws and takes action as necessary to comply with
these laws. The Company maintains an environmental and safety program and employs two full-time
environmental engineers at its Carlsbad, California facility to manage the program. The environmental and safety
program includes obtaining environmental permits as required, capturing and appropriately disposing of any
waste by-products, tracking hazardous waste generation and disposal, air emissions, safety situations, material
safety data sheet management, storm water management and recycling, and auditing and reporting on its
compliance.
In addition, The Top-Flite Golf Company is a charter member in the U.S. Environmental Protection
Agency’s National Performance Track program. This program recognizes facilities that have demonstrated a
commitment to superior environmental performance and have a good record of compliance with environmental
regulations. The National Environmental Performance Track was developed by the Environmental Protection
Agency to reward companies who do more than environmental regulations require.
Historically, the costs of environmental compliance have not had a material adverse effect upon the
Company’s business. Furthermore, the Company does not believe that the monitoring and remedial obligations it
assumed in connection with the Top-Flite Acquisition will have a material adverse effect upon the Company’s
business. The Company believes that its operations are in substantial compliance with all applicable
Environmental Laws.
Intellectual Property
The Company is the owner of over 2,500 U.S. and foreign trademark registrations and over 1,700 U.S. and
foreign patents relating to the Company’s products, product designs, manufacturing processes and research and
development concepts. Other patent and trademark applications are pending and await registration. In addition,
6