Callaway 2005 Annual Report Download - page 32

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Information Systems
All of the Company’s major operations, including manufacturing, distribution, sales and accounting, are
dependent upon the Company’s information computer systems. Any significant disruption in the operation of
such systems, as a result of an internal system malfunction, infection from an external computer virus, or
otherwise, would have a significant adverse effect upon the Company’s ability to operate its business. Although
the Company has taken steps to mitigate the effect of any such disruptions, there is no assurance that such steps
would be adequate in a particular situation. Consequently, a significant or extended disruption in the operation of
the Company’s information systems could have a material adverse effect upon the Company’s operations and
therefore financial performance and condition.
Change in Accounting Rules
The Company currently and historically has accounted for its stock-based compensation under Accounting
Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). Under APB
No. 25, the Company is not required to record compensation expense for equity-based awards granted to
employees. The Financial Accounting Standards Board recently issued SFAS No. 123R, “Share-Based Payment,”
which requires the Company to begin recording compensation expense for such awards based upon the fair value
of such awards for the first fiscal year beginning after January 1, 2006. Such non-cash compensation expense is
anticipated to have a significant adverse effect upon the Company’s reported earnings.
Although the Company has historically provided in the notes to its financial statements pro forma earnings
information showing what the Company’s results would have been had the Company been recording
compensation expense for such awards, the amount of such expense was not reflected in its financial results.
Consequently, when the Company begins recording such compensation expense in 2006, the period over period
comparisons will be significantly affected by the inclusion of such expense in 2006 and the absence of such
expense from prior periods. If investors do not appropriately consider these changes in accounting rules, the price
at which the Company’s stock is traded could be significantly adversely affected.
Analyst Guidance, Media Reports and Market Volatility
The Company’s stock is traded publicly, principally on the New York Stock Exchange. As a result, at any
given time, there are usually various securities analysts who follow the Company and issue reports on the
Company. These reports include information about the Company’s historical financial results as well as the
analysts’ estimates of the Company’s future performance. The analysts’ estimates are based upon their own
opinions and are often different from the Company’s own estimates or expectations. The Company has a policy
against confirming financial forecasts or projections issued by analysts and any reports issued by such analysts
are not the responsibility of the Company. Investors should not assume that the Company agrees with any report
issued by any analyst or with any statements, projections, forecasts or opinions contained in any such report. In
addition to analyst reports, the media also reports its opinion on the Company’s results. These media reports are
often written quickly so as to be the first to the news wire and in an attempt to garner attention often lead with
headlines that are not representative of the substance of the article. Furthermore, these media reports, which are
often written by writers who are not financial experts, reflect only the writers’ views of the Company’s results.
Investors should not assume that the Company agrees with such media reports or the manner in which the
Company’s results are presented or characterized in such reports.
The price at which the Company’s stock is traded on the securities exchanges is based upon many factors. In
the short-term, the price at which the Company’s stock is traded can be significantly affected, positively or
negatively, by analysts’ reports and media reports, regardless of the accuracy of such reports. Over the long term,
the price at which the Company’s stock is traded should tend to reflect the Company’s performance irrespective
of such reports.
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