Callaway 2006 Annual Report Download - page 26

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Company already has a significant share of worldwide sales of golf clubs and golf balls. Therefore, opportunities
for additional market share may be limited. Furthermore, the Company does not believe there has been any
material increase in the number of golfers worldwide in over five years. The Company also believes that overall
dollar volume of the worldwide market for golf equipment sales has not experienced substantial growth in the
past several years. In the future, the overall dollar volume of worldwide sales of golf clubs or golf balls may not
grow or may decline.
If the Company inaccurately forecasts demand for its products, it may manufacture insufficient or excess
quantities, which, in either case, could adversely affect its financial performance.
The Company plans its manufacturing capacity based upon the forecasted demand for its products. The
nature of the Company’s business makes it difficult to quickly adjust its manufacturing capacity if actual demand
for its products exceeds or is less than forecasted demand. If actual demand for its products exceeds the
forecasted demand, the Company may not be able to produce sufficient quantities of new products in time to
fulfill actual demand, which could limit the Company’s sales and adversely affect its financial performance. On
the other hand, if actual demand is less than the forecasted demand for its products, the Company could produce
excess quantities, resulting in excess inventories and related obsolescence charges that could adversely affect the
Company’s financial performance.
The Company depends on single-source or a limited number of suppliers for some of its products, and the
loss of any of these suppliers could harm its business.
The Company is dependent on a limited number of suppliers for its clubheads and shafts, some of which are
single-sourced. In addition, some of the Company’s products require specifically developed manufacturing
techniques and processes which make it difficult to identify and utilize alternative suppliers quickly. If current
suppliers are unable to deliver clubheads, shafts or other components, or if the Company is required to transition
to other suppliers, the Company could experience significant production delays or disruption to its business. The
Company also depends on a single or a limited number of suppliers for the materials it uses to make its golf balls.
Many of these materials are customized for the Company. Any delay or interruption in such supplies could have
a material adverse impact upon the Company’s golf ball business. If the Company did experience any such
delays or interruptions, the Company may not be able to find adequate alternative suppliers at a reasonable cost
or without significant disruption to its business.
If the Company is unable to obtain at reasonable costs materials or electricity necessary for the
manufacture of its products its business would be adversely affected.
The Company’s size has made it a large consumer of certain materials, including steel, titanium alloys,
carbon fiber and rubber. The Company does not make these materials itself, and must rely on its ability to obtain
adequate supplies in the world marketplace in competition with other users of such materials. In the future, the
Company may be unable to obtain its requirements for such materials at a reasonable price or at all. An
interruption in the supply of the materials used by the Company or a significant change in costs could have a
material adverse effect on the Company’s business.
The Company’s golf club and golf ball manufacturing facilities use, among other resources, significant
quantities of electricity to operate. An interruption in the supply of electricity or a significant increase in the cost
of electricity could have a significant adverse effect upon the Company’s results of operations.
A disruption in the service or a significant increase in the cost of the Company’s primary delivery services
for its products and component parts could have a material adverse effect on the Company’s business.
The Company uses United Parcel Service, or UPS, for substantially all ground shipments of products to its
U.S. customers. The Company uses air carriers and ship services for most of its international shipments of
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