Callaway 2006 Annual Report Download - page 33

The Company relies on its information systems for management of its manufacturing, distribution, sales
and other functions. If the Company’s information systems fail to perform these functions adequately or if
the Company experiences an interruption in their operation, its business and results of operations could
suffer.
All of the Company’s major operations, including manufacturing, distribution, sales and accounting, are
dependent upon the Company’s information computer systems. The Company’s information systems are
vulnerable to damage or interruption from:
• earthquake, fire, flood and other natural disasters;
• power loss, computer systems failure, Internet and telecommunications or data network failure; and
• hackers, computer viruses, software bugs or glitches.
Any damage or significant disruption in the operation of such systems or the failure of the Company’s
information systems to perform as expected could disrupt the Company’s business, result in decreased sales,
increased overhead costs, excess inventory and product shortages and otherwise adversely affect the Company’s
operations, financial performance and condition.
Item 1B. Unresolved SEC Comments
None.
Item 2. Properties
The Company and its subsidiaries conduct operations in both owned and leased properties. The Company’s
principal executive offices and domestic operations are located in Carlsbad, California. The eight buildings
utilized in the Company’s Carlsbad operations include corporate offices, as well as manufacturing, research and
development, warehousing and distribution facilities. These buildings comprise approximately 735,000 square
feet. The Company owns seven of these buildings, representing approximately 585,000 square feet of space. An
additional property, representing approximately 150,000 square feet of space, is leased and the lease is scheduled
to expire in November 2017. As part of the Top-Flite Acquisition, the Company acquired the Chicopee,
Massachusetts manufacturing plant, warehouse and offices that encompass approximately 869,000 square feet
and a manufacturing plant in Gloversville, New York comprising approximately 70,000 square feet. In addition,
the Company owns and leases a number of other properties domestically and internationally, including properties
in Australia, Canada, Japan, Korea, the United Kingdom and China. The Company’s operations at each of these
properties are used to some extent for both the golf club and golf ball businesses. The Company believes that its
facilities currently are adequate to meet its requirements.
Item 3. Legal Proceedings
In conjunction with the Company’s program of enforcing its proprietary rights, the Company has initiated or
may initiate actions against alleged infringers under the intellectual property laws of various countries, including,
for example, the U.S. Lanham Act, the U.S. Patent Act, and other pertinent laws. Defendants in these actions
may, among other things, contest the validity and/or the enforceability of some of the Company’s patents and/or
trademarks. Others may assert counterclaims against the Company. Historically, these matters individually and in
the aggregate have not had a material adverse effect upon the financial position or results of operations of the
Company. It is possible, however, that in the future one or more defenses or claims asserted by defendants in one
or more of those actions may succeed, resulting in the loss of all or part of the rights under one or more patents,
loss of a trademark, a monetary award against the Company or some other material loss to the Company. One or
more of these results could adversely affect the Company’s overall ability to protect its product designs and
ultimately limit its future success in the marketplace.
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