Callaway 2007 Annual Report Download - page 29

foreign distribution in the Company’s international markets, as well as the management of relationships with
international suppliers and vendors, will continue to require the dedication of management and other Company
resources.
As a result of this international business, the Company is exposed to increased risks inherent in conducting
business outside of the United States. In addition to foreign currency risks, these risks include:
• increased difficulty in protecting the Company’s intellectual property rights and trade secrets;
• unexpected government action or changes in legal or regulatory requirements;
• social, economic or political instability;
• the effects of any anti-American sentiments on the Company’s brands or sales of the Company’s
products;
• increased difficulty in ensuring compliance by employees, agents and contractors with the Company’s
policies as well as with the laws of multiple jurisdictions, including but not limited to the U.S. Foreign
Corrupt Practices Act, and local international environmental, health and safety laws, and increasingly
complex regulations relating to the conduct of international commerce;
• increased difficulty in controlling and monitoring foreign operations from the United States, including
increased difficulty in identifying and recruiting qualified personnel for its foreign operations; and
• increased exposure to interruptions in air carrier or ship services.
Although the Company believes the benefits of conducting business internationally outweigh these risks,
any significant adverse change in circumstances or conditions could have a significant adverse effect upon the
Company’s operations, financial performance and condition.
If the Company’s customers and distributors do not pay for their purchases in a timely manner, the
Company’s financial results would be harmed.
The Company primarily sells its products to golf equipment retailers directly and through wholly owned
domestic and foreign subsidiaries, and to foreign distributors. The Company performs ongoing credit evaluations
of its customers’ financial condition and generally requires no collateral from these customers. Historically, the
Company’s bad debt expense has been low. However, a downturn in the retail golf equipment market could result
in increased delinquent or uncollectible accounts for some of the Company’s significant customers. A failure by
the Company’s customers to pay a significant portion of outstanding account receivable balances would
adversely impact the Company’s performance and financial condition.
The Company relies on increasingly complex 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 complex information systems. The Company’s information systems are
vulnerable to damage or interruption from:
• earthquake, fire, flood, hurricane 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.
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