Callaway 2007 Annual Report Download - page 82

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Interest and Other Income, Net
Interest and other income, net primarily includes gains and losses on foreign currency transactions, interest
income and gains and losses on investments to fund the deferred compensation plan. The components of interest
and other income, net are as follows:
Year Ended December 31,
2007 2006 2005
(In thousands)
Foreign currency gains (losses) .......................................... $ 158 $ 251 $(2,441)
Interest income ....................................................... 2,202 1,329 900
Gains on deferred compensation plan assets ................................ 496 272 100
Other ............................................................... 599 1,512 1,051
$3,455 $3,364 $ (390)
Other Accumulated Comprehensive Income
Components of comprehensive income are reported in the financial statements in the period in which they
are recognized. The components of comprehensive income for the Company include net income, unrealized gains
on cash flow hedges and foreign currency translation adjustments. Since the Company has met the indefinite
reversal criteria, it does not accrue income taxes on foreign currency translation adjustments. During 2007 and
2006, no gains or losses were reclassified to earnings as a result of the discontinuance of cash flow hedges. The
total equity adjustment from foreign currency translation included in accumulated other comprehensive income
was $18,904,000 and $11,135,000 as of December 31, 2007 and 2006, respectively.
Segment Information
The Company’s operating segments are organized on the basis of products and consist of Golf Clubs and
Golf Balls. The Golf Clubs segment consists primarily of Callaway Golf, Top-Flite and Ben Hogan woods,
hybrids, irons, wedges and putters as well as Odyssey putters, pre-owned clubs, other golf-related accessories and
royalty and other income. The Golf Balls segment consists primarily of Callaway Golf, Top-Flite and Ben Hogan
golf balls that are designed, manufactured and sold by the Company. The Company also discloses information
about geographic areas. This information is presented in Note 15.
Diversification of Credit Risk
The Company’s financial instruments that are subject to concentrations of credit risk consist primarily of
cash equivalents, trade receivables and foreign currency contracts.
The Company historically invests its excess cash in money market accounts and short-term U.S.
Government securities and has established guidelines relative to diversification and maturities in an effort to
maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of
trends in yields and interest rates.
The Company operates in the golf equipment industry and primarily sells its products to golf equipment
retailers (including pro shops at golf courses and off course retailers), sporting goods retailers and mass
merchants, 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. The Company maintains reserves for estimated credit losses, which it considers
adequate to cover any such losses. Managing customer-related credit risk is more difficult in regions outside of
the United States. During 2007, 2006 and 2005, approximately 47%, 44% and 44%, respectively, of the
Company’s net sales were made in regions outside of the United States. An adverse change in either economic
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