Callaway 2008 Annual Report Download - page 24

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If the Company inaccurately forecasts demand for its products, it may manufacture either 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. Furthermore, some of the Company’s products require specifically developed manufacturing
techniques and processes which make it difficult to identify and utilize alternative suppliers quickly. In addition,
many of the Company’s suppliers are not well capitalized and prolonged unfavorable economic conditions could
increase the risk that they will go out of business. 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.
A significant disruption in the operations of the Company’s golf club assembly facilities in Carlsbad,
California or its golf ball manufacturing facilities in Chicopee, Massachusetts could have a material adverse
effect on the Company’s sales, profitability and results of operations.
A substantial majority of the Company’s golf club products are assembled at and shipped from its facilities
in Carlsbad, California. A large majority of the Company’s golf ball products are manufactured at and shipped
from its facilities in Chicopee, Massachusetts. Any natural disaster or other significant disruption to the operation
of these facilities could substantially disrupt the Company’s global supply chain coordination for the relevant
golf club or golf ball business segment, including damage to inventory at the respective facilities. In addition, the
Company could incur significantly higher costs and longer delivery times associated with fulfilling orders and
distributing product. As a result, a significant disruption at either of the Carlsbad, California or Chicopee,
Massachusetts, facilities could adversely affect the Company’s sales, profitability and results of operations.
If the Company is unable to obtain at reasonable costs materials or electricity necessary for the manufacture
of its products, its business could 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 produce 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.
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