Callaway 2010 Annual Report Download - page 34

Changes in tax laws and unanticipated tax liabilities could adversely affect our effective income tax rate and
profitability.
We are subject to income taxes in the United States and numerous foreign jurisdictions. Our effective
income tax rate in the future could be adversely affected by a number of factors, including: changes in the mix of
earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and
liabilities, changes in tax laws, the outcome of income tax audits in various jurisdictions around the world, and
any repatriation of non-US earnings for which we have not previously provided for U.S. taxes. We regularly
assess all of these matters to determine the adequacy of our tax provision, which is subject to significant
discretion. Recently proposed legislation in the United States would change how U.S. multinational corporations
are taxed on their foreign income. If such legislation is enacted, it may have a material adverse impact to our tax
rate and in turn, our profitability.
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.
Item 1B. Unresolved Staff 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 Company occupies
six buildings that are utilized in its Carlsbad operations, which are comprised of corporate offices and the
Company’s performance center, as well as manufacturing, research and development, warehousing and
distribution facilities. These buildings comprise approximately 666,000 square feet of space. The Company owns
five of these buildings, representing approximately 516,000 square feet of space, and leases a property
representing approximately 150,000 square feet of space. The lease term expires in November 2017.
The Company also owns a manufacturing plant, warehouse and offices that encompass approximately
869,000 square feet in Chicopee, Massachusetts in addition to a property in Gloversville, New York of
approximately 77,000 square feet, representing a former golf ball manufacturing facility. The Company has been
actively marketing its property in Gloversville, New York for sale as a result of the Company’s decision to
consolidate its golf ball operations into other existing locations within and outside the U.S.
During the third quarter of 2010, the Company announced the restructuring of its golf club and golf ball
manufacturing and distribution operations, which includes the reorganization of the Company’s manufacturing
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