Callaway 2011 Annual Report Download - page 87

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Other Income (Expense), Net
Other income (expense), net primarily includes gains and losses on foreign currency exchange contracts and
foreign currency transactions. The components of other income (expense), net are as follows:
Year Ended December 31,
2011 2010 2009
(In thousands)
Foreign currency exchange contract losses, net ............................ $(8,861) $(18,600) $(7,594)
Foreign currency transaction gains, net .................................. 708 6,926 7,112
Gains on deferred compensation plan assets .............................. — 199 867
Other ............................................................. 52 478 493
$(8,101) $(10,997) $ 878
Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income for the Company include net income 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. The total equity adjustment from foreign
currency translation included in accumulated other comprehensive income was income of $14,071,000 and
$13,564,000 as of December 31, 2011 and 2010, 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 and Top-Flite woods, hybrids, irons,
wedges and putters as well as Odyssey putters, pre-owned clubs, GPS on-course range finders, other golf-related
accessories and royalties from licensing of the Company’s trademarks and service marks. The Golf Balls
segment consists primarily of Callaway Golf and Top-Flite 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 19.
Concentration 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 exchange 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. At December 31, 2011, no single customer in the United States represented
over 10% of the Company’s outstanding accounts receivable balance. Managing customer-related credit risk is
more difficult in regions outside of the United States. During 2011, approximately 53% of the Company’s net
sales were made in regions outside of the United States, compared to 52% in 2010 and 50% in 2009. Prolonged
unfavorable economic conditions in the United States or in the Company’s international markets could
significantly increase the Company’s credit risk.
F-13