Callaway 2012 Annual Report Download - page 105

Download and view the complete annual report

Please find page 105 of the 2012 Callaway annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 122

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122

The Company regularly assesses such matters to determine the degree of probability that the Company will
incur a material loss as a result of such matters as well as the range of possible loss. An estimated loss
contingency is accrued in the Company’s financial statements if it is probable the Company will incur a loss and
the amount of the loss can be reasonably estimated. The Company reviews all claims, proceedings, and
investigations at least quarterly and establishes or adjusts any accruals for such matters to reflect the impact of
negotiations, settlements, advice of legal counsel, and other information and events pertaining to a particular
matter. All legal costs associated with such matters are expensed as incurred.
Historically, the claims, proceedings and investigations brought against the Company, individually, and in
the aggregate, have not had a material adverse effect upon the consolidated results of operations, cash flows, or
financial position of the Company. The Company believes that it has valid legal defenses to the matters currently
pending against the Company. These matters are inherently unpredictable and the resolutions of these matters are
subject to many uncertainties and the outcomes are not predictable with assurance. Consequently, management is
unable to estimate the ultimate aggregate amount of monetary loss, amounts covered by insurance, or the
financial impact that will result from such matters. Management believes that the final resolution of the current
matters pending against the Company, individually and in the aggregate, will not have a material adverse effect
upon the Company’s consolidated financial position. It is possible, however, that the Company’s results of
operations or cash flows could be materially affected in any particular period by the unfavorable resolution of
one or more of these contingencies.
Lease Commitments
The Company leases certain warehouse, distribution and office facilities, vehicles as well as office
equipment under operating leases. Lease terms range from 1 to 6 years expiring at various dates through August
2018, with options to renew at varying terms. Commitments for minimum lease payments under non-cancelable
operating leases as of December 31, 2012 are as follows (in thousands):
2013 .............................................................................. $12,914
2014 .............................................................................. 10,571
2015 .............................................................................. 5,849
2016 .............................................................................. 2,639
2017 .............................................................................. 1,717
Thereafter .......................................................................... 313
$34,003
Rent expense for the Company’s lease commitments for the years ended December 31, 2012, 2011 and 2010
was $18,420,000, $22,318,000, and $13,967,000, respectively.
Unconditional Purchase Obligations
During the normal course of its business, the Company enters into agreements to purchase goods and
services, including purchase commitments for production materials, endorsement agreements with professional
golfers and other endorsers, employment and consulting agreements, and intellectual property licensing
agreements pursuant to which the Company is required to pay royalty fees. It is not possible to determine the
amounts the Company will ultimately be required to pay under these agreements as they are subject to many
variables including performance-based bonuses, reductions in payment obligations if designated minimum
performance criteria are not achieved, the Company’s sales levels, and severance arrangements. As of
December 31, 2012, the Company has entered into many of these contractual agreements with terms ranging
from one to six years. The minimum obligation that the Company is required to pay under these agreements is
$79,218,000 over the next six years. In addition, the Company also enters into unconditional purchase obligations
with various vendors and suppliers of goods and services in the normal course of operations through purchase
F-29