Callaway 2012 Annual Report Download - page 32

Download and view the complete annual report

Please find page 32 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

followed in the United States, Canada and Mexico, and The R&A publishes rules that are generally followed in
most other countries throughout the world. However, the Rules of Golf as published by The R&A and the USGA
are virtually the same, and are intended to be so pursuant to a Joint Statement of Principles issued in 2001.
In the future, existing USGA and/or R&A standards may be altered in ways that adversely affect the sales of
the Company’s current or future products. If a change in rules were adopted and caused one or more of the
Company’s current or future products to be nonconforming, the Company’s sales of such products would be
adversely affected.
The Company’s sales and business could be materially and adversely affected if professional golfers do not
endorse or use the Company’s products.
The Company establishes relationships with professional golfers in order to evaluate and promote Callaway
Golf and Odyssey branded products. The Company has entered into endorsement arrangements with members of
the various professional tours, including the Champions Tour, the PGA Tour, the LPGA Tour, the PGA European
Tour, the Japan Golf Tour and the Nationwide Tour. While most professional golfers fulfill their contractual
obligations, some have been known to stop using a sponsor’s products despite contractual commitments. If
certain of the Company’s professional endorsers were to stop using the Company’s products contrary to their
endorsement agreements, the Company’s business could be adversely affected in a material way by the negative
publicity or lack of endorsement.
The Company believes that professional usage of its golf clubs and golf balls contributes to retail sales. The
Company therefore spends a significant amount of money to secure professional usage of its products. Many
other companies, however, also aggressively seek the patronage of these professionals and offer many
inducements, including significant cash incentives and specially designed products. There is a great deal of
competition to secure the representation of tour professionals. As a result, it is expensive to attract and retain
such tour professionals. The inducements offered by other companies could result in a decrease in usage of the
Company’s products by professional golfers or limit the Company’s ability to attract other tour professionals. A
decline in the level of professional usage of the Company’s products could have a material adverse effect on the
Company’s sales and business.
Failure to adequately enforce the Company’s intellectual property rights could adversely affect its reputation
and sales.
The golf club industry, in general, has been characterized by widespread imitation of popular club designs.
The Company has an active program of monitoring, investigating and enforcing its proprietary rights against
companies and individuals who market or manufacture counterfeits and “knockoff” products. The Company
asserts its rights against infringers of its copyrights, patents, trademarks, and trade dress. However, these efforts
may not be successful in reducing sales of golf products by these infringers. Additionally, other golf club
manufacturers may be able to produce successful golf clubs which imitate the Company’s designs without
infringing any of the Company’s copyrights, patents, trademarks, or trade dress. The failure to prevent or limit
such infringers or imitators could adversely affect the Company’s reputation and sales.
The Company may become subject to intellectual property suits that could cause it to incur significant costs or
pay significant damages or that could prohibit it from selling its products.
The Company’s competitors also seek to obtain patent, trademark, copyright or other protection of their
proprietary rights and designs for golf clubs and golf balls. From time to time, third parties have claimed or may
claim in the future that the Company’s products infringe upon their proprietary rights. The Company evaluates
any such claims and, where appropriate, has obtained or sought to obtain licenses or other business arrangements.
To date, there have been no significant interruptions in the Company’s business as a result of any claims of
infringement. However, in the future, intellectual property claims could force the Company to alter its existing
products or withdraw them from the market or could delay the introduction of new products.
18