Callaway 2012 Annual Report Download - page 90

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The Company is required to file federal and state income tax returns in the United States and various other
income tax returns in foreign jurisdictions. The preparation of these income tax returns requires the Company to
interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of
tax paid by the Company. The Company accrues an amount for its estimate of additional tax liability, including
interest and penalties in income tax expense, for any uncertain tax positions taken or expected to be taken in an
income tax return. The Company reviews and updates the accrual for uncertain tax positions as more definitive
information becomes available. Historically, additional taxes paid as a result of the resolution of the Company’s
uncertain tax positions have not been materially different from the Company’s expectations. For further
information, see Note 12 “Income Taxes.”
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,
2012 2011 2010
(In thousands)
Foreign currency exchange contract gains/(losses), net ...................... $6,591 $(8,861) $(18,600)
Foreign currency transaction gains/(losses), net ........................... (3,343) 708 6,926
Gains on deferred compensation plan assets .............................. — — 199
Other ............................................................. (96) 52 478
$ 3,152 $(8,101) $(10,997)
Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income 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 $14,770,000 and $14,071,000 as of
December 31, 2012 and 2011, 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 woods, hybrids, irons, wedges and putters as
well as Odyssey putters, pre-owned clubs, rangefinders, other golf-related accessories and royalties from
licensing of the Company’s trademarks and service marks. The golf balls segment consists of Callaway Golf 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.
F-14