Callaway 2014 Annual Report Download - page 21

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For both golf clubs and golf balls, the Company generally competes on the basis of technology, quality, performance,
customer service and price. In order to gauge the effectiveness of the Company’s response to such factors, management receives
and evaluates Company-generated market trends for U.S. and foreign markets, as well as periodic public and customized
market research for the U.S. and U.K. markets from Golf Datatech that include trends from certain on- and off-course retailers.
In addition, the Company utilizes Sports Marketing Surveys for the U.K. markets and GfK Group for the markets in Japan.
For certain risks associated with competition, see “Risk Factors” contained in Item 1A.
Seasonality of Company's Business
In most of the regions where the Company does business, the game of golf is played primarily on a seasonal basis.
Weather conditions in most parts of the world generally restrict golf from being played year-round, with many of the Company’s
on-course customers closing during the cold weather months. The Company’s business is therefore subject to seasonal
fluctuations. In general, during the first quarter, the Company begins selling its products into the golf retail channel for the
new golf season. This initial sell-in generally continues into the second quarter. The Company’s second-quarter sales are
significantly affected by the amount of reorder business of the products sold during the first quarter. The Company’s third-
quarter sales are generally dependent on reorder business but are generally less than the second quarter as many retailers begin
decreasing their inventory levels in anticipation of the end of the golf season. The Company’s fourth-quarter sales are generally
less than the other quarters due to the end of the golf season in many of the Company’s key markets. However, third-quarter
sales can be affected by a mid-year launch of product, and fourth-quarter sales can be affected from time to time by the early
launch of product introductions related to the new golf season of the subsequent year. This seasonality, and therefore quarter
to quarter fluctuations, can be affected by many factors, including the timing of new product introductions as well as weather
conditions. In general, however, because of this seasonality, a majority of the Company’s sales and most, if not all, of its
profitability generally occurs during the first half of the year.
Environmental Matters
The Company’s operations are subject to federal, state and local environmental laws and regulations that impose
limitations on the discharge of pollutants into the environment and establish standards for the handling, generation, emission,
release, discharge, treatment, storage and disposal of certain materials, substances and wastes and the remediation of
environmental contaminants (collectively, “Environmental Laws”). In the ordinary course of its manufacturing processes, the
Company uses paints, chemical solvents and other materials, and generates waste by-products that are subject to these
Environmental Laws. In addition, in connection with the Top-Flite asset acquisition in 2003, the Company assumed certain
monitoring and remediation obligations at its manufacturing facility in Chicopee, Massachusetts. In February 2013, the
Company sold this facility and leased back a reduced portion of the square footage that it believes is adequate for its ongoing
golf ball manufacturing operations. As part of the terms of this sale, the Company assumed certain ongoing environmental
remediation obligations.
The Company adheres to all applicable Environmental Laws and takes action as necessary to comply with these laws.
The Company maintains an environmental and safety program and employs full-time environmental, health and safety
professionals at its facilities located in Carlsbad, California, Chicopee, Massachusetts and Monterrey, Mexico. The
environmental and safety program includes obtaining environmental permits as required, capturing and appropriately disposing
of any waste by-products, tracking hazardous waste generation and disposal, air emissions, safety situations, material safety
data sheet management, storm water management and recycling, and auditing and reporting on its compliance.
Historically, the costs of environmental compliance have not had a material adverse effect upon the Company’s business.
The Company believes that its operations are in substantial compliance with all applicable Environmental Laws.
Sustainability
The Company believes it is important to conduct its business in an environmentally, economically and socially sustainable
manner. In this regard, the Company has an environmental sustainability program which focuses on the reductions of volatile
organic compound (VOC) emissions, reductions of hazardous waste, reductions in water usage, improved recycling and
development programs which involve the elimination or reduction of undesirable chemicals and solvents in favor of safer and
environmentally preferred alternatives. These efforts cross divisional lines and are visible in the following areas within the
Company: