Callaway 2015 Annual Report Download - page 33

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17
management of relationships with international suppliers and vendors, will continue to require the dedication of management
and other Company resources. The Company manufactures most of its products outside of the United States.
As a result of this international business, the Company is exposed to increased risks inherent in conducting business
outside of the United States. In addition to foreign currency risks, these risks include:
• Increased difficulty in protecting the Company’s intellectual property rights and trade secrets;
• Unexpected government action or changes in legal or regulatory requirements;
• Social, economic or political instability;
• The effects of any anti-American sentiments on the Company’s brands or sales of the Company’s products;
• Increased difficulty in ensuring compliance by employees, agents and contractors with the Company’s policies as
well as with the laws of multiple jurisdictions, including but not limited to the U.S. Foreign Corrupt Practices Act,
local international environmental, health and safety laws, and increasingly complex regulations relating to the
conduct of international commerce;
• Increased difficulty in controlling and monitoring foreign operations from the United States, including increased
difficulty in identifying and recruiting qualified personnel for its foreign operations; and
• Increased exposure to interruptions in air carrier or ship services.
Any significant adverse change in circumstances or conditions could have a significant adverse effect upon the Company’s
operations, financial performance and condition.
Changes in tax laws and unanticipated tax liabilities could adversely affect the Company's effective income tax rate and
profitability.
The Company is subject to income taxes in the United States and numerous foreign jurisdictions. The Company's effective
income tax rate in the future could be adversely affected by a number of factors, including: changes in the mix of earnings in
countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws,
the outcome of income tax audits in various jurisdictions around the world, and any repatriation of non-US earnings for which
the Company has not previously provided for U.S. taxes. The Company regularly assesses all of these matters to determine
the adequacy of its tax provision, which is subject to significant discretion.
The Company relies on complex information systems for management of its manufacturing, distribution, sales and other
functions. If the Company’s information systems fail to perform these functions adequately or if the Company experiences
an interruption in their operation, including a breach in cyber security, its business and results of operations could suffer.
All of the Company’s major operations, including manufacturing, distribution, sales and accounting, are dependent upon
the Company’s complex information systems. The Company’s information systems are vulnerable to damage or interruption
from:
• Earthquake, fire, flood, hurricane and other natural disasters;
• Power loss, computer systems failure, Internet and telecommunications or data network failure; and
• Hackers, computer viruses, software bugs or glitches.
Any damage or significant disruption in the operation of such systems or the failure of the Company’s information
systems to perform as expected would disrupt the Company’s business, which may result in decreased sales, increased overhead
costs, excess inventory and product shortages and otherwise adversely affect the Company’s operations, financial performance
and condition.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Company and its subsidiaries conduct operations in both owned and leased properties. The Company’s principal
executive offices and domestic operations are located in Carlsbad, California. The Company owns two buildings comprised
of approximately 269,000 square feet of space that are utilized in its Carlsbad operations, which include the Company's