Callaway 2000 Annual Report Download - page 45

Callaway Golf Company | 45
During the restructuring, the Company consolidated its opera-
tions and sold certain of its buildings, which housed a portion of
its manufacturing and research and development activities. Other
write-downs were recorded during 1998 for idle assets, assets
whose manner of use had changed significantly and equipment
replaced as a result of capital improvements. The impaired assets
included buildings, building improvements, and machinery and
equipment used in certain of the Company’s manufacturing and
research and development activities.
The projected future cash flows from these assets were less
than the carrying values of the assets. The carrying values of the
assets held for sale and the assets to be held and used were
reduced to their estimated fair values based on independent
appraisals of selling values and values of similar assets sold, less
costs to sell. In 1998, the Company recorded losses from impair-
ment of assets of $12,634,000, which were recorded as restructur-
ing costs. The Company completed the dispositions in 1999. At
December 31, 1998, subsequent to the write-down for impair-
ments, the carrying amount of the assets held for disposal and
assets to be held and used was $13,678,000 and $4,582,000,
respectively. The Company continued to depreciate the assets that
were held and used but did not further depreciate the assets held
for disposition. The effect on depreciation for the years ended
December 31, 2000 and 1999 did not materially impact the
Company’s results of operations and management does not expect
this effect to materially impact future results of operations.
Details of the one-time charge are as follows:
(in thousands) Reserve Reserve Reserve
Cash/ One-Time Balance Balance Balance
Non-Cash Charge Activity at 12/31/98 Activity (1) at 12/31/99 Activity at 12/31/00
Elimination of Job Responsibilities $11,664 $8,473 $3,191 $3,191
Severance packages Cash 11,603 8,412 3,191 3,191
Other Non-cash 61 61
Exiting Certain Non-Core
Business Activities $28,788 $12,015 $16,773 $15,394 $1,379 $1,379
Loss on disposition of subsidiaries Non-cash 13,072 10,341 2,731 2,731 (2) 1,379 1,379
Excess lease costs Cash 12,660 146 12,514 11,135
Contract cancellation fees Cash 2,700 1,504 1,196 1,196
Other Cash 356 24 332 332
Consolidation of Operations $13,783 $2,846 $10,937 $10,937
Loss on impairment/disposition
of assets Non-cash 12,364 2,730 9,634 9,634 (3)
Excess lease costs Cash 806 4 802 802 (4)
Other Cash 613 112 501 501
(1) Includes reversal of reserve totaling $8,609,000, as actual amounts differed from estimates. Significant reversals are noted below in (2) through (4).
(2) Includes reversal of $6,076,000 of reserve due to the assignment of lease obligation at terms significantly more favorable than estimated at the
establishment of the reserve.
(3) Includes reversal of $1,470,000 of reserve related to disposition of two buildings at higher sales prices than estimated.
(4) Includes reversal of $491,000 of reserve due to the sublease of a facility at terms more favorable than estimated at the establishment of the reserve.
During 1999, the Company incurred charges of $1,295,000 on the disposition of building improvements eliminated during the
consolidation of manufacturing operations, as well as other charges of $671,000. These charges did not meet the criteria for accrual in
1998. Additionally, in 1999, the Company incurred charges of $749,000 related to asset dispositions and other restructuring activities for
which reserves were not established in 1998. No charges were incurred during 2000.