Callaway 2000 Annual Report Download - page 46

Callaway Golf Company | 46
Notes to Consolidated Financial Statements
Note 15
AQUISITIONS AND REORGANIZATIONS
On December 29, 2000, the Company consolidated a wholly-owned
subsidiary, Callaway Golf Ball Company, with the Company. During
1999, the Company acquired distribution rights and substantially
all of the assets from its distributor in Ireland for $810,000. Also
in 1999, the Company merged its subsidiary, Callaway Golf Europe,
S.A., with another of its subsidiaries, Callaway Golf Europe, Ltd.
and now operates in France through a satellite office. During 1998,
the Company acquired distribution rights and substantially all of
the assets from its distributors in Korea, Canada, France, Belgium,
Norway and Denmark, as well as the remaining 20% interest in
Callaway Golf Trading GmbH (Note 17), the results of which are
consolidated in the results of Callaway Golf (Germany) GmbH. The
aggregate purchase price for these transactions was $27,229,000,
excluding the assumption and subsequent retirement of short-term
debt obligations of $10,373,000. The excess of the purchase price
over net assets acquired of $20,935,000 was allocated to goodwill
and is being amortized over estimated useful lives of three to 10
years. These acquisitions, along with the acquisition of the remain-
ing 80% interest in All-American (discussed below) are not con-
sidered significant business combinations. Accordingly, pro forma
financial information is not presented.
In May 1998, the Company acquired for $4,526,000 the
remaining 80% interest in All-American, which operates a nine-
hole golf course, performance center, training facility and driving
range located in Las Vegas, Nevada. On December 30, 1998, as part
of its business plan to discontinue certain non-core business
activities, the Company sold the business of All-American in
exchange for barter trade credits, which were recorded at the fair
market value of the asset exchanged. The Company recorded a loss
on the disposition of this business of $10,341,000 in December
1998 (Note 14).
Note 16
SEGMENT INFORMATION
The Company’s operating segments are organized on the basis of
products and include golf clubs and golf balls. The Golf Clubs seg-
ment consists of Callaway Golf® titanium and stainless steel metal
woods and irons, Callaway Golf® and Odyssey® putters and
wedges and related accessories. The Golf Balls segment consists of
golf balls that are designed, manufactured, marketed and distrib-
uted by the Company. All Other segments, including interactive
golf sites, golf book publishing, new player development and a
driving range venture, are aggregated as they do not meet require-
ments for separate disclosure set forth in SFAS No. 131. In accor-
dance with its restructuring, the Company is no longer pursuing
these initiatives (Note 14). There are no significant intersegment
transactions. In 2000, management changed its method of allo-
cating certain corporate costs and other income (expense) used in
evaluating segment income (loss) before tax. As a result, certain
amounts are not attributable to the segments in the determina-
tion of segment income (loss) before tax. Prior period amounts
have been reclassified to reflect the current allocation methodol-
ogy. The tables below contain information utilized by manage-
ment to evaluate its operating segments.
(in thousands) 2000 1999 1998
Net sales
Golf Clubs $803,663 $719,038 $703,060
Golf Balls 33,964
All Other
$837,627 $719,038 $703,060
Income (loss) before tax
Golf Clubs $213,786 $175,794 $ 47,493
Golf Balls (45,918) (36,097) (21,826)
All Other (26,089)
Reconciling items(1) (38,546) (54,200) (38,477)
$129,322 $ 85,497 $ (38,899)
Depreciation and amortization
Golf Clubs $ 34,326 $ 36,151 $ 34,121
Golf Balls 5,923 3,726 1,072
All Other 692
$ 40,249 $ 39,877 $ 35,885
Additions to long-lived assets
Golf Clubs $ 24,703 $ 10,210 $ 39,854
Golf Balls 3,683 46,912(2) 47,721
All Other 1,408
$ 28,386 $ 57,122 $ 88,983
(1) Represents corporate general and administrative expenses and other
income (expense) not utilized by management in determining segment
profitability.
(2) Includes amounts converted to an operating lease in 1999.
The Company markets its products domestically and interna-
tionally, with its principal international markets being Asia and
Europe. The tables below contain information about the geo-
graphical areas in which the Company operates. Revenues are
attributed to the location to which the product was shipped.
Long-lived assets are based on location of domicile.
The Company, through a distribution agreement, had appointed
Sumitomo as the sole distributor of Callaway Golf ® clubs in Japan.
The distribution agreement, which began in February 1993 and
ended on December 31, 1999, required Sumitomo to purchase spec-
ified minimum quantities. In 1999 and 1998, sales to Sumitomo