Callaway 2000 Annual Report Download - page 47

Callaway Golf Company | 47
accounted for 7% and 8%, respectively, of the Company’s net sales.
In the fourth quarter of 1999, the Company successfully completed
negotiations with Sumitomo to provide a smooth transition of its
business. As a result of this transition agreement, the Company
recorded a net charge of $8.6 million in the fourth quarter of 1999
for buying certain current inventory, payments for non-current
inventory and other transition expenses, including foreign currency
transaction losses. Odyssey® brand products are sold through the
Company’s wholly-owned Japanese subsidiary, Callaway Golf K.K.,
and beginning January 1, 2000, Callaway Golf ® brand products
were sold through this subsidiary.
(in thousands) Sales Long-Lived Assets
2000
United States $451,264 $228,920
Europe 125,511 11,229
Japan 122,003 3,229
Rest of Asia 82,371 994
Other foreign countries 56,478 3,164
Total $837,627 $247,536
1999
United States $418,397 $241,241
Europe 115,673 14,027
Japan 55,927 2,634
Rest of Asia 73,121 974
Other foreign countries 55,920 3,481
Total $719,038 $262,357
1998
United States $442,043 $277,611
Europe 117,107 17,789
Japan 61,460 857
Rest of Asia 34,189 1,194
Other foreign countries 48,261 3,122
Total $703,060 $300,573
Note 17
TRANSACTIONS WITH RELATED PARTIES
During 1998, the Company entered into an agreement with
Callaway Editions, Inc. to form CGMV, a limited liability company
that was owned 80% by the Company and 20% by Callaway
Editions, Inc. (“Callaway Editions”). Callaway Editions is a pub-
lishing and media company which is owned 9% by Ely Callaway,
Chairman, President and Chief Executive Officer of the Company,
and 81% by his son, Nicholas Callaway. CGMV was formed to pro-
duce print and other media products that relate to the game of
golf. Pursuant to the agreement, the Company agreed to loan
CGMV up to $20,000,000 for working capital, subject to CGMV’s
achievement of certain milestones to the satisfaction of the
Company in its sole discretion. Also pursuant to the agreement,
CGMV was obligated to pay an annual management fee of
$450,000 to Callaway Editions. In conjunction with the Company’s
restructuring plan, the Company committed to sell or assign its
interest in CGMV to Callaway Editions. Accordingly, the Company
recorded a charge in operations to December 1998 based on the
December 31, 1998 book value of CGMV (Note 14).
During 1999, the Company forgave the existing loan balance
from CGMV of approximately $2,142,000, sold its interest to
Callaway Editions for a nominal amount and paid $1,000,000 as
consideration for release from its obligation to loan CGMV up to
$20,000,000. These transactions did not result in a charge in
1999, as they were adequately accrued in the 1998 restructuring
reserve (Note 14).
In December 1998, the Company purchased the remaining 20%
interest in Callaway Golf Trading GmbH, the Company’s former
German distributor, for $6,766,000. The purchase price was in the
form of a note payable bearing interest at 7%, due in June 1999
to the seller, who was then an officer of a wholly-owned sub-
sidiary of the Company. The note payable was included in
accounts payable and accrued expenses at December 31, 1998 and
was paid in February 1999.