Callaway 1998 Annual Report Download - page 37

CALLAWAY GOLF COMPANY
35
NOTE 13
ACQUISITIONS
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 15), 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 pur-
chase price over net assets acquired of $20,935,000 was
allocated to goodwill and is being amortized over esti-
mated useful lives of three to 10 years. These acquisi-
tions, along with the acquisition of the remaining 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, per-
formance 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 its interest in
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 dispo-
sition of this subsidiary of $10,341,000 in December
1998 (Note 11).
On August 8, 1997, the Company consummated
its acquisition of substantially all of the assets and cer-
tain liabilities of Odyssey Sports, Inc., by its wholly-
owned subsidiary, Odyssey, subject to certain adjust-
ments as of the time of closing. Odyssey’s results of oper-
ations have been included in the Company’s consolidat-
ed results of operations since August 8, 1997. Odyssey
manufactures and markets the Odyssey®line of putters
and wedges with Stronomic®and Lyconite®face inserts.
The cost to acquire substantially all of the assets and
certain liabilities of Odyssey Sports, Inc., including pro-
fessional fees directly related to the acquisition, was
approximately $129,256,000 and has been accounted
for using the purchase method of accounting. The allo-
cation of the acquisition cost to assets acquired and lia-
bilities assumed are summarized in the table that fol-
lows. Amounts allocated to trade name, trademark,
trade dress and goodwill are being amortized on the
straight-line basis over 40 years. The amounts allocated
to the process patent and covenant not to compete are
being amortized on the straight-line basis over 16 and
three years, respectively.
The following unaudited pro forma net sales, net
income and earnings per share data for the years ended
December 31, 1997 and 1996 are based on the respec-
tive historical financial statements of the Company and
Odyssey Sports, Inc. The pro forma data presented for
the year ended December 31, 1997 combines the
results of operations of the Company for the year ended
December 31, 1997 with the results of operations of
Odyssey Sports, Inc. for the ten months ended August
7, 1997 and the results of Odyssey for the two months
ended September 30, 1997 and assumes that the acqui-
sition of substantially all of the assets and certain liabil-
ities of Odyssey Sports, Inc. occurred on January 1,
1997. The pro forma data presented for the year ended
December 31, 1996 combines the results of operations
of the Company for the year ended December 31, 1996
with the results of operations of Odyssey Sports, Inc.
for the year ended September 30, 1996 and assumes
that the acquisition of substantially all the assets and
certain liabilities of Odyssey Sports, Inc. occurred on
January 1, 1996.
The pro forma financial data presented are not nec-
essarily indicative of the Company’s results of operations
that might have occurred had the transaction been com-
pleted at the beginning of the periods specified, and do
not purport to represent what the Company’s consolidat-
ed results of operations might be for any future period.
(in thousands) August 8, 1997
Assets acquired/liabilities assumed:
Total assets acquired $132,591
Total liabilities assumed (3,335)
Net assets acquired $129,256
(in thousands, Year ended December 31,
except per share data) (unaudited)
1997 1996
Net sales $884,840 $711,715
Net income $134,512 $119,385
Earnings per common share
Basic $1.97 $1.79
Diluted $1.88 $1.69