Callaway 2001 Annual Report Download - page 60

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Callaway Golf Company
58
Summarized Quarterly Financial Data (Unaudited)
(in thousands, except per share data) Fiscal Year 2001 Quarters
1st 2nd (2) 3rd (2) 4th Total
Net sales $ 261,365 $ 253,655 $ 195,848 $ 105,295 $ 816,163
Gross profit $ 136,907 $ 131,936 $ 95,024 $ 40,711 $ 404,578
Net income (loss) $ 34,075 $ 26,975 $ 6,519 $ (9,194) $ 58,375
Earnings (loss) per common share (1)
Basic $ 0.49 $ 0.38 $ 0.09 $ (0.14) $ 0.84
Diluted $ 0.47 $ 0.36 $ 0.09 $ (0.14) $ 0.82
Fiscal Year 2000 Quarters
1st 2nd 3rd 4th Total
Net sales $ 197,406 $ 289,922 $ 208,081 $ 142,218 $ 837,627
Gross profit $ 88,265 $ 144,507 $ 102,031 $ 62,705 $ 397,508
Income before cumulative effect of accounting change $ 13,098 $ 44,189 $ 20,055 $ 4,614 $ 81,956
Cumulative effect of accounting change $ (957) $ — $ — $ — $ (957)
Net income $ 12,141 $ 44,189 $ 20,055 $ 4,614 $ 80,999
Earnings per common share (1)
Basic
Income before cumulative effect of accounting change $ 0.18 $ 0.63 $ 0.29 $ 0.07 $ 1.17
Cumulative effect of accounting change $ (0.01) $ — $ — $ — $ (0.01)
$ 0.17 $ 0.63 $ 0.29 $ 0.07 $ 1.16
Diluted
Income before cumulative effect of accounting change $ 0.18 $ 0.61 $ 0.29 $ 0.07 $ 1.14
Cumulative effect of accounting change $ (0.01) $ — $ — $ — $ (0.01)
$ 0.17 $ 0.61 $ 0.29 $ 0.07 $ 1.13
(1) Earnings per share is computed individually for each of the quarters presented; therefore, the sum of the quar terly earnings per share may not necessarily equal the total for the year.
(2) The Company’s net income and earnings per common share includes the recognition of unrealized energy contract losses due to changes in the estimated fair value of the energy contract based on
market rates. During the second and third quarters of 2001, the Company recorded $6,400,000 and $7,800,000, respectively, of after-tax unrealized losses. During the fourth quar ter of
2001, the Company terminated the energy contract. As a result, the Company will continue to reflect the derivative valuation account on its balance sheet with no future valuation adjustments for
changes in market rates, subject to periodic review (Notes 6 and 11).
Change in Independent Public Accountants
In early 2001, the Company’s Audit Committee requested that the Company
evaluate proposals from other firms in addition to its then current outside audi-
tor, PricewaterhouseCoopers (“PwC”). Management solicited proposals from
likely candidates, and during the second quarter of 2001 the Audit Committee
reviewed a number of candidates that had been pre-screened by management.
At the conclusion of this review process, the Audit Committee recommended
to the Board of Directors, and the Board of Directors approved, the appoint-
ment, effective as of June 18, 2001, of Arthur Andersen LLP (“Arthur
Andersen”) as the Company’s new outside auditor for fiscal year 2001 (PwC’s
engagement officially ended on June 15, 2001). The Audit Committee recom-
mended the change because, among other things, it believed that a change in
outside auditor could help assure an independent and rigorous review of the
Company’s practices. (PwC had been the Company’s outside auditor for over
ten years). In addition, the Committee felt that Arthur Andersen offered a very
high level of audit services at a competitive cost to the Company.
The report of Arthur Andersen in connection with its audit of the Company’s
consolidated financial statements for the year ended December 31, 2001 does
not contain an adverse opinion or a disclaimer of opinion, nor was it quali-
fied or modified as to uncertainty, audit scope or accounting principles.
PwC’s reports in connection with its audits of the Company’s consolidated
financial statements for the years ended December 31, 2000 and December 31,
1999, do not contain an adverse opinion or a disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope or accounting princi-
ples. In addition, during the Company’s fiscal years ended December 31, 2000
and December 31, 1999 and through the subsequent interim period through
the date PwC ceased to be the Company’s auditor, there were no disagreements
with PwC on any matter of accounting principles or practices, financial state-
ment disclosure, or auditing scope or procedure, which disagreements if not
resolved to PwC’s satisfaction would have caused PwC to make reference to the
subject matter of the disagreement in connection with its reports.