Callaway 2003 Annual Report Download - page 24

CALLAWAY GOLF COMPANY 21
The following summarizes what net income and earnings per
share would have been had the warranty reserve adjustment
and the energy derivative charge, adjusted for taxes, been
excluded from reported results:
employee stock options ($13.8 million) and purchases under the
employee stock purchase plan ($4.2 million). Cash flows
provided by operating activities reflect net income adjusted for
depreciation and amortization ($44.5 million) and losses on the
disposal of long-lived assets ($24.2 million — see above “Top-
Flite Acquisition”) combined with decreases in accounts
receivables ($12.7 million) and inventories ($4.9 million),
partially offset by increases in other assets ($4.7 million),
accrued employee compensation and benefits ($3.9 million) and
accounts payable and accrued expenses ($2.6 million).
At December 31, 2003, the Company’s net accounts receivable
increased $36.8 million to $100.7 million from $63.9 million
at December 31, 2002. The increase is partially due to the
addition of Top-Flite’s accounts receivable which were $28.6
million at December 31, 2003. Excluding the Top-Flite balances,
accounts receivable would have increased $8.2 million.
At December 31, 2003, the Company’s net inventory
increased $33.6 million to $185.4 million from $151.8 million
at December 31, 2002. This increase was due to the addition
of Top-Flite’s inventory which was $39.9 million at December
31, 2003. Excluding the Top-Flite balances, inventory would
have decreased $6.3 million in 2003 as compared to 2002.
At December 31, 2003, the Company’s net property, plant and
equipment decreased $2.5 million to $164.8 million from
$167.3 million at December 31, 2002. This decrease is primarily
due to current-year depreciation and amortization expense of
$42.5 million and the disposal of $24.1 million of assets during
the fourth quarter of 2003, resulting from efforts to consolidate
the Callaway Golf and Top-Flite golf ball and golf club
manufacturing and research and development operations (see
above “Top-Flite Acquisition”). These decreases were partially
offset by the addition of Top-Flite property, plant and
equipment of $56.7 million and current-year capital
expenditures of $7.8 million.
At December 31, 2003, the Company’s net intangible assets
increased $46.5 million to $149.6 million from $103.1 million
at December 31, 2002. This increase is due to the addition of
Top-Flite intangible assets of $47.6 million in 2003.
Financial Condition
Cash and cash equivalents decreased $61.2 million (56%) to
$47.3 million at December 31, 2003, from $108.5 million at
December 31, 2002. This decrease resulted primarily from
cash used in investing activities of $167.9 million and cash
used in financing activities of $13.4 million, substantially offset
by cash provided by operating activities of $118.7 million.
Cash flows used in investing activities are primarily attributable
to cash used to purchase the Top-Flite assets ($160.3 million)
and capital expenditures ($7.8 million). Cash flows used in
financing activities are primarily attributable to the payment
of dividends ($18.5 million), the acquisition of treasury stock
($4.8 million) and payments related to financing arrangements
($8.1 million), partially offset by proceeds from the
exercise of
For the Years Ended
December 31, Growth/(Decline)
(In millions, except per share data) 2002 2001 Dollars Percent
Reported net income $ 69.4 $ 58.4 $ 11.0 19%
Non-cash warranty
reserve adjustment (10.5) —
Non-cash energy
derivative charge — 14.2
Pro forma net income $ 58.9 $ 72.6 $ (13.7) (19)%
Reported basic earnings
per share $ 1.04 $ 0.84 $ 0.20 24%
Non-cash warranty
reserve adjustment (0.16) —
Non-cash energy
derivative charge — 0.20
Pro forma basic earnings
per share $ 0.88 $ 1.04 $ (0.16) (15)%
Reported diluted earnings
per share $ 1.03 $ 0.82 $ 0.21 26%
Non-cash warranty
reserve adjustment (0.16) —
Non-cash energy
derivative charge — 0.20
Pro forma diluted earnings
per share $ 0.87 $ 1.02 $ (0.15) (15)%