Callaway 2003 Annual Report Download - page 55

52 CALLAWAY GOLF COMPANY
restructuring, discontinued operation, plant closing or other
exit or disposal activity. SFAS No. 146 is effective prospectively
for exit and disposal activities initiated after December 31,
2002. The adoption of SFAS No. 146 has and will continue to
govern the accounting methodology applied to costs associated
with the Company’s consolidation of the Callaway Golf and
Top-Flite operations (Note 3).
Reclassifications
Certain prior period amounts have been reclassified to conform
with the current period presentation.
The Top-Flite Acquisition was accounted for as a purchase in
accordance with SFAS No. 141, “Business Combinations.”
Under SFAS No. 141, the estimated aggregate cost of the
acquired assets is $183,066,000, which includes cash paid
($154,145,000), transaction costs (approximately
$6,176,000), and assumed liabilities (approximately
$22,745,000). The estimated fair value of the assets exceeded
the estimated aggregate acquisition costs. As a result, the
Company was required to reduce the carrying value of the
acquired long-term assets on a pro rata basis. In accordance
with applicable accounting rules, a full determination of the
allocation of the aggregate acquisition costs will be made
upon a final assessment of the estimated fair value of the
acquired net assets. It is anticipated that the final assessment
will be completed during the second quarter of 2004 and that
the final allocation will not differ materially from the
pre
liminary allocation. The preliminary allocation is as
follows (in thousands):
Assets Acquired:
Accounts receivable $ 43,976
Inventory 32,809
Other assets 1,154
Property and equipment 56,668
Intangible assets (Note 6) 48,459
Liabilities Assumed:
Current liabilities (17,917)
Long term liabilities (4,828)
Total net assets acquired $ 160,321
During the fourth quarter of 2003, the Company recorded
pre-tax charges of $24,080,000 associated with the integration
of the Callaway Golf and Top-Flite Golf operations (Note 2).
Note 3. Top-Flite Asset Purchase
On September 15, 2003, the Company acquired through a
court-approved sale substantially all of the golf-related assets
of TFGC Estate Inc. (f/k/a The Top-Flite Golf Company, f/k/a
Spalding Sports Worldwide, Inc., the “Seller”) and thereafter
completed the valuation and settlement of certain additional
assets related to Seller’s international operations (the “Top-
Flite Acquisition”). The settlement of the international assets
was effective October 1, 2003.
The Company acquired the Top-Flite assets because they
provided a unique opportunity to increase significantly the
size and profitability of the Company’s golf ball business and
the Company was able to purchase the acquired assets at less
than their estimated fair value. The Company paid the cash
purchase price for the Top-Flite Acquisition from cash on
hand. The Company intends to continue the U.S. and foreign
operations of the acquired golf assets, including the use of
acquired assets in the manufacture of golf balls and golf clubs
and the commercialization of existing Top-Flite, Strata and
Ben Hogan brands, patents and trademarks.
The Company’s consolidated statement of operations include
the Company’s Top-Flite business results of operations in the
United States for the period of September 15, 2003, through
December 31, 2003. The Company’s consolidated statement
of operations include the Company’s Top-Flite business
results of operations outside of the United States for the period
of October 1, 2003, through December 31, 2003.