Callaway 2003 Annual Report Download - page 75

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72 CALLAWAY GOLF COMPANY
The Callaway Golf Company Foundation (the “Foundation”)
oversees and administers charitable giving for the Company
and makes grants to carefully selected organizations.
Directors and executive officers of the Company also serve as
directors of the Foundation and the Company’s employees
provide accounting and administrative services for the
Foundation. In 2003, 2002 and 2001, the Company recognized
charitable contribution expense of $939,000, $1,165,000
and $1,000,000, respectively, as a result of its unconditional
promise to contribute such amounts to the Foundation.
In the latter part of 2003, the Company requested on short
notice that one of its executive officers relocate to Chicopee,
Massachusetts, to be the President and Chief Operating Officer
of the newly acquired Top-Flite business. In order to assist this
officer with his relocation across country on such short notice
(and because under the Sarbanes-Oxley Act of 2002 the
Company is prohibited from making a loan to him), the
Company purchased his residence in California at a cost of
$2,000,000. The purchase price was determined based upon
two independent appraisals. As of December 31, 2003, the
Company was marketing the home and accounted for the
home as a long-lived asset held for sale classified as other assets.
Note 17. Summarized Quarterly Data (Unaudited)
Fiscal Year 2003 Quarters
(In thousands, except per share data) 1st 2nd 3rd
(3)
4th
(3)(5)
Total
Net sales $ 271,719 $ 242,077 $ 153,634 $ 146,602 $ 814,032
Gross profit $ 137,837 $ 126,494 $ 70,220 $ 34,064 $ 368,615
Net income (loss) $ 42,477 $ 34,143 $ 2,334 $ (33,431) $ 45,523
Earnings (loss) per common share
(1)
Basic $ 0.65 $ 0.52 $ 0.04 $ (0.50) $ 0.69
Diluted $ 0.64 $ 0.52 $ 0.03 $ (0.50) $ 0.68
Fiscal Year 2002 Quarters
(In thousands, except per share data) 1st 2nd 3rd
(4)
4th Total
Net sales
(2)
$256,708 $ 252,473 $ 161,257 $ 122,781 $ 793,219
Gross profit
(2)
$128,751 $ 137,789 $ 79,886 $ 53,725 $ 400,151
Net income (loss) $ 30,694 $ 37,142 $ 7,187 $ (5,577) $ 69,446
Earnings (loss) per common share
(1)
Basic $ 0.46 $ 0.56 $ 0.11 $ (0.08) $ 1.04
Diluted $ 0.45 $ 0.55 $ 0.11 $ (0.08) $ 1.03
(1) Earnings per share is computed individually for each of the quarters presented; therefore, the sum of the quarterly earnings per share may not necessarily equal the total for the year.
(2) Beginning in the first quarter of 2003, the Company records royalty revenue as a component of net sales and royalty expenses as a component of selling expenses. Previously, royalty
revenue and royalty expense was recorded as a component of other income. Prior periods have been reclassified to conform with the current period presentation. Previously reported net
sales for 2002 were $256,380,000, $252,182,000, $160,981,000, $122,521,000 and $792,064,000 for the first, second, third and fourth quarters and for the year ended 2002, respectively.
Previously reported gross profit for 2002 was $128,423,000, $137,498,000, $79,610,000, $53,465,000 and $398,996,000 for the first, second, third and fourth quarters and for the year ended
2002, respectively.
(3) On September 15, 2003, the Company completed the domestic portion of the Top-Flite Acquisition. The settlement of the international assets was effective October 1, 2003. Thus, the
Company’s consolidated statement of operations include The Top-Flite Golf Company results of operations in the United States for the period of September 15, 2003, through December 31,
2003, and the international operations for the period of October 1, 2003, through December 31, 2003. See Note 3 for pro forma disclosure for the years ended December 31, 2003, and 2002.
(4) The Company’s gross profit, net income and earnings per common share includes the effect of the change in accounting estimate for the Company’s warranty accrual. During the third
quarter of 2002, the Company reduced its warranty reserve by approximately $17,000,000, pre-tax (Note 4).
(5) The Company’s gross profit, net income and earnings per common share include the recognition of $24,080,000 in pre-tax integration charges recorded during the fourth quarter of 2003
related to the consolidation of its Callaway Golf and Top-Flite operations (Note 2).