Callaway 2004 Annual Report Download - page 37

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adjustment, adjusted for taxes, been excluded from reported results and reconciles such non-GAAP Ñnancial
measures to the most directly comparable GAAP Ñnancial measures:
Year Ended
December 31, Growth/(Decline)
2003 2002 Dollars Percent
(In millions, except per share data)
Reported net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $45.5 $ 69.4 $(23.9) (34)%
Non-cash integration charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16.2
Non-cash warranty reserve adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (10.5)
Pro forma net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $61.7 $ 58.9 $ 2.8 5 %
Reported basic earnings per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $0.69 $ 1.04 $(0.35) (34)%
Non-cash integration charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.24 Ì
Non-cash warranty reserve adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (0.16)
Pro forma basic earnings per shareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $0.93 $ 0.88 $ 0.05 6 %
Reported diluted earnings per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $0.68 $ 1.03 $(0.35) (34)%
Non-cash integration charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.25 Ì
Non-cash warranty reserve adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (0.16)
Pro forma diluted earnings per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $0.93 $ 0.87 $ 0.06 7 %
Financial Condition
Cash and cash equivalents decreased $15.6 million (33%) to $31.7 million at December 31, 2004, from
$47.3 million at December 31, 2003. This resulted primarily from cash used in investing activities of
$34.8 million, partially oÅset by cash provided by Ñnancing activities of $7.9 million, cash provided by
operating activities of $8.5 million and the eÅect of exchange rate changes on cash of $2.6 million. Cash
provided by operating activities decreased $110.2 million to $8.5 million for the year ended December 31,
2004 from $118.7 million in 2003. This decrease was primarily due to a $55.6 million decrease in net income,
as well as a $40.7 million decrease in income taxes payable. Cash used in investing activities decreased
$133.2 million to $34.8 million for the year ended December 31, 2004 from $167.9 in 2003. This decrease
primarily reÖects the $160.3 million use of cash for the purchase of the Top-Flite assets in 2003. Cash
provided by Ñnancing activities increased $21.4 million to cash provided by Ñnancing activities of $7.9 million
in 2004 from cash used in Ñnancing activities of $13.4 million in 2003. The $21.4 million increase is primarily
due to proceeds from borrowings under the Company's line of credit, as well as an increase in proceeds from
the issuance of common stock in connection with the exercise of stock options during the year.
The Company's net accounts receivable balance increased $4.5 million to $105.2 million at December 31,
2004 from $100.7 million at December 31, 2003. The Company's consolidated days sales outstanding
(""DSO'') increased to 71 days as of December 2004 as compared to 60 days as of December 2003. The
increase in DSO and accounts receivable balance is primarily attributable to extended payment terms for
strategic customers.
The Company's net inventory decreased $4.2 million to $181.2 million at December 31, 2004 from
$185.4 million at December 31, 2003. This decrease is due to the Company's decrease in inventories of drivers
and fairway woods of $7.6 million, irons and wedges of $3.8 million, putters of $3.2 million, balls of
$5.4 million and bags and accessories of $3.6 million. These decreases were partially oÅset by a $5.0 million
decrease in the Company's reserve for obsolete inventory, an increase in Top-Flite inventory of $8.0 million
and the addition of FrogTrader inventory of $4.8 million.
At December 31, 2004, the Company's net property, plant and equipment decreased $28.9 million to
$135.9 million from $164.8 million at December 31, 2003. This decrease is primarily due to current year
depreciation and amortization expense of $47.8 million and the disposal of $7.7 million of assets during 2004
28