Callaway 2005 Annual Report Download - page 104

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CALLAWAY GOLF COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 15. Licensing Arrangements
The Company from time to time licenses its trademarks and service marks to third parties for use on
products such as golf apparel, footwear, watches, luggage and other golf-related products, such as headwear,
travel bags, golf towels and golf umbrellas. The Company has a current licensing arrangement with Ashworth,
Inc. for a complete line of Callaway Golf men’s and women’s apparel for distribution in the United States,
Canada, Europe, Australia, New Zealand and South Africa. The first full year in which the Company received
royalty revenue under these licensing arrangements was 2003. The Company also has a current licensing
arrangement with Sanei International Co., Ltd. (“Sanei”) for a complete line of Callaway Golf men’s and
women’s apparel for distribution in Asian Pacific markets including Japan, Korea, Hong Kong, Taiwan,
Singapore, Indonesia, Malaysia, Thailand, Vietnam, Philippines, Brunei, Myanmar and China.
In addition to apparel, the Company has also entered into licensing arrangements with (i) Tour Golf Group,
Inc. for a Callaway Golf footwear collection, (ii) Fossil, Inc. for a line of Callaway Golf watches and clocks,
(iii) TRG Accessories, LLC for a collection consisting of travel gear, (iv) Global Wireless Entertainment, Inc. for
the creation of golf-related software and applications for wireless handheld devices and platforms and
(v) MicroVision Optical, Inc. for eyewear. The Company assumed certain license agreements Top-Flite had
previously entered into with third parties to license the use of its Top-Flite, Ben Hogan and Strata brands on
apparel and accessories.
Note 16. Transactions with Related Parties
The Callaway Golf Company Foundation (the “Foundation”) oversees and administers charitable giving for
the Company and makes grants to carefully selected organizations. 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 2005, the Company did not contribute to the Foundation. In 2004 and 2003, the Company
recognized charitable contribution expense of $920,000 and $939,000, respectively, as a result of its
unconditional promise to contribute such amounts to the Foundation.
In connection with the terms of the Company’s former chief executive officer’s separation from the
Company, the Company purchased his primary residence at a cost of $1,715,000. The purchase price was
determined based upon two independent appraisals. During March 2005, the Company was marketing the home
and accounted for the home as a long-lived asset held for sale classified as other assets. In 2005, this residence
was sold and the Company recorded a gain of $6,000.
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. In 2004, this residence was sold and the
Company recorded a net loss of $27,000.
F-36