Callaway 2005 Annual Report Download - page 84

CALLAWAY GOLF COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Top-Flite Acquisition was accounted for as a purchase in accordance with SFAS No. 141. Under SFAS
No. 141, the estimated aggregate cost of the acquired assets was $182,960,000, which includes cash paid of
$154,145,000, transaction costs of approximately $6,331,000, and assumed liabilities of approximately
$22,484,000. The estimated fair value of the net assets acquired 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. The allocation of the aggregate acquisition costs is as follows (in thousands):
Assets Acquired:
Accounts receivable ............................................................. $ 45,360
Inventory ..................................................................... 32,746
Other assets ................................................................... 1,147
Property and equipment .......................................................... 55,775
Intangible assets (Note 6) ......................................................... 47,932
Liabilities Assumed:
Current liabilities ............................................................... (17,398)
Long-term liabilities ............................................................. (5,086)
Total net assets acquired ..................................................... $160,476
Pro Forma Results of Operations
The following sets forth the Company’s pro forma results of operations for the year ended December 31,
2003, as if the acquisition of the Top-Flite golf operations had taken place at the beginning of the period
presented. No pro forma information has been included relating to the FrogTrader acquisition, as this acquisition
was not deemed to be significant under the applicable rules (in thousands, except per share data)(1).
Year Ended
December 31,
2003
Net sales ........................................................................ $1,005,070
Net income ...................................................................... $ 33,471
Earnings per common share:
Basic ....................................................................... $ 0.51
Diluted ..................................................................... $ 0.50
(1) Until September 15, 2003, the Top-Flite golf business was operated as a part of, and was integrated with, the
other businesses of Spalding Sports Worldwide. The pro forma results of operations presented above
therefore are based upon an estimated allocation of personnel and costs with regard to the manner in which
the Top-Flite golf business was structured and operated as part of Spalding Sports Worldwide. The allocated
personnel and costs are not necessarily indicative of the personnel and costs that would have been included
had the Top-Flite business been operated as part of Callaway Golf Company since the beginning of the
periods presented. As a result, the pro forma results of operations are not necessarily indicative of the results
of operations had the acquisition been completed at the beginning of the period presented.
Note 4. Restructuring and Integration Initiatives
In September 2005, the Company began the implementation of several company-wide restructuring
initiatives designed to improve the Company’s business processes and reduce the Company’s overall expenses
(the “2005 Restructuring Initiatives”). The 2005 Restructuring Initiatives include, among other things, the
integration of the Callaway Golf, Odyssey, Top-Flite and Ben Hogan selling functions, the complete
consolidation of all golf ball manufacturing at the Top-Flite locations in Massachusetts and New York, and the
elimination or reduction of other operating expenses. The 2005 Restructuring Initiatives and estimated charges
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