Callaway 2005 Annual Report Download - page 85

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CALLAWAY GOLF COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
for such initiatives are in addition to the previously reported integration of the Callaway Golf and Top-Flite
operations and the charges for such integration.
In connection with the 2005 Restructuring Initiatives, the Company committed to staff reductions that
involve the elimination of approximately 500 positions worldwide, including full-time and part-time employees,
temporary staffing and open positions. Most of the employee terminations were completed by December 31,
2005 and all such employee terminations will be completed by December 31, 2006. Terminated employees will
receive termination benefits for a specified period. As of December 31, 2005, the Company recorded charges to
cost of sales, selling expense, general and administrative expense, and research and development expense in the
amount of $7,119,000 for employee termination benefits and $1,205,000 for facility closures and other costs. The
Company expects to incur additional charges of approximately $4,000,000 in 2006.
The activity and liability balances recorded as part of the 2005 Restructuring Initiatives were as follows (in
thousands):
Workforce
Reductions
Facility
and
Other Total
Charges to cost and expense ............................... $7,119 $ 1,205 $ 8,324
Non-cash items ......................................... — (1,024) (1,024)
Cash payments .......................................... (3,682) (181) (3,863)
Restructuring balance, December 31, 2005 ................... $3,437 $ — $ 3,437
In October 2005, the Company completed its full consolidation of the Callaway Golf ball manufacturing
with the Top-Flite golf ball manufacturing at the Chicopee, Massachusetts and Gloversville, New York locations.
During December 2005, 2004 and 2003, in connection with the consolidation, the Company incurred charges to
pre-tax earnings of $12,413,000 million, $28,500,000 million and $24,080,000 million, respectively. The 2005
charges included non-cash charges for acceleration of depreciation on certain golf ball manufacturing equipment
and cash charges related to severance and facility consolidations. The charges incurred during 2004 included
severance, the disposition of certain long-lived assets and other costs associated with the consolidation of certain
facilities. During 2006, the Company anticipates additional charges to pre-tax earnings of $3,000,000 million in
order to complete the restoration of the ball manufacturing plant in Carlsbad, California. The activity recorded as
part of the 2005 Restructuring Initiatives was as follows (in thousands):
Workforce
Reductions
Facility
and Other Total
Charges to cost and expense ............................. $ — $24,080 $ 24,080
Non-cash items ....................................... — (24,080) (24,080)
Cash payments ........................................ — — —
Integration balance, December 31, 2003 .................... — — —
Charges to cost and expense ............................. 8,583 19,917 28,500
Non-cash payments .................................... — (15,828) (15,828)
Cash payments ........................................ (8,029) (4,089) (12,118)
Integration balance, December 31, 2004 .................... 554 — 554
Charges to cost and expense ............................. 1,241 11,172 12,413
Non-cash payments .................................... — (7,011) (7,011)
Cash payments ........................................ (1,795) (2,572) (4,367)
Integration balance, December 31, 2005 .................... $ — $ 1,589 $ 1,589
F-17