Callaway 2007 Annual Report Download - page 106

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countries, and (iii) Playcorp Pty. Ltd. for a complete line of men’s and women’s apparel for distribution in
Australia and New Zealand.
In addition to apparel, the Company has also licensed its trademarks to, among others, (i) Fossil, Inc. for a
line of Callaway Golf watches and clocks, (ii) TRG Accessories, LLC for a collection primarily consisting of
travel gear, (iii) Global Wireless Entertainment, Inc. for the creation of golf-related software and applications for
wireless handheld devices and platforms, (iv) MicroVision Optical, Inc. for eyewear and (v) Nikon Vision Co.,
Ltd. for rangefinders. Prior to April, 2006, the Company had a licensing arrangement with Tour Golf Group, Inc.
(“TGG”) for a line of Callaway Golf footwear. In April 2006, the licensing arrangement was terminated and the
Company acquired certain assets of TGG. The Company currently designs and sells the Callaway Golf footwear
line. The Company recognized royalty income under its various licensing agreements of $8,672,000, $8,292,000
and $7,080,000 during 2007, 2006 and 2005, respectively.
Note 17. Transactions with Related Parties
In December 2006, the Company purchased the primary residence from one of its recently hired officers at a
cost of $545,000. The purchase was pursuant to the Company’s home purchase procedures as referenced in the
officer’s Employment Agreement. The purchase price was determined based upon two independent appraisals.
During December 2006, the Company was marketing the home and accounted for the home as a long-lived asset
held for sale classified as other assets. In January 2007, this residence was sold and the Company recorded a net
loss of $22,500.
In connection with the terms of a 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. In 2005, this residence was sold and the Company recorded a gain of $6,000.
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. During 2007, 2006 and 2005, the Company did not contribute to the Foundation.
Note 18. Summarized Quarterly Data (Unaudited)
Fiscal Year 2007 Quarters
1st 2nd 3rd 4th Total
(In thousands, except per share data)
Net sales .............................. $334,607 $380,017 $235,549 $174,418 $1,124,591
Gross profit ............................ $160,721 $175,125 $ 94,006 $ 63,371 $ 493,223
Net income (loss) ....................... $ 32,836 $ 36,639 $ 1,269 $ (16,157) $ 54,587
Earnings (loss) per common share(1)
Basic ............................. $ 0.49 $ 0.54 $ 0.02 $ (0.25) $ 0.82
Diluted ............................ $ 0.48 $ 0.53 $ 0.02 $ (0.25) $ 0.81
Fiscal Year 2006 Quarters
1st 2nd 3rd 4th Total
Net sales .............................. $302,445 $341,815 $193,763 $179,884 $1,017,907
Gross profit ............................ $131,512 $140,086 $ 67,705 $ 58,772 $ 398,075
Net income (loss) ....................... $ 22,861 $ 22,539 $ (11,916) $ (10,194) $ 23,290
Earnings (loss) per common share(1)
Basic ............................. $ 0.33 $ 0.33 $ (0.18) $ (0.15) $ 0.34
Diluted ............................ $ 0.33 $ 0.33 $ (0.18) $ (0.15) $ 0.34
(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.
F-36