Callaway 2008 Annual Report Download - page 90

Download and view the complete annual report

Please find page 90 of the 2008 Callaway annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

acquired. As a result, the Company has preliminarily recorded goodwill of $361,000, none of which is deductible
for tax purposes. In accordance with applicable accounting rules, a final determination of the allocation of the
aggregate acquisition costs will be made upon a final assessment of the estimated fair value of the acquired net
assets. It is anticipated that the final assessment will be completed during the first half of 2009 and that the final
allocation will not differ materially from the preliminary allocation. The Company has preliminarily recorded the
fair values of uPlay’s database and technology, trademarks and trade names, and non-compete agreements using
an income valuation approach. This valuation technique provides an estimate of the fair value of an asset based
on the cash flows that the asset can be expected to generate over its remaining useful life.
In connection with this purchase, the Company could be required to pay an additional purchase price not to
exceed $10,000,000 based on a percentage of earnings generated from the sale of uPlay products over a period of three
years ending on December 31, 2011. Any such additional purchase price paid at the end of the three year period will be
recorded as goodwill. The preliminary allocation of the aggregate acquisition costs is as follows (in thousands):
Assets Acquired:
Cash .......................................................................... $ 208
Accounts receivable .............................................................. 948
Inventory ...................................................................... 228
Property, plant and equipment ...................................................... 254
Database and technology .......................................................... 7,800
Trademarks and trade names ....................................................... 540
Non-compete agreements .......................................................... 760
Other .......................................................................... 87
Goodwill (Note 7) ............................................................... 361
Liabilities:
Current liabilities ................................................................ (1,181)
Total net assets acquired ...................................................... $10,005
The pro-forma effects of the uPlay, LLC asset acquisition would not have been material to the Company’s results
of operations for fiscal years 2008, 2007 or 2006 and, therefore, are not presented.
Note 5. Restructuring and Integration Initiatives
In connection with the Company’s gross margin improvement initiatives and its actions to improve the
profitability of its golf ball business, the Company has taken actions to consolidate its golf ball operations into
other existing locations. As a result of these initiatives, in May 2008, the Company announced the closure of its
golf ball manufacturing facility in Gloversville, New York. This closure resulted in the recognition of non-cash
charges for the acceleration of depreciation on certain golf ball manufacturing equipment and cash charges
related to severance benefits and facility costs. During the twelve months ended December 31, 2008, the
Company recorded pre-tax charges of $4,254,000 in connection with the closure of this facility. In addition, the
Company expects to incur additional charges of approximately $300,000 in 2009, primarily related to the costs
associated with the closure of the manufacturing facility. The remaining liability as of December 31, 2008,
represents estimated costs for certain ongoing facility costs and severance benefits.
The activity and liability balances recorded as part of the Company’s golf ball manufacturing consolidation
were as follows (in thousands):
Workforce
Reductions
Facility
and Other Total
Charges to cost and expense ........................................ $1,295 $ 2,959 $ 4,254
Non-cash items ................................................... — (1,798) (1,798)
Cash payments ................................................... (1,162) (890) (2,052)
Restructuring payable balance, December 31, 2008 ...................... $ 133 $ 271 $ 404
F-16