Callaway 2009 Annual Report Download - page 98

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The following table summarizes the fair value of derivative instruments by contract type as well as the
location of the asset and/or liability on the consolidated condensed balance sheets at December 31, 2009 and
2008 (in thousands):
Asset Derivatives
December 31, 2009 December 31, 2008
Derivatives not designated as hedging
instruments Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Foreign currency exchange contracts . . . Other current assets $2,705 Other current assets $ —
Liability Derivatives
December 31, 2009 December 31, 2008
Derivatives not designated as hedging
instruments Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Foreign currency exchange contracts . . . Accounts payable and
accrued expenses
$ 47 Accounts payable and
accrued expenses
$2,007
The following table summarizes the location of gains and losses on the consolidated statements of
operations that were recognized during the years ended December 31, 2009, 2008 and 2007, respectively, in
addition to the derivative contract type (in thousands):
Amount of Gain / (Loss)
Recognized in Income on
Derivative Instruments
Year Ended December 31,
Derivatives not designated as hedging
instruments
Location of gain (loss) recognized in income on
derivative instruments 2009 2008 2007
Foreign currency exchange contracts . . . Other income (expense) $(7,594) $(3,251) $(5,979)
The net realized and unrealized contractual net losses noted in the table above for the years ended
December 31, 2009, 2008 and 2007 were used by the Company to offset actual foreign currency transactional net
gains of $7,112,000, $3,770,000 and $6,137,000, respectively.
Supply of Electricity and Energy Contracts
The Company previously had an energy supply contract, which the Company accounted for as a derivative
instrument. The Company terminated this contract in 2001, and upon termination, the contract ceased to be a
derivative instrument. At the time of termination, the Company did not meet the criteria to extinguish the
$19,922,000 unrealized loss liability associated with the derivative instrument. The Company continued to reflect
the derivative liability on its balance sheet as a derivative valuation account, subject to quarterly review in
accordance with applicable law and accounting regulations, including Topic 405-20 “Extinguishment of
Liabilities” (“ASC 405-20”). During the fourth quarter of 2008, the Company, in consultation with its outside
advisors, determined that the Company had met the criteria under ASC 405-20 and therefore reversed the
derivative liability. As a result, the Company recorded in other income in the fourth quarter of 2008, a
$19,922,000 non-cash, non-operational benefit.
Note 11. Earnings (Loss) per Common Share
Earnings (loss) per common share, basic, is computed by dividing net income (loss) allocable to common
shareholders by the weighted-average number of common shares outstanding for the period. Earnings (loss) per
common share, diluted, is computed by dividing net income by the weighted-average number of common and
potentially dilutive common equivalent shares outstanding for the period. Weighted-average common shares
outstanding—diluted is the same as weighted-average common shares outstanding—basic in periods when a net
loss is reported, or in periods when diluted earnings (loss) per share is more favorable than basic earnings (loss)
per share.
F-22