Callaway 2012 Annual Report Download - page 52

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(1) Included in the Company’s golf clubs and golf balls segments are the following pre-tax charges:
• $30.4 million and $16.6 million, respectively, for the year ended December 31, 2012, in connection
with the Company’s Cost Reduction Initiatives announced in July 2012;
• $0.8 million and $0.2 million, respectively, for the year ended December 31, 2012 in connection with
the Company’s Reorganization and Reinvestment Initiatives that were announced in June 2011;
• $15.6 million and $5.0 million, respectively, for the year ended December 31, 2011, in connection with
the final phase of the Company’s GOS initiatives. The Company completed the final phase of the GOS
initiatives in December 2011; and
• $5.6 million and $1.3 million, respectively, for the year ended December 31, 2011 in connection with
the Company’s Reorganization and Reinvestment Initiatives.
See Note 3 “Restructuring Initiatives” to the Notes to Consolidated Financial Statements for details
regarding the initiatives referenced herein.
(2) Reconciling items represent corporate general and administrative expenses and other income (expense) not
included by management in determining segment profitability. For the year ended December 31, 2012, the
reconciling items include:
• Pre-tax charges of $7.1 million in connection with the Cost Reduction Initiatives (see Note 3
“Restructuring Initiatives” in the Notes to Consolidated Financial Statements);
• A pre-tax gain of $6.6 million in connection with the sale of the Top-Flite and Ben Hogan brands (see
Note 8 “Goodwill and Intangible Assets” in the Notes to Consolidated Financial Statements); and
• Net gains of $3.2 million related to foreign currency hedging contracts offset by foreign currency
transaction losses.
For the year ended December 31, 2011, the reconciling items include:
• Pre-tax charges of $4.1 million in connection with the Company’s GOS initiatives (see Note 3
“Restructuring Initiatives” in the Notes to Consolidated Financial Statements);
• Pre-tax charges of $9.4 million in connection with the Company’s Reorganization and Reinvestment
Initiatives (see Note 3 “Restructuring Initiatives” in the Notes to Consolidated Financial Statements);
• Pre-tax impairment charges of $6.5 million, primarily in connection with certain intangible assets
related to the acquisition of Top-Flite in 2003 (see Note 8 “Goodwill and Intangible Assets” in the
Notes to Consolidated Financial Statements);
• A pre-tax gain of $6.2 million in connection with the sale of certain buildings (see Note 7 “Sale of
Buildings” in the Notes to Consolidated Financial Statements); and
• Net losses of $8.2 million related to foreign currency hedging contracts offset by foreign currency
transaction gains.
Pre-tax loss in the Company’s golf clubs operating segment increased to $59.8 million for 2012 from $3.9
million for 2011. This increase was primarily attributable to a $58.9 million decrease in gross margin combined
with a decrease in net sales as discussed above, offset by a decrease in operating expenses. The decrease in gross
margin was primarily driven by $30.4 million of charges incurred in connection with the Company’s Cost
Reduction Initiatives announced in July 2012 compared to $21.2 million of charges incurred in 2011 related to
the Company’s Reorganization and Reinvestment and GOS Initiatives. In addition, club margins were negatively
affected by sales promotions, closeout activity and increased club component costs as compared to the same
period in 2011.
Pre-tax loss in the Company’s golf balls operating segment increased to $15.0 million for 2012 from $12.7
million for 2011. This increase in pre-tax loss was primarily attributable to a decrease in net sales primarily due
to the sale of the Top-Flite and Ben Hogan Brands, as discussed above combined with a $4.3 million decrease in
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