Callaway 2012 Annual Report Download - page 92

demand creation initiatives to drive sales growth. The Company’s restructuring plan resulted in annualized pre-
tax savings of approximately $50,000,000 of which approximately half were reinvested into the Callaway and
Odyssey brands and demand creation initiatives.
In connection with these initiatives, during 2012 the Company recognized net pre-tax charges of $1,012,000
of which $473,000 and $539,000 were recognized in cost of sales and operating expenses, respectively. In 2011,
the Company recognized total pre-tax charges $16,329,000, of which $1,251,000 and $15,078,000 were
recognized in cost of sales and operating expenses, respectively.
The table below depicts the activity and liability balances recorded as part of the GOS Initiatives and the
Reorganization and Reinvestment Initiatives (in thousands). Amounts payable as of December 31, 2012 were
included in accrued employee compensation and benefits, and amounts payable as of December 31, 2011 were
included in accrued employee compensation and benefits and accounts payable and accrued expenses in the
accompanying consolidated balance sheets.
GOS Initiatives
Reorganization
and
Reinvestment
Initiatives
Workforce
Reductions
Transition
Costs
Asset
Write-offs
Workforce
Reductions Total
Charges to cost and expense ..................... $5,177 $ 7,861 $ 1,778 $ — $ 14,816
Non-cash items ............................... — — (1,778) — (1,778)
Cash payments ............................... (1,909) (7,477) — — (9,386)
Restructuring payable balance, December 31, 2010 . . $ 3,268 $ 384 $ — $ — $ 3,652
Charges to cost and expense ..................... 4,702 17,527 2,451 16,329 41,009
Non-cash items ............................... — — (2,451) (2,126) (4,577)
Cash payments ............................... (6,751) (17,856) — (8,846) (33,453)
Restructuring payable balance, December 31, 2011 . . $ 1,219 $ 55 $ — $ 5,357 $ 6,631
Charges to cost and expense ..................... (98) 21 — 1,012 935
Cash payments ............................... (985) (76) — (6,316) (7,377)
Restructuring payable balance, December 31, 2012 . . $ 136 $ — $ — $ 53 $ 189
Cost Reduction Initiatives
In July 2012, the Company announced it was undertaking additional cost-reduction initiatives (the “Cost
Reduction Initiatives”). These initiatives were designed to streamline and further simplify the Company’s
organizational structure and change the manner in which the Company approaches and operates its business. The
actions taken in 2012 included (i) a reduction in workforce that impacted all regions and levels of the
organization in addition to other transition costs, which resulted in pre-tax charges of $17,471,000; (ii) greater
focus on the Company’s core product lines including licensing to third parties the rights to develop, manufacture
and distribute certain non-core product lines (e.g. apparel and footwear), which resulted in pre-tax charges of
$5,810,000; (iii) transitioning the Company’s integrated device business to a third party based model, which
resulted in pre-tax charges of $6,976,000 to write-off inventory and $4,345,000 to write-off property, plant and
equipment related to uPro devices, in addition to impairment charges of $5,156,000 related to intangible assets
and goodwill related to the uPlay, LLC acquisition (see Note 8); and (iv) the reorganization of the Company’s
golf ball manufacturing supply chain, which resulted in pre-tax charges of $14,303,000, including charges for the
sale and lease-back of a reduced portion of the square footage of the Company’s ball manufacturing facility in
Chicopee, Massachusetts (Note 7), and the write-off of certain patents related to the Top-Flite brand (Note 8).
These initiatives are estimated to yield approximately $60,000,000 in annualized savings. In connection with
these initiatives, the Company expects to incur total pre-tax charges of approximately $60,000,000, of which
approximately two-thirds is expected to be non-cash charges. The Company expects to incur estimated future
F-16