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FORM 10-K
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
|
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95-3797580
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Title of each class
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Name of each exchange on which registered
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Common Stock, $.01 par value per share
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New York Stock Exchange
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Large accelerated filer
¨
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Accelerated filer
x
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Non-accelerated filer
¨
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Smaller reporting company
¨
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(Do not check if a smaller reporting company)
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Years Ended December 31,
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|||||||||||||||||||
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2013
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2012
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2011
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|||||||||||||||
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(Dollars in millions)
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|||||||||||||||||||
Woods
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$
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256.4
|
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30
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%
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$
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200.6
|
|
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24
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%
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$
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211.2
|
|
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24
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%
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Irons
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181.8
|
|
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22
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%
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170.8
|
|
|
20
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%
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206.8
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23
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%
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|||
Putters
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89.6
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11
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%
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93.3
|
|
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11
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%
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88.2
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|
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10
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%
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|||
Golf balls
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132.1
|
|
|
16
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%
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139.6
|
|
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17
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%
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160.3
|
|
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18
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%
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|||
Accessories and other
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182.9
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21
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%
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229.8
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28
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%
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220.0
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|
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25
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%
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|||
Net sales
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$
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842.8
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|
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100
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%
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$
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834.1
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|
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100
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%
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$
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886.5
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|
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100
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%
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•
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Facilities through the partnership with local utilities to implement energy reduction initiatives such as energy efficient lighting, demand response energy management and heating, ventilation and air conditioning optimization;
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•
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Manufacturing through lean initiatives and waste minimization;
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•
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Product development through specification of environmentally preferred substances;
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•
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Logistics improvements and packaging minimization; and
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•
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Supply chain management through Social, Safety, and Environmental Responsibility audits of suppliers.
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Name
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Age
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Position(s) Held
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Oliver G. Brewer III
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50
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President and Chief Executive Officer, Director
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Bradley J. Holiday
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60
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Senior Executive Vice President and Chief Financial Officer
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Alan Hocknell
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42
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Senior Vice President, Research and Development
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Brian Lynch
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52
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Senior Vice President, General Counsel & Corporate Secretary
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Mark Leposky
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49
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Senior Vice President, Global Operations
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Alex Boezeman
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54
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President, East Asia
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Leighton Richards
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38
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Managing Director, Southeast Asia and South Pacific
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Neil Howie
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51
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Managing Director, Europe, Middle East and Africa
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•
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Increased difficulty in protecting the Company’s intellectual property rights and trade secrets;
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•
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Unexpected government action or changes in legal or regulatory requirements;
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•
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Social, economic or political instability;
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•
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The effects of any anti-American sentiments on the Company’s brands or sales of the Company’s products;
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•
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Increased difficulty in ensuring compliance by employees, agents and contractors with the Company’s policies as well as with the laws of multiple jurisdictions, including but not limited to the U.S. Foreign Corrupt Practices Act, local international environmental, health and safety laws, and increasingly complex regulations relating to the conduct of international commerce;
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•
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Increased difficulty in controlling and monitoring foreign operations from the United States, including increased difficulty in identifying and recruiting qualified personnel for its foreign operations; and
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•
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Increased exposure to interruptions in air carrier or ship services.
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•
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Earthquake, fire, flood, hurricane and other natural disasters;
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•
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Power loss, computer systems failure, Internet and telecommunications or data network failure; and
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•
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Hackers, computer viruses, software bugs or glitches.
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Year Ended December 31,
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||||||||||||||||||||||
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2013
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2012
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||||||||||||||||||||
Period:
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High
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Low
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Dividend
|
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High
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Low
|
|
Dividend
|
||||||||||||
First Quarter
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$
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7.30
|
|
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$
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6.30
|
|
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$
|
0.01
|
|
|
$
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7.29
|
|
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$
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5.48
|
|
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$
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0.01
|
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Second Quarter
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$
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7.11
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$
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6.15
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|
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$
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0.01
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|
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$
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7.13
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$
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5.17
|
|
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$
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0.01
|
|
Third Quarter
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$
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7.58
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|
|
$
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6.58
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|
|
$
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0.01
|
|
|
$
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6.45
|
|
|
$
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5.20
|
|
|
$
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0.01
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|
Fourth Quarter
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$
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8.97
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|
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$
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7.07
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|
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$
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0.01
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|
|
$
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6.80
|
|
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$
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5.37
|
|
|
$
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0.01
|
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
2012
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|
2013
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||||||||||||
Callaway Golf (NYSE: ELY)
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$
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100.00
|
|
|
$
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82.27
|
|
|
$
|
88.51
|
|
|
$
|
61.05
|
|
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$
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72.22
|
|
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$
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94.19
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|
S&P 500
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$
|
100.00
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|
|
$
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123.45
|
|
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$
|
139.23
|
|
|
$
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139.23
|
|
|
$
|
157.90
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|
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$
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204.63
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|
S&P 600 Smallcap
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$
|
100.00
|
|
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$
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123.78
|
|
|
$
|
154.70
|
|
|
$
|
154.46
|
|
|
$
|
177.41
|
|
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$
|
247.66
|
|
|
|
|
|
|
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Years Ended December 31,
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||||||||||||||||||
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2013
(1)(2)
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2012
(1)(2)(3)(4)
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|
2011
(4)(5)(6)(7)(8)
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|
2010
(4)(6)(7)
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2009
(4)(6)
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||||||||||
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(In thousands, except per share data)
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||||||||||||||||||
Statement of Operations Data:
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|
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|
|
|
|
|
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|
||||||||||
Net sales
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$
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842,801
|
|
|
$
|
834,065
|
|
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$
|
886,528
|
|
|
$
|
967,656
|
|
|
$
|
950,799
|
|
Cost of sales
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528,043
|
|
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585,897
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|
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575,226
|
|
|
602,160
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|
|
607,036
|
|
|||||
Gross profit
|
314,758
|
|
|
248,168
|
|
|
311,302
|
|
|
365,496
|
|
|
343,763
|
|
|||||
Selling, general and administrative expenses
|
294,583
|
|
|
334,861
|
|
|
358,081
|
|
|
355,716
|
|
|
342,084
|
|
|||||
Research and development expenses
|
30,937
|
|
|
29,542
|
|
|
34,309
|
|
|
36,383
|
|
|
32,213
|
|
|||||
Loss from operations
|
(10,762
|
)
|
|
(116,235
|
)
|
|
(81,088
|
)
|
|
(26,603
|
)
|
|
(30,534
|
)
|
|||||
Interest income
|
558
|
|
|
550
|
|
|
546
|
|
|
2,886
|
|
|
1,807
|
|
|||||
Interest expense
|
(9,123
|
)
|
|
(5,513
|
)
|
|
(1,618
|
)
|
|
(848
|
)
|
|
(1,754
|
)
|
|||||
Other income (expense), net
|
6,005
|
|
|
3,152
|
|
|
(8,101
|
)
|
|
(10,997
|
)
|
|
878
|
|
|||||
Loss before income taxes
|
(13,322
|
)
|
|
(118,046
|
)
|
|
(90,261
|
)
|
|
(35,562
|
)
|
|
(29,603
|
)
|
|||||
Income tax provision (benefit)
|
5,599
|
|
|
4,900
|
|
|
81,559
|
|
|
(16,758
|
)
|
|
(14,343
|
)
|
|||||
Net loss
|
(18,921
|
)
|
|
(122,946
|
)
|
|
(171,820
|
)
|
|
(18,804
|
)
|
|
(15,260
|
)
|
|||||
Dividends on convertible preferred stock
|
3,332
|
|
|
8,447
|
|
|
10,500
|
|
|
10,500
|
|
|
5,688
|
|
|||||
Net loss allocable to common shareholders
|
$
|
(22,253
|
)
|
|
$
|
(131,393
|
)
|
|
$
|
(182,320
|
)
|
|
$
|
(29,304
|
)
|
|
$
|
(20,948
|
)
|
Loss per common share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
(0.31
|
)
|
|
$
|
(1.96
|
)
|
|
$
|
(2.82
|
)
|
|
$
|
(0.46
|
)
|
|
$
|
(0.33
|
)
|
Diluted
|
$
|
(0.31
|
)
|
|
$
|
(1.96
|
)
|
|
$
|
(2.82
|
)
|
|
$
|
(0.46
|
)
|
|
$
|
(0.33
|
)
|
Dividends paid per common share
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.10
|
|
|
December 31,
|
||||||||||||||||||
|
2013
(1)(2)
|
|
2012
(1)(2)(3)
|
|
2011
(5)(7)(8)
|
|
2010
(7)
|
|
2009
(9)
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
36,793
|
|
|
$
|
52,003
|
|
|
$
|
43,023
|
|
|
$
|
55,043
|
|
|
$
|
78,314
|
|
Working capital
|
$
|
195,407
|
|
|
$
|
225,430
|
|
|
$
|
251,545
|
|
|
$
|
368,563
|
|
|
$
|
360,654
|
|
Total assets
|
$
|
663,863
|
|
|
$
|
637,636
|
|
|
$
|
727,112
|
|
|
$
|
876,012
|
|
|
$
|
866,963
|
|
Long-term liabilities
|
$
|
153,048
|
|
|
$
|
154,362
|
|
|
$
|
46,514
|
|
|
$
|
13,967
|
|
|
$
|
14,594
|
|
Total Callaway Golf Company shareholders’ equity
|
$
|
284,619
|
|
|
$
|
318,990
|
|
|
$
|
509,956
|
|
|
$
|
684,267
|
|
|
$
|
698,291
|
|
|
(1)
|
On August 29, 2012, the Company issued $112.5 million of 3.75% Convertible Senior Notes (the “convertible notes”) due August 15, 2019, of which $63.2 million in aggregate principal amount was exchanged for 632,270 shares of the Company’s outstanding 7.50% Series B Cumulative Perpetual Convertible Preferred Stock in separate, privately negotiated exchange transactions, and $49.3 million in aggregate principal amount was issued in private placement transactions for cash (see Note 4 “Financing Arrangements” to the Notes to Consolidated Financial Statements in this Form 10-K). In connection with the convertible notes, the Company recognized $4.9 million and $1.7 million in interest expense for the years ended December 31, 2013 and 2012, respectively.
|
(2)
|
The Company’s operating statement for the years ended December 31, 2013 and 2012 include pre-tax charges of
$16.6 million
and $54.1 million, respectively, in connection with the Cost Reduction Initiatives. As a result of these initiatives, in 2012, the Company recorded related decreases in working capital and total assets from the impairment of certain intangible assets including goodwill, as well as the write-off of certain long-lived assets and inventory. See Note 3 “Restructuring Initiatives,” Note 8 “Goodwill and Intangible Assets,” and Note 7 “Sale of Buildings” to the Notes to Consolidated Financial Statements in this Form 10-K.
|
(3)
|
During the first quarter of 2012, in an effort to simplify the Company’s operations and increase focus on the Company’s core Callaway and Odyssey business, the Company sold certain assets related to the Top-Flite and Ben Hogan brands, including trademarks, service marks and certain other intellectual property for net cash proceeds of $26.9 million. The sale of these two brands resulted in a pre-tax net gain of $6.6 million. See Note 8 “Goodwill and Intangible Assets” to the Notes to Consolidated Financial Statements in this Form 10-K.
|
(4)
|
The Company’s operating statements for the years ended December 31, 2012 and 2011 include pre-tax charges of $1.0 million and $16.3 million, respectively, in connection with workforce reductions related to the Reorganization and Reinvestment Initiatives announced in June 2011. See Note 3 “Restructuring Initiatives” to the Notes to Consolidated Financial Statements in this Form 10-K. The operating statements for the years ended December 31, 2010 and 2009, include pre-tax charges of $4.0 million and $5.2 million, respectively, in connection with certain workforce reductions announced in 2010 and 2009.
|
(5)
|
The Company’s provision for income taxes for the year ended December 31, 2011 includes $52.5 million of tax expense in order to establish a valuation allowance against its U.S. deferred tax assets and $21.6 million related to the recognition of certain prepaid tax expenses on intercompany profits. The reduction of deferred tax assets had a corresponding decrease in working capital and total assets, as well as an increase in long-term liabilities. See Note 12 “Income Taxes” to the Notes to Consolidated Financial Statements in this Form 10-K.
|
(6)
|
In connection with the Global Operations Strategy Initiatives that were announced in 2010, the Company’s operating statements for the years ended December 31, 2011 and 2010 include pre-tax charges of $24.7 million and $14.8 million, respectively, related to these initiatives. See Note 3 “Restructuring Initiatives” to the Notes to Consolidated Financial Statements in this Form 10-K. The Company's operating statement for 2009 includes charges of $6.2 million related to these initiatives.
|
(7)
|
In 2011 and 2010, the Company recognized pre-tax impairment charges of $5.4 million and $7.5 million, respectively, in connection with the write-down of certain trademarks and trade names. Additionally, in 2011, the Company recognized a pre-tax impairment charge of $1.1 million in connection with the write-off of goodwill. For further discussion of charges recognized in 2011, see Note 8 “Goodwill and Intangible Assets” to the Notes to Consolidated Financial Statements in this Form 10-K.
|
(8)
|
In March 2011, the Company completed the sale of three of its buildings located in Carlsbad, California. In connection with this sale, the Company recognized a pre-tax gain of $6.2 million. See Note 7 “Sale of Buildings” to the Notes to Consolidated Financial Statements in this Form 10-K.
|
(9)
|
On June 15, 2009, the Company sold 1.4 million shares of its 7.50% Series B Cumulative Perpetual Convertible Preferred Stock, $0.01 par value (“preferred stock”). As a result, total shareholders’ equity as of December 31, 2009 includes net proceeds of $134.0 million in connection with the issuance of preferred stock. For further discussion, see Note 5 “Preferred Stock” to the Notes to Consolidated Financial Statements in this Form 10-K.
|
|
Years Ended
December 31,
|
|
Growth/(Decline)
|
|||||||||||
|
2013
|
|
2012
|
|
Dollars
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
United States
|
$
|
401.5
|
|
|
$
|
392.1
|
|
|
$
|
9.4
|
|
|
2
|
%
|
Europe
|
121.5
|
|
|
120.2
|
|
|
1.3
|
|
|
1
|
%
|
|||
Japan
|
161.6
|
|
|
157.3
|
|
|
4.3
|
|
|
3
|
%
|
|||
Rest of Asia
|
84.1
|
|
|
75.0
|
|
|
9.1
|
|
|
12
|
%
|
|||
Other foreign countries
|
74.1
|
|
|
89.5
|
|
|
(15.4
|
)
|
|
(17
|
)%
|
|||
|
$
|
842.8
|
|
|
$
|
834.1
|
|
|
$
|
8.7
|
|
|
1
|
%
|
|
2013
|
|
2012
|
||||
Pre-tax charges related to the Cost Reduction Initiatives
|
$
|
(16.6
|
)
|
|
$
|
(32.2
|
)
|
Pre-tax impairment charges
|
—
|
|
|
(21.9
|
)
|
||
Pre-tax charges related to the Reorganization and Reinvestment Initiatives
|
—
|
|
|
(1.0
|
)
|
||
Pre-tax gain on the sale of Top-Flite and Ben Hogan brands
|
—
|
|
|
6.6
|
|
||
Total
|
$
|
(16.6
|
)
|
|
$
|
(48.5
|
)
|
|
Years Ended
December 31,
|
|
Growth/(Decline)
|
|||||||||||
|
2013
|
|
2012
|
|
Dollars
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Woods
|
$
|
256.5
|
|
|
$
|
200.6
|
|
|
$
|
55.9
|
|
|
28
|
%
|
Irons
|
181.8
|
|
|
170.8
|
|
|
11.0
|
|
|
6
|
%
|
|||
Putters
|
89.6
|
|
|
93.3
|
|
|
(3.7
|
)
|
|
(4
|
)%
|
|||
Accessories and other
|
182.8
|
|
|
229.8
|
|
|
(47.0
|
)
|
|
(20
|
)%
|
|||
|
$
|
710.7
|
|
|
$
|
694.5
|
|
|
$
|
16.2
|
|
|
2
|
%
|
|
Years Ended
December 31,
|
|
Growth
|
|||||||||||
|
2013
|
|
2012
|
|
Dollars
|
|
Percent
|
|||||||
Income (loss) before income taxes:
|
|
|
|
|
|
|
|
|||||||
Golf clubs
(1)
|
$
|
27.7
|
|
|
$
|
(59.8
|
)
|
|
$
|
87.5
|
|
|
146
|
%
|
Golf balls
(1)
|
1.6
|
|
|
(15.0
|
)
|
|
16.6
|
|
|
111
|
%
|
|||
Reconciling items
(2)
|
(42.6
|
)
|
|
(43.2
|
)
|
|
0.6
|
|
|
(1
|
)%
|
|||
|
$
|
(13.3
|
)
|
|
$
|
(118.0
|
)
|
|
$
|
104.7
|
|
|
89
|
%
|
|
(1)
|
Included in the Company’s golf clubs and golf balls segments are the following pre-tax charges:
|
•
|
$6.4 million and $7.0 million, respectively, for the year ended December 31, 2013, in connection with the Company's Cost Reduction Initiatives;
|
•
|
$30.4 million and $16.6 million, respectively, for the year ended December 31, 2012, in connection with the Company’s Cost Reduction Initiatives;
|
•
|
$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;
|
(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, 2013, the reconciling items include:
|
•
|
Pre-tax charges of $3.2 million in connection with the Cost Reduction Initiatives; and
|
•
|
Net gains of $5.9 million related to foreign currency hedging contracts offset by foreign currency transaction losses.
|
•
|
Pre-tax charges of $7.1 million in connection with the Cost Reduction Initiatives;
|
•
|
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.
|
|
Years Ended
December 31,
|
|
Growth/(Decline)
|
|||||||||||
|
2012
|
|
2011
|
|
Dollars
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
United States
|
$
|
392.1
|
|
|
$
|
419.4
|
|
|
$
|
(27.3
|
)
|
|
(7
|
)%
|
Europe
|
120.2
|
|
|
133.6
|
|
|
(13.4
|
)
|
|
(10
|
)%
|
|||
Japan
|
157.3
|
|
|
149.8
|
|
|
7.5
|
|
|
5
|
%
|
|||
Rest of Asia
|
75.0
|
|
|
82.7
|
|
|
(7.7
|
)
|
|
(9
|
)%
|
|||
Other foreign countries
|
89.5
|
|
|
101.0
|
|
|
(11.5
|
)
|
|
(11
|
)%
|
|||
|
$
|
834.1
|
|
|
$
|
886.5
|
|
|
$
|
(52.4
|
)
|
|
(6
|
)%
|
|
2012
|
|
2011
|
||||
Pre-tax charges related to the Cost Reduction Initiatives
|
$
|
(32.2
|
)
|
|
$
|
—
|
|
Pre-tax impairment charges
|
(21.9
|
)
|
|
(6.5
|
)
|
||
Pre-tax charges related to the Reorganization and Reinvestment Initiatives
|
(1.0
|
)
|
|
(16.3
|
)
|
||
Pre-tax gain on the sale of Top-Flite and Ben Hogan brands
|
6.6
|
|
|
—
|
|
||
Pre-tax GOS charges
|
—
|
|
|
(24.7
|
)
|
||
Pre-tax gain on the sale of buildings
|
—
|
|
|
6.2
|
|
||
Income tax provision
(1)
|
(4.9
|
)
|
|
(81.6
|
)
|
||
Total charges
|
$
|
(53.4
|
)
|
|
$
|
(122.9
|
)
|
|
(1)
|
The Company’s income tax provision for 2012 and 2011 is affected by a valuation allowance against the Company’s U.S. deferred tax assets and is therefore not directly correlated to the amount of its pretax loss. See Note 12 “Income Taxes” to the Notes to Consolidated Financial Statements included in this Form 10-K.
|
|
Years Ended
December 31,
|
|
Growth/(Decline)
|
|||||||||||
|
2012
|
|
2011
|
|
Dollars
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Woods
|
$
|
200.6
|
|
|
$
|
211.2
|
|
|
$
|
(10.6
|
)
|
|
(5
|
)%
|
Irons
|
170.8
|
|
|
206.8
|
|
|
(36.0
|
)
|
|
(17
|
)%
|
|||
Putters
|
93.3
|
|
|
88.1
|
|
|
5.2
|
|
|
6
|
%
|
|||
Accessories and other
|
229.8
|
|
|
220.0
|
|
|
9.8
|
|
|
4
|
%
|
|||
|
$
|
694.5
|
|
|
$
|
726.1
|
|
|
$
|
(31.6
|
)
|
|
(4
|
)%
|
|
Years Ended
December 31,
|
|
Growth/(Decline)
|
|||||||||||
|
2012
|
|
2011
|
|
Dollars
|
|
Percent
|
|||||||
Loss before income taxes:
|
|
|
|
|
|
|
|
|||||||
Golf clubs
(1)
|
$
|
(59.8
|
)
|
|
$
|
(3.9
|
)
|
|
$
|
(55.9
|
)
|
|
(1433
|
)%
|
Golf balls
(1)
|
(15.0
|
)
|
|
(12.7
|
)
|
|
(2.3
|
)
|
|
(18
|
)%
|
|||
Reconciling items
(2)
|
(43.2
|
)
|
|
(73.7
|
)
|
|
30.5
|
|
|
41
|
%
|
|||
|
$
|
(118.0
|
)
|
|
$
|
(90.3
|
)
|
|
$
|
(27.7
|
)
|
|
(31
|
)%
|
|
(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.
|
(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.
|
•
|
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.
|
|
Payments Due By Period
|
||||||||||||||||||
|
Total
|
|
Less than
1 Year
|
|
1-3 Years
|
|
4-5 Years
|
|
More than
5 Years
|
||||||||||
Convertible notes
(1)
|
$
|
112.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
112.5
|
|
Interest on convertible notes
(1)
|
23.7
|
|
|
4.2
|
|
|
8.4
|
|
|
8.4
|
|
|
2.7
|
|
|||||
Capital Leases
(2)
|
1.7
|
|
|
0.9
|
|
|
0.7
|
|
|
0.1
|
|
|
—
|
|
|||||
Operating leases
(3)
|
33.0
|
|
|
13.1
|
|
|
13.7
|
|
|
5.0
|
|
|
1.2
|
|
|||||
Unconditional purchase obligations
(4)
|
58.5
|
|
|
43.3
|
|
|
14.1
|
|
|
1.1
|
|
|
—
|
|
|||||
Uncertain tax contingencies
(5)
|
6.5
|
|
|
2.6
|
|
|
0.7
|
|
|
1.0
|
|
|
2.2
|
|
|||||
Employee incentive compensation
(6)
|
11.0
|
|
|
11.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other long term liabilities
(7)
|
2.5
|
|
|
—
|
|
|
2.5
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
249.4
|
|
|
$
|
75.1
|
|
|
$
|
40.1
|
|
|
$
|
15.6
|
|
|
$
|
118.6
|
|
|
(1)
|
In August 2012, the Company issued $112.5 million of convertible notes due August 15, 2019. Interest of 3.75% per year on the principal amount is payable semiannually in arrears on February 15 and August 15 of each year.
|
(2)
|
Amounts represent future minimum lease payments. Capital lease obligations are included in other long-term liabilities in the accompanying consolidated balance sheets.
|
(3)
|
The Company leases certain warehouse, distribution and office facilities, vehicles and office equipment under operating leases. The amounts presented in this line item represent commitments for minimum lease payments under non-cancelable operating leases.
|
(4)
|
During the normal course of its business, the Company enters into agreements to purchase goods and services, including purchase commitments for production materials, endorsement agreements with professional golfers and other endorsers, employment and consulting agreements, and intellectual property licensing agreements pursuant to which the Company is required to pay royalty fees. It is not possible to determine the amounts the Company will ultimately be required to pay under these agreements as they are subject to many variables including performance-based bonuses, severance arrangements, the Company’s sales levels, and reductions in payment obligations if designated minimum performance criteria are not achieved. The amounts listed approximate minimum purchase obligations, base compensation, and guaranteed minimum royalty payments the Company is obligated to pay under these agreements. The actual amounts paid under some of these agreements may be higher or lower than the amounts included. In the aggregate, the actual amount paid under these obligations is likely to be higher than the amounts listed as a result of the variable nature of these obligations. In addition, the Company also enters into unconditional purchase obligations with various vendors and suppliers of goods and services in the normal course of operations through purchase orders or other documentation or that are undocumented except for an invoice. Such unconditional purchase obligations are generally outstanding for periods less than a year and are settled by cash payments upon delivery of goods and services and are not reflected in this line item.
|
(5)
|
Amount represents the current and non-current portions of uncertain income tax positions as recorded on the Company's consolidated balance sheet as of December 31, 2013. Amount excludes uncertain income tax positions that the Company would be able to offset against deferred taxes. For further discussion see Note 12 “Income Taxes” to the Notes to Consolidated Financial Statements in this Form 10-K.
|
(6)
|
Amount represents accrued employee incentive compensation expense earned in 2013, and paid in February 2014.
|
(7)
|
Consists primarily of cash-settled phantom stock units and stock appreciation rights (see Note 15 "Share-Based Compensation" to the Notes to Consolidated Financial Statements in this Form 10-K).
|
Plan Category
|
Number of Shares
to be Issued Upon
Exercise of
Outstanding Options and
Vesting of RSUs
(4)(6)
|
|
Weighted Average
Exercise Price of
Outstanding Options
(5)
|
|
Number of Shares
Remaining
Available for
Future Issuance
|
||||
|
(In thousands, except dollar amounts)
|
||||||||
Equity Compensation Plans Approved by Shareholders
(1)
|
5,138
(3)
|
|
|
$
|
8.95
|
|
|
11,516
|
|
Equity Compensation Plans Not Approved by Shareholders
(2)
|
234
(2)
|
|
|
$
|
17.92
|
|
|
—
|
|
Total
|
5,372
|
|
|
$
|
9.42
|
|
|
11,516
|
|
|
(1)
|
Consists of the following plans: 1996 Stock Option Plan, 2001 Non-Employee Directors Stock Incentive Plan, 2004 Incentive Plan and 2013 Non-Employee Directors Incentive Plan. No shares are available for grant under the 1996 Stock Option Plan, and all shares outstanding at December 31, 2013 expired in January 2014. The 2001 Non-Employee Directors Stock Incentive Plan expired on December 31, 2011. The shares available for grant under this plan are only available to satisfy incremental dividend equivalent rights for outstanding awards. The 2004 Incentive Plan permits the award of stock options, restricted stock, performance units and various other stock-based awards. The 2013 Non-Employee Directors Incentive Plan permits the award of stock options, restricted stock and restricted stock units.
|
(2)
|
Consists of shares in underlying stock options issuable from the 1995 Employee Stock Incentive Plan (the “1995 Plan”). In connection with shareholder approval of the 2004 Incentive Plan, the Company agreed that no further grants would be made
|
(3)
|
Includes 60,489 shares underlying RSUs issuable under the 2013 Non-Employee Directors Incentive Plan; 4,072,382 and 761,400 shares underlying stock options and RSUs, respectively, issuable from the 2004 Incentive Plan; 86,000 and 58,631 shares underlying stock options and RSUs, respectively, issuable from the 2001 Non-Employee Directors Stock Incentive Plan; and 100,000 shares underlying stock options issuable from the 1996 Stock Option Plan. The shares issuable under the 1996 Stock Option Plan expired in January 2014.
|
(4)
|
Includes unvested shares underlying stock dividend equivalent rights on restricted stock units.
|
(5)
|
Does not include shares underlying RSUs, which do not have an exercise price.
|
(6)
|
Outstanding shares underlying restricted stock units granted under the 2001 Directors Plan, 2004 Plan and 2013 Directors Plan include accrued incremental dividend equivalent rights.
|
2.1
|
|
|
Asset Purchase Agreement among American Sports Licensing, Inc. and Dick’s Sporting Goods, Inc., collectively the buyer, and Callaway Golf Company as the seller dated as of March 30, 2012, incorporated herein by this reference to Exhibit 2.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, as filed with the Commission on April 27, 2012 (file no. 1-10962).
|
|
|
|
|
3.1
|
|
|
Certificate of Incorporation, incorporated herein by this reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, as filed with the Commission on July 1, 1999 (file no. 1-10962).
|
|
|
|
|
3.2
|
|
|
Fifth Amended and Restated Bylaws, as amended and restated as of November 18, 2008, incorporated herein by this reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, as filed with the Commission on November 21, 2008 (file no. 1-10962).
|
|
|
|
|
3.3
|
|
|
Amended and Restated Certificate of Designation for 7.50% Series B Cumulative Perpetual Convertible Preferred Stock, incorporated herein by this reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, as filed with the Commission on March 5, 2010 (file no. 1-10962).
|
|
|
|
|
4.1
|
|
|
Form of Specimen Stock Certificate for Common Stock, incorporated herein by this reference to Exhibit 4.1 to the Company's Current Report on Form 8-K, as filed with the Commission on June 15, 2009 (file no. 1-10962).
|
|
|
|
|
4.2
|
|
|
Form of Specimen Stock Certificate for 7.50% Series B Cumulative Perpetual Convertible Preferred Stock, incorporated herein by this reference to Exhibit 4.2 to the Company's Current Report on Form 8-K, as filed with the Commission on June 15, 2009 (file no. 1-10962).
|
|
|
|
|
4.3
|
|
|
Indenture, dated as of August 29, 2012 between Callaway Golf Company and Wilmington Trust, National Association, as Trustee, incorporated herein by this reference to Exhibit 4.1 to the Company's Current Report on Form 8-K, as filed with the Commission on September 4, 2012 (File No. 1-10962).
|
|
|
|
|
4.4
|
|
|
Global Note due 2019, incorporated herein by this reference to Exhibit 4.4 to the Company's Current Report on Form 8-K, as filed with the Commission on October 28, 2013 (File No. 1-10962).
|
|
|
Executive Compensation Contracts/Plans
|
|
10.1
|
|
|
First Amendment to Officer Employment Agreement, effective as of March 5, 2013, by and between the Company and Oliver G. Brewer, III, incorporated herein by this reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the Commission on March 5, 2013 (file no. 1-10962).
|
|
|
|
|
10.2
|
|
|
Officer Employment Agreement, effective as of May 1, 2012, by and between Callaway Golf Company and Bradley J. Holiday, incorporated herein by this reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the Commission on May 7, 2012 (file no. 1-10962).
|
|
|
|
|
10.3
|
|
|
Officer Employment Agreement, effective as of April 25, 2012, by and between Callaway Golf Company and Mark Leposky, incorporated herein by this reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, as filed with the Commission on August 2, 2012 (file no. 1-10962).
|
|
|
|
|
10.4
|
|
|
Officer Employment Agreement, effective as of June 1, 2012, by and between Callaway Golf Company and Brian Lynch, incorporated herein by this reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, as filed with the Commission on August 2, 2012 (file no. 1-10962).
|
|
|
|
|
10.5
|
|
|
Officer Employment Agreement, effective as of May 1, 2012, by and between Callaway Golf Company,and Alan Hocknell, Ph.D. †
|
|
|
|
|
10.6
|
|
|
Director's Service Agreement, effective as of December 1, 2002, as amended, by and between Callaway Golf Company and Neil Howie, incorporated herein by this reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, as filed with the Commission on August 2, 2012 (file no. 1-10962).
|
|
|
|
|
10.7
|
|
|
Executive Entrustment Agreement, effective as of March 1, 2008, as amended, by and between Callaway Golf Company and Alex Boezeman, incorporated herein by this reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, as filed with the Commission on August 2, 2012 (file no. 1-10962).
|
|
|
|
|
10.8
|
|
|
Contract of Employment, effective as of October 19, 2009, as amended, by and between Callaway Golf Company and Leighton Richards, incorporated herein by this reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, as filed with the Commission on August 2, 2012 (file no. 1-10962).
|
|
|
|
|
10.9
|
|
|
Form of Exchange Agreement, incorporated herein by this reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the Commission on August 15, 2013 (file No. 1-10962).
|
|
|
|
|
10.10
|
|
|
Form of Purchase Agreement, incorporated herein by this reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, as filed with the Commission on August 24, 2012 (File No. 1-10962).
|
|
|
|
|
10.11
|
|
|
Callaway Golf Company Amended and Restated 2004 Incentive Plan (effective May 19, 2009), incorporated herein by this reference to Appendix A to the Company's Definitive Proxy Statement on Schedule 14A, as filed with the Commission on April 5, 2013 (file no. 1-10962).
|
|
|
|
|
10.12
|
|
|
Callaway Golf Company 2013 Non-Employee Directors Stock Incentive Plan (effective May 15, 2013), incorporated herein by this reference to Appendix B to the Company's Definitive Proxy Statement on Schedule 14A, as filed with the Commission on April 5, 2013 (file no. 1-10962).
|
|
|
|
|
10.13
|
|
|
Form of Notice of Grant of Restricted Stock Agreement for Non-Employee Directors, incorporated herein by this reference to Exhibit 10.3 the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, as filed with the Commission on July 29, 2013 (file no. 1-10962).
|
|
|
|
|
10.14
|
|
|
Form of Non-Employee Director Phantom Stock Unit Grant Agreement, incorporated herein by this reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, as filed with the Commission on August 2, 2012 (file no. 1-10962).
|
|
|
|
|
10.15
|
|
|
Form of Notice of Grant and Agreement for Stock Appreciation Right, incorporated herein by this reference to Exhibit 10.35 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the Commission on March 2, 2012 (file no. 1-10962).
|
|
|
|
10.16
|
|
|
Notice of Grant and Agreement for Stock Appreciation Right, by and between Callaway Golf Company and Anthony S. Thornley effective September 1, 2011, incorporated herein by this reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the Commission on September 2, 2011 (file no. 1-10962).
|
|
|
|
|
10.17
|
|
|
Form of Restricted Stock Grant, incorporated herein by this reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the Commission on February 26, 2010 (file no. 1-10962).
|
|
|
|
|
10.18
|
|
|
Form of Phantom Stock Units Agreement, incorporated herein by this reference to Exhibit 10.57 to the Company's Current Report on Form 8-K, as filed with the Commission on December 30, 2009 (file no. 1-10962).
|
|
|
|
|
10.19
|
|
|
Form of Notice of Grant of Stock Option and Option Agreement, incorporated herein by this reference to Exhibit 10.61 to the Company's Current Report on Form 8-K, as filed with the Commission on January 22, 2007 (file no. 1-10962).
|
|
|
|
|
10.20
|
|
|
Form of Restricted Stock Unit Grant, incorporated herein by this reference to Exhibit 10.62 to the Company's Current Report on Form 8-K, as filed with the Commission on January 22, 2007 (file no. 1-10962).
|
|
|
|
|
10.21
|
|
|
Form of Performance Unit Grant, incorporated herein by this reference to Exhibit 10.63 to the Company's Current Report on Form 8-K, as filed with the Commission on January 22, 2007 (file no. 1-10962).
|
|
|
|
|
10.22
|
|
|
Form of Notice of Grant of Stock Option and Option Agreement for Officers, incorporated herein by this reference to Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the Commission on March 10, 2005 (file no. 1-10962).
|
|
|
|
|
10.23
|
|
|
Callaway Golf Company 1995 Employee Stock Incentive Plan (As Amended and Restated November 7, 2001), incorporated herein by this reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, as filed with the Commission on March 17, 2003 (file no. 1-10962).
|
|
|
|
|
10.24
|
|
|
Callaway Golf Company 2001 Non-Employee Directors Stock Incentive Plan (Amended and Restated Effective as of June 6, 2006), incorporated herein by this reference to Exhibit 10.57 to the Company's Current Report on Form 8-K, as filed with the Commission on June 9, 2006 (file no. 1-10962).
|
|
|
|
|
10.25
|
|
|
Callaway Golf Company Amended and Restated 2004 Incentive Plan (effective May 19, 2009), incorporated herein by this reference to Exhibit A to the Company's Definitive Proxy Statement on Schedule 14A, as filed with the Commission on April 3, 2009 (file no. 1-10962).
|
|
|
|
|
10.26
|
|
|
Annual Incentive Plan Guidelines, incorporated herein by this reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the Commission on March 28, 2012 (file no. 1-10962).
|
|
|
|
|
10.27
|
|
|
Indemnification Agreement, dated January 25, 2010, between the Company and Adebayo O. Ogunlesi incorporated herein by reference to Exhibit 10.35 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the Commission on February 26, 2010 (file no. 1-10962).
|
|
|
|
|
10.28
|
|
|
Indemnification Agreement, dated March 4, 2009, between the Company and John F. Lundgren, incorporated herein by this reference to Exhibit 10.51 to the Company's Current Report on Form 8-K, as filed with the Commission on March 10, 2009 (file no. 1-10962).
|
|
|
|
|
10.29
|
|
|
Indemnification Agreement, dated April 7, 2004, between the Company and Anthony S. Thornley, incorporated herein by this reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the Commission on March 10, 2005 (file no. 1-10962).
|
|
|
|
|
10.30
|
|
|
Indemnification Agreement, dated as of April 21, 2003, between the Company and Samuel H. Armacost, incorporated herein by this reference to Exhibit 10.57 the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, as filed with the Commission on August 7, 2003 (file no. 1-10962).
|
|
|
|
|
10.31
|
|
|
Indemnification Agreement, dated as of April 21, 2003, between the Company and John C. Cushman, III, incorporated herein by this reference to Exhibit 10.58 the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, as filed with the Commission on August 7, 2003 (file no. 1-10962).
|
|
|
|
10.32
|
|
|
Indemnification Agreement, effective June 7, 2001, between the Company and Ronald S. Beard, incorporated herein by this reference to Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, as filed with the Commission on November 14, 2001 (file no. 1-10962).
|
|
|
|
|
10.33
|
|
|
Indemnification Agreement, dated July 1, 1999, between the Company and Yotaro Kobayashi, incorporated herein by this reference to Exhibit 10.30 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, as filed with the Commission on August 16, 1999 (file no. 1-10962).
|
|
|
|
|
10.34
|
|
|
Indemnification Agreement, dated July 1, 1999, between the Company and Richard L. Rosenfield, incorporated herein by this reference to Exhibit 10.32 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, as filed with the Commission on August 16, 1999 (file no. 1-10962).
|
|
|
Other Contracts
|
|
10.35
|
|
|
Loan and Security Agreement, dated as of June 30, 2011, among Callaway Golf Company, Callaway Golf Sales Company, Callaway Golf Ball Operations, Inc., Callaway Golf Canada Ltd., Callaway Golf Interactive, Inc., Callaway Golf International Sales Company, Bank of America, N.A., as administrative agent and collateral agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger and sole bookrunner and certain financial institutions as lenders, incorporated herein by this reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the Commission on July 6, 2011 (file no. 1-10962).
|
|
|
|
|
10.36
|
|
|
Amended and Restated Loan and Security Agreement, dated as of July 22, 2011, among Callaway Golf Company, Callaway Golf Sales Company, Callaway Golf Ball Operations, Inc., Callaway Golf Canada Ltd., Callaway Golf Interactive, Inc., Callaway Golf International Sales Company, Bank of America, N.A., as administrative agent and collateral agent, UBS Securities LLC, as syndication agent, Wells Fargo Capital Finance, LLC, as documentation agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger and sole bookrunner and certain financial institutions as lenders, incorporated herein by this reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the Commission on July 27, 2011 (file no. 1-10962).
|
|
|
|
|
10.37
|
|
|
Second Amended and Restated Loan and Security Agreement, dated as of December 22, 2011, among Callaway Golf Company, Callaway Golf Sales Company, Callaway Golf Ball Operations, Inc., Callaway Golf Canada Ltd., Callaway Golf Europe Ltd., Callaway Golf Interactive, Inc., Callaway Golf International Sales Company, Callaway Golf European Holding Company Limited, Bank of America, N.A., as administrative agent and collateral agent, UBS Securities LLC, as syndication agent, Wells Fargo Capital Finance, LLC, as documentation agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger and sole bookrunner and certain financial institutions as lenders, incorporated herein by this reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the Commission on December 28, 2011 (file no. 1-10962).
|
|
|
|
|
10.38
|
|
|
First Amendment to Second Amended and Restated Loan and Security Agreement, dated as of December 22, 2011, among Callaway Golf Company, Callaway Golf Sales Company, Callaway Golf Ball Operations, Inc., Callaway Golf Canada Ltd., Callaway Golf Europe Ltd., Callaway Golf Interactive, Inc., Callaway Golf International Sales Company, Callaway Golf European Holding Company Limited, Bank of America, N.A., as administrative agent and collateral agent, UBS Securities LLC, as syndication agent, Wells Fargo Capital Finance, LLC, as documentation agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger and sole bookrunner and certain financial institutions as lenders, incorporated herein by this reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, as filed with the Commission on August 2, 2012 (file no. 1-10962).
|
|
|
|
|
10.39
|
|
|
Second Amendment to Second Amended and Restated Loan and Security Agreement, dated as of September 5, 2013, among Callaway Golf Company, Callaway Golf Sales Company, Callaway Golf Ball Operations, Inc., Callaway Golf Canada Ltd., Callaway Golf Europe Ltd., Bank of America, N.A., as administrative agent and collateral agent, UBS Securities LLC, as syndication agent, Wells Fargo Capital Finance, LLC, as documentation agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger and sole bookrunner and certain financial institutions as lenders, incorporated herein by this reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, as filed with the Commission on October 28, 2013 (file no. 1-10962).
|
|
|
|
|
21.1
|
|
|
List of Subsidiaries.†
|
23.1
|
|
|
Consent of Deloitte & Touche LLP.†
|
24.1
|
|
|
Form of Limited Power of Attorney.†
|
|
|
|
CALLAWAY GOLF COMPANY
|
|
|
|
By:
|
/S/ OLIVER G. BREWER III
|
|
|
|
Oliver G. Brewer III
|
|
|
|
President and Chief Executive Officer
|
Signature
|
|
Title
|
Dated as of
|
Principal Executive Officer:
|
|
|
|
|
|
|
|
/S/ OLIVER G. BREWER III
|
|
President and Chief Executive Officer, Director
|
February 27, 2014
|
Oliver G. Brewer III
|
|
|
|
|
|
|
|
Principal Financial Officer:
|
|
|
|
|
|
|
|
/S/ BRADLEY J. HOLIDAY
|
|
Senior Executive Vice President and Chief Financial Officer
|
February 27, 2014
|
Bradley J. Holiday
|
|
|
|
|
|
|
|
Principal Accounting Officer:
|
|
|
|
|
|
|
|
/s/ JENNIFER THOMAS
|
|
Vice President and Chief Accounting Officer
|
February 27, 2014
|
Jennifer Thomas
|
|
|
|
|
|
|
|
Directors:
|
|
|
|
|
|
|
|
*
|
|
Director
|
February 27, 2014
|
Samuel H. Armacost
|
|
|
|
|
|
|
|
*
|
|
Chairman of the Board
|
February 27, 2014
|
Ronald S. Beard
|
|
|
|
|
|
|
|
*
|
|
Director
|
February 27, 2014
|
John C. Cushman, III
|
|
|
|
|
|
|
|
*
|
|
Director
|
February 27, 2014
|
Richard L. Rosenfield
|
|
|
|
|
|
|
|
*
|
|
Director
|
February 27, 2014
|
John F. Lundgren
|
|
|
|
|
|
|
|
*
|
|
Director
|
February 27, 2014
|
Adebayo O. Ogunlesi
|
|
|
|
*By:
|
/S/ BRADLEY J. HOLIDAY
|
|
|
Bradley J. Holiday
|
|
|
Attorney-in-fact
|
|
|
December 31,
|
||||||
|
2013
|
|
2012
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
36,793
|
|
|
$
|
52,003
|
|
Accounts receivable, net
|
92,203
|
|
|
91,072
|
|
||
Inventories
|
263,492
|
|
|
211,734
|
|
||
Deferred taxes, net
|
6,419
|
|
|
4,170
|
|
||
Income taxes receivable
|
228
|
|
|
1,810
|
|
||
Other current assets
|
22,468
|
|
|
23,811
|
|
||
Assets held for sale
|
—
|
|
|
2,396
|
|
||
Total current assets
|
421,603
|
|
|
386,996
|
|
||
Property, plant and equipment, net
|
71,341
|
|
|
89,093
|
|
||
Intangible assets, net
|
88,901
|
|
|
89,189
|
|
||
Goodwill
|
29,212
|
|
|
29,034
|
|
||
Deferred taxes, net
|
2,299
|
|
|
1,910
|
|
||
Other assets
|
50,507
|
|
|
41,414
|
|
||
Total assets
|
$
|
663,863
|
|
|
$
|
637,636
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
157,120
|
|
|
$
|
129,021
|
|
Accrued employee compensation and benefits
|
31,585
|
|
|
20,649
|
|
||
Asset-based credit facility
|
25,660
|
|
|
—
|
|
||
Accrued warranty expense
|
6,406
|
|
|
7,539
|
|
||
Income tax liability
|
5,425
|
|
|
3,430
|
|
||
Deferred taxes, net
|
—
|
|
|
927
|
|
||
Total current liabilities
|
226,196
|
|
|
161,566
|
|
||
Long-term liabilities:
|
|
|
|
||||
Income taxes payable
|
4,387
|
|
|
6,565
|
|
||
Deferred taxes, net
|
35,271
|
|
|
33,533
|
|
||
Convertible notes, net (Note 4)
|
107,835
|
|
|
107,133
|
|
||
Long-term incentive compensation and other
|
5,555
|
|
|
7,131
|
|
||
Commitments and contingencies (Note 13)
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, $.01 par value, 3,000,000 shares authorized, 0 and 417,639 shares issued and outstanding at December 31, 2013 and 2012, respectively
|
—
|
|
|
4
|
|
||
Common stock, $.01 par value, 240,000,000 shares authorized, 78,314,902 shares and 72,264,020 shares issued at December 31, 2013 and 2012, respectively
|
783
|
|
|
723
|
|
||
Additional paid-in capital
|
205,712
|
|
|
204,510
|
|
||
Retained earnings
|
77,038
|
|
|
113,831
|
|
||
Accumulated other comprehensive income
|
12,177
|
|
|
14,770
|
|
||
Less: Common stock held in treasury, at cost, 967,089 shares and 1,267,436 shares at December 31, 2013 and 2012, respectively
|
(11,091
|
)
|
|
(14,848
|
)
|
||
Total Callaway Golf Company shareholders’ equity
|
284,619
|
|
|
318,990
|
|
||
Non-controlling interest in consolidated entity (Note 10)
|
—
|
|
|
2,718
|
|
||
Total shareholders’ equity
|
284,619
|
|
|
321,708
|
|
||
Total liabilities and shareholders’ equity
|
$
|
663,863
|
|
|
$
|
637,636
|
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Net sales
|
$
|
842,801
|
|
|
$
|
834,065
|
|
|
$
|
886,528
|
|
Cost of sales
|
528,043
|
|
|
585,897
|
|
|
575,226
|
|
|||
Gross profit
|
314,758
|
|
|
248,168
|
|
|
311,302
|
|
|||
Selling expenses
|
226,496
|
|
|
268,088
|
|
|
265,325
|
|
|||
General and administrative expenses
|
68,087
|
|
|
66,773
|
|
|
92,756
|
|
|||
Research and development expenses
|
30,937
|
|
|
29,542
|
|
|
34,309
|
|
|||
Total operating expenses
|
325,520
|
|
|
364,403
|
|
|
392,390
|
|
|||
Loss from operations
|
(10,762
|
)
|
|
(116,235
|
)
|
|
(81,088
|
)
|
|||
Interest income
|
558
|
|
|
550
|
|
|
546
|
|
|||
Interest expense
|
(9,123
|
)
|
|
(5,513
|
)
|
|
(1,618
|
)
|
|||
Other income (expense), net
|
6,005
|
|
|
3,152
|
|
|
(8,101
|
)
|
|||
Loss before income taxes
|
(13,322
|
)
|
|
(118,046
|
)
|
|
(90,261
|
)
|
|||
Income tax provision
|
5,599
|
|
|
4,900
|
|
|
81,559
|
|
|||
Net loss
|
(18,921
|
)
|
|
(122,946
|
)
|
|
(171,820
|
)
|
|||
Dividends on convertible preferred stock
|
3,332
|
|
|
8,447
|
|
|
10,500
|
|
|||
Net loss allocable to common shareholders
|
$
|
(22,253
|
)
|
|
$
|
(131,393
|
)
|
|
$
|
(182,320
|
)
|
Loss per common share:
|
|
|
|
|
|
||||||
Basic
|
$
|
(0.31
|
)
|
|
$
|
(1.96
|
)
|
|
$
|
(2.82
|
)
|
Diluted
|
$
|
(0.31
|
)
|
|
$
|
(1.96
|
)
|
|
$
|
(2.82
|
)
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
||||||
Basic
|
72,809
|
|
|
67,061
|
|
|
64,601
|
|
|||
Diluted
|
72,809
|
|
|
67,061
|
|
|
64,601
|
|
|
Year Ended December 31,
|
||||||||||
2013
|
|
2012
|
|
2011
|
|||||||
Net loss
|
$
|
(18,921
|
)
|
|
$
|
(122,946
|
)
|
|
$
|
(171,820
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
||||||
Foreign currency translation adjustments
|
(2,593
|
)
|
|
699
|
|
|
507
|
|
|||
Comprehensive loss
|
$
|
(21,514
|
)
|
|
$
|
(122,247
|
)
|
|
$
|
(171,313
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net loss
|
$
|
(18,921
|
)
|
|
$
|
(122,946
|
)
|
|
$
|
(171,820
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
25,543
|
|
|
34,411
|
|
|
38,636
|
|
|||
Impairment charges
|
—
|
|
|
21,933
|
|
|
6,533
|
|
|||
Deferred taxes
|
(2,309
|
)
|
|
(1,925
|
)
|
|
55,930
|
|
|||
Non-cash share-based compensation
|
3,533
|
|
|
3,142
|
|
|
9,570
|
|
|||
Loss/(gain) on disposal of long-lived assets and deferred gain amortization
|
2,242
|
|
|
(1,261
|
)
|
|
(7,491
|
)
|
|||
Gain on sale of intangible assets
|
—
|
|
|
(6,602
|
)
|
|
—
|
|
|||
Discount amortization on convertible notes
|
702
|
|
|
235
|
|
|
—
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable, net
|
(6,690
|
)
|
|
23,701
|
|
|
28,100
|
|
|||
Inventories
|
(60,966
|
)
|
|
20,216
|
|
|
36,460
|
|
|||
Other assets
|
(190
|
)
|
|
1,044
|
|
|
20,599
|
|
|||
Accounts payable and accrued expenses
|
34,663
|
|
|
1,042
|
|
|
(12,613
|
)
|
|||
Accrued employee compensation and benefits
|
11,523
|
|
|
(4,057
|
)
|
|
(4,187
|
)
|
|||
Income taxes receivable and payable
|
2,761
|
|
|
2,563
|
|
|
7,653
|
|
|||
Accrued warranty expense
|
(1,133
|
)
|
|
(601
|
)
|
|
(287
|
)
|
|||
Other liabilities
|
293
|
|
|
297
|
|
|
3,015
|
|
|||
Net cash (used in) provided by operating activities
|
(8,949
|
)
|
|
(28,808
|
)
|
|
10,098
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Capital expenditures
|
(13,038
|
)
|
|
(18,403
|
)
|
|
(28,931
|
)
|
|||
Proceeds from sale of intangible assets
|
—
|
|
|
26,861
|
|
|
—
|
|
|||
Proceeds from sale of property, plant and equipment
|
4,148
|
|
|
355
|
|
|
19,371
|
|
|||
Investment in golf-related ventures
|
(13,637
|
)
|
|
(3,268
|
)
|
|
—
|
|
|||
Net cash (used in) provided by investing activities
|
(22,527
|
)
|
|
5,545
|
|
|
(9,560
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Proceeds from asset-based credit facility
|
25,660
|
|
|
—
|
|
|
—
|
|
|||
Proceeds from issuance of convertible notes
|
—
|
|
|
46,819
|
|
|
—
|
|
|||
Debt issuance costs
|
—
|
|
|
(3,534
|
)
|
|
(2,467
|
)
|
|||
Issuance of common stock
|
—
|
|
|
—
|
|
|
2,195
|
|
|||
Exercise of stock options
|
1,652
|
|
|
19
|
|
|
—
|
|
|||
Equity issuance costs
|
(341
|
)
|
|
—
|
|
|
—
|
|
|||
Dividends paid, net
|
(5,599
|
)
|
|
(11,019
|
)
|
|
(13,093
|
)
|
|||
Other financing activities
|
(32
|
)
|
|
(159
|
)
|
|
80
|
|
|||
Net cash provided by (used in) financing activities
|
21,340
|
|
|
32,126
|
|
|
(13,285
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
(5,074
|
)
|
|
117
|
|
|
727
|
|
|||
Net (decrease) increase in cash and cash equivalents
|
(15,210
|
)
|
|
8,980
|
|
|
(12,020
|
)
|
|||
Cash and cash equivalents at beginning of year
|
52,003
|
|
|
43,023
|
|
|
55,043
|
|
|||
Cash and cash equivalents at end of year
|
$
|
36,793
|
|
|
$
|
52,003
|
|
|
$
|
43,023
|
|
Supplemental disclosures:
|
|
|
|
|
|
||||||
Cash paid for interest and fees
|
$
|
(6,741
|
)
|
|
$
|
(7,544
|
)
|
|
$
|
(3,744
|
)
|
Cash (paid) received for income taxes, net
|
$
|
(4,986
|
)
|
|
$
|
(4,234
|
)
|
|
$
|
3,473
|
|
Noncash investing and financing activities:
|
|
|
|
|
|
||||||
Dividends payable
|
$
|
—
|
|
|
$
|
131
|
|
|
$
|
438
|
|
Issuance of common stock in exchange for preferred stock
|
$
|
42,278
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Issuance of convertible notes in exchange for preferred stock
|
$
|
—
|
|
|
$
|
60,078
|
|
|
$
|
—
|
|
Issuance of treasury stock from the settlement of compensatory stock awards
|
$
|
1,649
|
|
|
$
|
3,735
|
|
|
$
|
5,026
|
|
Acquisition of treasury stock for minimum statutory withholding taxes
|
$
|
(364
|
)
|
|
$
|
(783
|
)
|
|
$
|
(1,587
|
)
|
Accrued capital expenditures at period end
|
$
|
1,467
|
|
|
$
|
92
|
|
|
$
|
1,888
|
|
|
Callaway Golf Shareholders
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
|
Preferred Stock
|
|
Common Stock
|
|
Additional Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income
|
|
Grantor
Stock Trust
|
|
Treasury Stock
|
|
Non-controlling
Interest
|
|
Total
|
|||||||||||||||||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|||||||||||||||||||||||||||||||||
Balance, December 31, 2010
|
1,400
|
|
|
$
|
14
|
|
|
66,317
|
|
|
$
|
663
|
|
|
$
|
264,235
|
|
|
$
|
432,977
|
|
|
|
$
|
13,564
|
|
|
|
$
|
(2,351
|
)
|
|
(1,911
|
)
|
|
$
|
(24,835
|
)
|
|
$
|
2,612
|
|
|
$
|
686,879
|
|
Tax deficit from exercise of stock options and compensatory stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(83
|
)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(83
|
)
|
|||||||||
Acquisition of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(227
|
)
|
|
(1,587
|
)
|
|
—
|
|
|
(1,587
|
)
|
|||||||||
Compensatory stock and stock options
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
2,889
|
|
|
—
|
|
|
|
—
|
|
|
|
1,655
|
|
|
394
|
|
|
5,026
|
|
|
—
|
|
|
9,570
|
|
|||||||||
Employee stock purchase plan
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,035
|
)
|
|
—
|
|
|
|
—
|
|
|
|
634
|
|
|
290
|
|
|
3,596
|
|
|
—
|
|
|
2,195
|
|
|||||||||
Stock dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
123
|
|
|
(123
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,093
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,093
|
)
|
|||||||||
Adjustment of grantor stock trust shares to market
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(62
|
)
|
|
—
|
|
|
|
—
|
|
|
|
62
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
Equity adjustment from foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
507
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
507
|
|
|||||||||
Change in non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(341
|
)
|
|
(341
|
)
|
|||||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(171,820
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
587
|
|
|
(171,233
|
)
|
|||||||||
Balance, December 31, 2011
|
1,400
|
|
|
$
|
14
|
|
|
66,341
|
|
|
$
|
663
|
|
|
$
|
265,067
|
|
|
$
|
247,941
|
|
|
|
$
|
14,071
|
|
|
|
$
|
—
|
|
|
(1,454
|
)
|
|
$
|
(17,800
|
)
|
|
$
|
2,858
|
|
|
$
|
512,814
|
|
Preferred stock to convertible note exchange
|
(632
|
)
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
(60,072
|
)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(60,078
|
)
|
|||||||||
Preferred stock to common stock exchange
|
(350
|
)
|
|
(4
|
)
|
|
5,867
|
|
|
59
|
|
|
(55
|
)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
Acquisition of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(122
|
)
|
|
(783
|
)
|
|
—
|
|
|
(783
|
)
|
|||||||||
Issuance of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,716
|
)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
309
|
|
|
3,735
|
|
|
—
|
|
|
19
|
|
|||||||||
Compensatory stock and stock options
|
—
|
|
|
—
|
|
|
56
|
|
|
1
|
|
|
3,141
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,142
|
|
|||||||||
Stock dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
145
|
|
|
(145
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,019
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,019
|
)
|
|||||||||
Equity adjustment from foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
699
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
699
|
|
|||||||||
Change in non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(399
|
)
|
|
(399
|
)
|
|||||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(122,946
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
259
|
|
|
(122,687
|
)
|
|||||||||
Balance, December 31, 2012
|
418
|
|
|
$
|
4
|
|
|
72,264
|
|
|
$
|
723
|
|
|
$
|
204,510
|
|
|
$
|
113,831
|
|
|
|
$
|
14,770
|
|
|
|
$
|
—
|
|
|
(1,267
|
)
|
|
$
|
(14,848
|
)
|
|
$
|
2,718
|
|
|
$
|
321,708
|
|
Exercise of stock options
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(820
|
)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
216
|
|
|
2,472
|
|
|
—
|
|
|
1,652
|
|
|||||||||
Tax deficit from exercise of stock options and
compensatory stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|||||||||
Preferred stock to common stock exchange
|
(417
|
)
|
|
(4
|
)
|
|
5,920
|
|
|
59
|
|
|
(55
|
)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
Redemption of preferred stock
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30
|
)
|
|||||||||
Equity issuance costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(341
|
)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(341
|
)
|
|||||||||
Acquisition of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(56
|
)
|
|
(364
|
)
|
|
—
|
|
|
(364
|
)
|
|||||||||
Issuance of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,649
|
)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
140
|
|
|
1,649
|
|
|
—
|
|
|
—
|
|
|||||||||
Compensatory stock and stock options
|
—
|
|
|
—
|
|
|
56
|
|
|
—
|
|
|
3,533
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,533
|
|
|||||||||
Stock dividends
|
—
|
|
|
—
|
|
|
75
|
|
|
1
|
|
|
566
|
|
|
(567
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,599
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,599
|
)
|
|||||||||
Equity adjustment from foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(2,593
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,593
|
)
|
|||||||||
Change in non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,718
|
)
|
|
(2,718
|
)
|
|||||||||
Deconsolidation of subsidiaries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,706
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,706
|
)
|
|||||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,921
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,921
|
)
|
|||||||||
Balance, December 31, 2013
|
—
|
|
|
$
|
—
|
|
|
78,315
|
|
|
$
|
783
|
|
|
$
|
205,712
|
|
|
$
|
77,038
|
|
|
|
$
|
12,177
|
|
|
|
$
|
—
|
|
|
(967
|
)
|
|
$
|
(11,091
|
)
|
|
$
|
—
|
|
|
$
|
284,619
|
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Beginning balance
|
$
|
7,539
|
|
|
$
|
8,140
|
|
|
$
|
8,427
|
|
Provision
|
5,177
|
|
|
7,507
|
|
|
8,614
|
|
|||
Claims paid/costs incurred
|
(6,310
|
)
|
|
(8,108
|
)
|
|
(8,901
|
)
|
|||
Ending balance
|
$
|
6,406
|
|
|
$
|
7,539
|
|
|
$
|
8,140
|
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Beginning balance
|
$
|
6,544
|
|
|
$
|
7,263
|
|
|
$
|
9,411
|
|
Provision
|
6,798
|
|
|
2,830
|
|
|
2,028
|
|
|||
Write-off of uncollectible amounts, net of recoveries
|
(1,687
|
)
|
|
(3,549
|
)
|
|
(4,176
|
)
|
|||
Ending balance
|
$
|
11,655
|
|
|
$
|
6,544
|
|
|
$
|
7,263
|
|
Buildings and improvements
|
10-30 years
|
Machinery and equipment
|
5-10 years
|
Furniture, computers and equipment
|
3-5 years
|
Production molds
|
2-5 years
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Foreign currency exchange contract gains/(losses), net
|
$
|
6,764
|
|
|
$
|
6,591
|
|
|
$
|
(8,861
|
)
|
Foreign currency transaction gains/(losses), net
|
(821
|
)
|
|
(3,343
|
)
|
|
708
|
|
|||
Other
|
62
|
|
|
(96
|
)
|
|
52
|
|
|||
|
$
|
6,005
|
|
|
$
|
3,152
|
|
|
$
|
(8,101
|
)
|
|
GOS Initiatives
|
|
Reorganization
and
Reinvestment
Initiatives
|
|
|
|||||||||||||||
|
Workforce
Reductions
|
|
Transition
Costs
|
|
Asset
Write-offs
|
|
Workforce
Reductions
|
|
Total
|
|||||||||||
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
|
|
Cash Payments
|
$
|
(136
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
$
|
(53
|
)
|
|
$
|
(189
|
)
|
Restructuring payable balance, December 31, 2013
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Cost Reduction Initiatives
|
||||||||||||||
|
Workforce
Reductions
|
|
Transition
Costs
|
|
Asset
Write-offs
|
|
Total
|
||||||||
Charges to cost and expense
(1)
|
$
|
14,506
|
|
|
$
|
6,719
|
|
|
$
|
32,836
|
|
|
$
|
54,061
|
|
Non-cash items
|
(448
|
)
|
|
(4,311
|
)
|
|
(32,836
|
)
|
|
(37,595
|
)
|
||||
Cash payments
|
(9,527
|
)
|
|
(1,817
|
)
|
|
—
|
|
|
(11,344
|
)
|
||||
Restructuring payable balance, December 31, 2012
|
$
|
4,531
|
|
|
$
|
591
|
|
|
$
|
—
|
|
|
$
|
5,122
|
|
Charges to cost and expense
(2)
|
2,977
|
|
|
8,777
|
|
|
4,802
|
|
|
16,556
|
|
||||
Non-cash items
|
—
|
|
|
(5,130
|
)
|
|
(4,802
|
)
|
|
(9,932
|
)
|
||||
Cash payments
|
(6,702
|
)
|
|
(1,737
|
)
|
|
—
|
|
|
(8,439
|
)
|
||||
Restructuring payable balance, December 31, 2013
|
$
|
806
|
|
|
$
|
2,501
|
|
|
$
|
—
|
|
|
$
|
3,307
|
|
|
•
|
$14,506,000
in workforce reductions, in addition to
$2,965,000
in other transition costs;
|
•
|
$5,810,000
primarily related to the write-off of inventory and long-lived assets in connection with the Company's decision to transition its golf apparel and golf footwear businesses in the U.S. to a third-party licensing arrangement;
|
•
|
$6,976,000
to write-off inventory related to the Company's decision to transition its integrated device business to a third-party based model,
$4,345,000
to write-off property, plant and equipment related to uPro devices, and an impairment charge of
$5,156,000
related to intangible assets and goodwill related to the uPlay, LLC acquisition (see Note 8); and
|
•
|
$14,303,000
related to the reorganization of the Company’s golf ball manufacturing supply chain.
|
•
|
$2,977,000
in continued costs associated with workforce reductions, in addition to
$4,459,000
in other transition costs;
|
•
|
$5,579,000
for the write down of assets and exit costs associated with the reorganization of golf ball manufacturing (see Note 10); and
|
•
|
$3,541,000
associated with the transition of the Company's golf apparel, golf footwear and integrated device businesses in the U.S. and Europe to a third-party licensing arrangement.
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands, except per share data)
|
||||||||||
Basic and diluted loss per common share
|
|
|
|
|
|
||||||
Net loss
|
$
|
(18,921
|
)
|
|
$
|
(122,946
|
)
|
|
$
|
(171,820
|
)
|
Less: Preferred stock dividends
|
3,332
|
|
|
8,447
|
|
|
10,500
|
|
|||
Net loss allocable to common shareholders
|
$
|
(22,253
|
)
|
|
$
|
(131,393
|
)
|
|
$
|
(182,320
|
)
|
Weighted-average common shares outstanding—basic and diluted
|
72,809
|
|
|
67,061
|
|
|
64,601
|
|
|||
Basic and diluted loss per common share
|
$
|
(0.31
|
)
|
|
$
|
(1.96
|
)
|
|
$
|
(2.82
|
)
|
|
Useful
Life
(Years)
|
|
December 31, 2013
|
|
December 31, 2012
|
||||||||||||||||||||||||
|
Gross
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
|
Gross
|
|
Accumulated
Amortization |
|
Net Book
Value |
||||||||||||||||||
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
(In thousands)
|
|
|
||||||||||||||||
Indefinite-lived:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trade name, trademark and trade dress and other
|
NA
|
|
$
|
88,590
|
|
|
|
$
|
—
|
|
|
|
$
|
88,590
|
|
|
$
|
88,590
|
|
|
|
$
|
—
|
|
|
|
$
|
88,590
|
|
Amortizing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Patents
|
2-16
|
|
31,581
|
|
|
|
31,287
|
|
|
|
294
|
|
|
31,581
|
|
|
|
31,022
|
|
|
|
559
|
|
||||||
Developed technology and other
|
1-9
|
|
7,961
|
|
|
|
7,944
|
|
|
|
17
|
|
|
7,961
|
|
|
|
7,921
|
|
|
|
40
|
|
||||||
Total intangible assets
|
|
|
$
|
128,132
|
|
|
|
$
|
39,231
|
|
|
|
$
|
88,901
|
|
|
$
|
128,132
|
|
|
|
$
|
38,943
|
|
|
|
$
|
89,189
|
|
2014
|
$
|
68
|
|
2015
|
51
|
|
|
2016
|
51
|
|
|
2017
|
51
|
|
|
2018
|
51
|
|
|
Thereafter
|
39
|
|
|
|
$
|
311
|
|
|
December 31,
|
||||||
|
2013
|
|
2012
|
||||
|
(In thousands)
|
||||||
Accounts receivable, net:
|
|
|
|
||||
Trade accounts receivable
|
$
|
111,192
|
|
|
$
|
103,999
|
|
Allowance for sales returns
|
(7,334
|
)
|
|
(6,383
|
)
|
||
Allowance for doubtful accounts
|
(11,655
|
)
|
|
(6,544
|
)
|
||
|
$
|
92,203
|
|
|
$
|
91,072
|
|
Inventories:
|
|
|
|
||||
Raw materials
|
$
|
56,104
|
|
|
$
|
43,469
|
|
Work-in-process
|
328
|
|
|
619
|
|
||
Finished goods
|
207,060
|
|
|
167,646
|
|
||
|
$
|
263,492
|
|
|
$
|
211,734
|
|
Property, plant and equipment, net:
|
|
|
|
||||
Land
|
$
|
7,452
|
|
|
$
|
8,892
|
|
Buildings and improvements
|
64,823
|
|
|
79,707
|
|
||
Machinery and equipment
|
126,282
|
|
|
153,303
|
|
||
Furniture, computers and equipment
|
120,943
|
|
|
126,733
|
|
||
Production molds
|
37,493
|
|
|
37,539
|
|
||
Construction-in-process
|
1,553
|
|
|
1,155
|
|
||
|
358,546
|
|
|
407,329
|
|
||
Accumulated depreciation
|
(287,205
|
)
|
|
(318,236
|
)
|
||
|
$
|
71,341
|
|
|
$
|
89,093
|
|
Accounts payable and accrued expenses:
|
|
|
|
||||
Accounts payable
|
$
|
59,914
|
|
|
$
|
45,376
|
|
Accrued expenses
|
77,492
|
|
|
68,300
|
|
||
Accrued goods in-transit
|
19,714
|
|
|
15,345
|
|
||
|
$
|
157,120
|
|
|
$
|
129,021
|
|
Accrued employee compensation and benefits:
|
|
|
|
||||
Accrued payroll and taxes
|
$
|
23,748
|
|
|
$
|
12,256
|
|
Accrued vacation and sick pay
|
7,225
|
|
|
7,549
|
|
||
Accrued commissions
|
612
|
|
|
844
|
|
||
|
$
|
31,585
|
|
|
$
|
20,649
|
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
United States
|
$
|
(28,622
|
)
|
|
$
|
(134,384
|
)
|
|
$
|
(105,841
|
)
|
Foreign
|
15,300
|
|
|
16,338
|
|
|
15,580
|
|
|||
|
$
|
(13,322
|
)
|
|
$
|
(118,046
|
)
|
|
$
|
(90,261
|
)
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Current tax provision (benefit):
|
|
|
|
|
|
||||||
Federal
|
$
|
195
|
|
|
$
|
(357
|
)
|
|
$
|
19,908
|
|
State
|
382
|
|
|
130
|
|
|
580
|
|
|||
Foreign
|
6,487
|
|
|
6,804
|
|
|
4,964
|
|
|||
|
7,064
|
|
|
6,577
|
|
|
25,452
|
|
|||
Deferred tax expense (benefit):
|
|
|
|
|
|
||||||
Federal
|
1,100
|
|
|
(1,448
|
)
|
|
43,948
|
|
|||
State
|
(817
|
)
|
|
92
|
|
|
10,987
|
|
|||
Foreign
|
(1,748
|
)
|
|
(321
|
)
|
|
1,172
|
|
|||
|
(1,465
|
)
|
|
(1,677
|
)
|
|
56,107
|
|
|||
Income tax provision
|
$
|
5,599
|
|
|
$
|
4,900
|
|
|
$
|
81,559
|
|
|
December 31,
|
||||||
|
2013
|
|
2012
|
||||
Deferred tax assets:
|
|
|
|
||||
Reserves and allowances not currently deductible for tax purposes
|
$
|
16,953
|
|
|
$
|
15,617
|
|
Basis difference related to fixed assets
|
13,137
|
|
|
10,711
|
|
||
Compensation and benefits
|
6,878
|
|
|
3,808
|
|
||
Basis difference for inventory valuation
|
1,593
|
|
|
2,502
|
|
||
Compensatory stock options and rights
|
3,925
|
|
|
5,238
|
|
||
Deferred revenue and other
|
459
|
|
|
101
|
|
||
Operating loss carryforwards
|
94,639
|
|
|
105,748
|
|
||
Tax credit carryforwards
|
11,584
|
|
|
6,024
|
|
||
Correlative effects of global income allocations
|
—
|
|
|
363
|
|
||
Federal impact of state taxes
|
—
|
|
|
808
|
|
||
Basis difference related to intangible assets with a definite life
|
18,363
|
|
|
6,165
|
|
||
Total deferred tax assets
|
167,531
|
|
|
157,085
|
|
||
Valuation allowance for deferred tax assets
|
(158,747
|
)
|
|
(151,097
|
)
|
||
Deferred tax assets, net of valuation allowance
|
$
|
8,784
|
|
|
$
|
5,988
|
|
Deferred tax liabilities:
|
|
|
|
||||
State taxes, net of federal income tax benefit
|
1
|
|
|
(33
|
)
|
||
Prepaid expenses
|
(970
|
)
|
|
(1,102
|
)
|
||
Deferred revenue
|
—
|
|
|
(330
|
)
|
||
Other
|
(84
|
)
|
|
(69
|
)
|
||
Basis difference related to intangible assets with an indefinite life
|
(34,284
|
)
|
|
(32,834
|
)
|
||
Total deferred tax liabilities
|
(35,337
|
)
|
|
(34,368
|
)
|
||
Net deferred tax liabilities
|
$
|
(26,553
|
)
|
|
$
|
(28,380
|
)
|
Net deferred tax assets (liabilities) are shown on the accompanying consolidated balance sheets as follows:
|
|
|
|
||||
Current deferred tax assets
|
$
|
6,419
|
|
|
$
|
4,170
|
|
Non-current deferred tax assets
|
2,299
|
|
|
1,910
|
|
||
Current deferred tax liabilities
|
—
|
|
|
(927
|
)
|
||
Non-current deferred tax liabilities
|
(35,271
|
)
|
|
(33,533
|
)
|
||
Net deferred tax liabilities
|
$
|
(26,553
|
)
|
|
$
|
(28,380
|
)
|
U.S. foreign tax credit
|
$
|
4,102
|
|
|
2020 - 2023
|
U.S. research tax credit
|
$
|
3,455
|
|
|
2030 - 2033
|
U.S. business tax credits
|
$
|
14
|
|
|
2030 - 2033
|
State investment tax credits
|
$
|
872
|
|
|
Do not expire
|
State research tax credits
|
$
|
8,528
|
|
|
Do not expire
|
U.S. loss carryforwards
|
$
|
252,927
|
|
|
2031 - 2033
|
State loss carryforwards
|
$
|
176,106
|
|
|
2014 - 2033
|
Foreign loss carryforwards
|
$
|
178
|
|
|
Do not expire
|
|
Years Ended December 31,
|
|||||||
|
2013
|
|
2012
|
|
2011
|
|||
Statutory U.S. tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income taxes, net of U.S. tax benefit
|
0.9
|
%
|
|
(0.8
|
)%
|
|
(0.8
|
)%
|
Federal and State tax credits, net of U.S. tax benefit
|
22.6
|
%
|
|
—
|
%
|
|
—
|
%
|
Expenses with no tax benefit
|
(15.3
|
)%
|
|
(0.9
|
)%
|
|
0.2
|
%
|
Foreign income taxed at other than U.S. statutory rate
|
(5.1
|
)%
|
|
2.0
|
%
|
|
(1.0
|
)%
|
Effect of foreign rate changes
|
(4.2
|
)%
|
|
—
|
%
|
|
(0.5
|
)%
|
Foreign tax credit
|
9.4
|
%
|
|
(1.2
|
)%
|
|
—
|
%
|
Basis differences of intangibles with an indefinite life
|
(4.1
|
)%
|
|
1.3
|
%
|
|
(1.0
|
)%
|
Release of prepaid taxes on intercompany profit
|
—
|
%
|
|
—
|
%
|
|
(24.0
|
)%
|
Change in deferred tax valuation allowance
|
(76.8
|
)%
|
|
(37.7
|
)%
|
|
(98.6
|
)%
|
Reversal of previously accrued taxes
|
—
|
%
|
|
0.1
|
%
|
|
—
|
%
|
Accrual for interest and income taxes related to uncertain tax positions
|
(0.1
|
)%
|
|
0.8
|
%
|
|
(0.6
|
)%
|
Other
|
(4.3
|
)%
|
|
(2.8
|
)%
|
|
0.9
|
%
|
Effective tax rate
|
(42.0
|
)%
|
|
(4.2
|
)%
|
|
(90.4
|
)%
|
|
2013
|
|
2012
|
|
2011
|
||||||
Balance at January 1
|
$
|
7,064
|
|
|
$
|
9,875
|
|
|
$
|
9,121
|
|
Additions based on tax positions related to the current year
|
4,853
|
|
|
432
|
|
|
830
|
|
|||
Additions for tax positions of prior years
|
545
|
|
|
96
|
|
|
370
|
|
|||
Reductions for tax positions of prior years
|
(538
|
)
|
|
(24
|
)
|
|
(39
|
)
|
|||
Settlement of tax audits
|
—
|
|
|
(768
|
)
|
|
—
|
|
|||
Reductions due to lapsed statute of limitations
|
(73
|
)
|
|
(2,547
|
)
|
|
(407
|
)
|
|||
Balance at December 31
|
$
|
11,851
|
|
|
$
|
7,064
|
|
|
$
|
9,875
|
|
|
Operating Leases
|
|
Capital Leases
|
||||
2014
|
$
|
13,081
|
|
|
$
|
871
|
|
2015
|
9,419
|
|
|
615
|
|
||
2016
|
4,287
|
|
|
132
|
|
||
2017
|
3,568
|
|
|
70
|
|
||
2018
|
1,392
|
|
|
—
|
|
||
Thereafter
|
1,268
|
|
|
—
|
|
||
|
$
|
33,015
|
|
|
$
|
1,688
|
|
2014
|
$
|
43,254
|
|
2015
|
10,208
|
|
|
2016
|
3,913
|
|
|
2017
|
1,011
|
|
|
2018
|
106
|
|
|
|
$
|
58,492
|
|
|
2011
|
|
Employee restricted stock units vested
|
205
|
|
Employee stock plan purchases
|
86
|
|
Total shares released from the GST
|
291
|
|
|
Authorized
|
|
Available
|
|
Outstanding
(2)
|
|||
|
(In thousands)
|
|||||||
1995 Employee Stock Incentive Plan
|
10,800
|
|
|
—
|
|
|
234
|
|
1996 Stock Option Plan
|
9,000
|
|
|
—
|
|
|
100
|
|
2001 Directors Plan
(1)
|
500
|
|
|
10
|
|
|
144
|
|
2004 Plan
|
24,000
|
|
|
10,567
|
|
|
4,834
|
|
2013 Directors Plan
|
1,000
|
|
|
939
|
|
|
60
|
|
Total
|
45,300
|
|
|
11,516
|
|
|
5,372
|
|
|
(1)
|
The Company’s 2001 Non-Employee Directors Plan expired on December 31, 2011. The shares available for grant under this plan are only available to satisfy incremental dividend equivalent rights for outstanding awards.
|
(2)
|
Outstanding shares underlying restricted stock units granted under the 2001 Directors Plan, 2004 Plan and 2013 Directors Plan include accrued incremental dividend equivalent rights.
|
|
2013
|
|
2012
|
|
2011
|
|||
Dividend yield
|
0.6
|
%
|
|
1.2
|
%
|
|
1.4
|
%
|
Expected volatility
|
48.8
|
%
|
|
50.6
|
%
|
|
48.5
|
%
|
Risk-free interest rate
|
0.7
|
%
|
|
0.8
|
%
|
|
2.0
|
%
|
Expected life
|
4.3 years
|
|
|
4.9 years
|
|
|
5.0 years
|
|
Options
|
Number of
Shares
|
|
Weighted-
Average
Exercise Price
Per Share
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
Outstanding at January 1, 2013
|
5,167
|
|
|
$
|
11.08
|
|
|
|
|
|
||
Granted
|
1,842
|
|
|
$
|
6.53
|
|
|
|
|
|
||
Exercised
|
(216
|
)
|
|
$
|
7.66
|
|
|
|
|
|
||
Forfeited
|
(86
|
)
|
|
$
|
6.77
|
|
|
|
|
|
||
Expired
|
(2,215
|
)
|
|
$
|
11.15
|
|
|
|
|
|
||
Outstanding at December 31, 2013
|
4,492
|
|
|
$
|
9.42
|
|
|
5.66
|
|
$
|
4,446
|
|
Vested and expected to vest in the future at December 31, 2013
|
4,365
|
|
|
$
|
9.51
|
|
|
5.56
|
|
$
|
4,208
|
|
Exercisable at December 31, 2013
|
2,598
|
|
|
$
|
11.48
|
|
|
3.27
|
|
$
|
989
|
|
Restricted Stock Units
|
Units
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|||
Nonvested at January 1, 2013
|
647
|
|
|
$
|
6.87
|
|
Granted
|
440
|
|
|
6.55
|
|
|
Vested
|
(193
|
)
|
|
7.86
|
|
|
Forfeited
|
(21
|
)
|
|
6.78
|
|
|
Nonvested at December 31, 2013
|
873
|
|
|
$
|
6.49
|
|
Phantom Stock Units
|
Units
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|||
Nonvested at January 1, 2013
|
508
|
|
|
$
|
6.77
|
|
Granted
|
—
|
|
|
—
|
|
|
Vested
|
(17
|
)
|
|
7.51
|
|
|
Forfeited
|
(47
|
)
|
|
7.04
|
|
|
Nonvested at December 31, 2013
|
444
|
|
|
$
|
6.72
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
Cost of sales
|
$
|
473
|
|
|
$
|
276
|
|
|
$
|
424
|
|
Operating expenses
|
7,711
|
|
|
6,874
|
|
|
10,882
|
|
|||
Total cost of employee share-based compensation included in loss before income tax
|
$
|
8,184
|
|
|
$
|
7,150
|
|
|
$
|
11,306
|
|
|
Fair
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
2013
|
|
|
|
|
|
|
|
||||||||
Foreign currency derivative instruments—asset position
|
$
|
557
|
|
|
$
|
—
|
|
|
$
|
557
|
|
|
$
|
—
|
|
Foreign currency derivative instruments—liability position
|
(823
|
)
|
|
—
|
|
|
(823
|
)
|
|
—
|
|
||||
|
$
|
(266
|
)
|
|
$
|
—
|
|
|
$
|
(266
|
)
|
|
$
|
—
|
|
2012
|
|
|
|
|
|
|
|
||||||||
Foreign currency derivative instruments—asset position
|
$
|
5,011
|
|
|
$
|
—
|
|
|
$
|
5,011
|
|
|
$
|
—
|
|
Foreign currency derivative instruments—liability position
|
(1,046
|
)
|
|
—
|
|
|
(1,046
|
)
|
|
—
|
|
||||
|
$
|
3,965
|
|
|
$
|
—
|
|
|
$
|
3,965
|
|
|
$
|
—
|
|
|
December 31, 2013
|
|
December 31, 2012
|
||||||||||||
|
Carrying
Value
|
|
Fair Value
|
|
Carrying
Value
|
|
Fair Value
|
||||||||
Convertible notes
(1)
|
$
|
107,835
|
|
|
$
|
138,668
|
|
|
$
|
107,133
|
|
|
$
|
118,406
|
|
ABL Facility
(2)
|
$
|
25,660
|
|
|
$
|
25,660
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Standby letters of credit
(3)
|
$
|
1,297
|
|
|
$
|
1,297
|
|
|
$
|
3,265
|
|
|
$
|
3,265
|
|
|
|
Asset Derivatives
|
||||||||||
|
December 31, 2013
|
|
December 31, 2012
|
||||||||
Derivatives not designated as hedging instruments
|
Balance Sheet Location
|
|
Fair Value
|
|
Balance Sheet Location
|
|
Fair Value
|
||||
Foreign currency exchange contracts
|
Other current assets
|
|
$
|
557
|
|
|
Other current assets
|
|
$
|
5,011
|
|
|
Liability Derivatives
|
||||||||||
|
December 31, 2013
|
|
December 31, 2012
|
||||||||
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
|
|
$
|
823
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
1,046
|
|
|
|
|
Amount of Gain / (Loss) Recognized in Income on Derivative Instruments
|
||||||||||
Derivatives not designated as hedging instruments
|
Location of gain (loss) recognized in income on derivative instruments
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||||
Foreign currency exchange contracts
|
Other income (expense), net
|
|
$
|
6,764
|
|
|
$
|
6,591
|
|
|
$
|
(8,861
|
)
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Net sales:
|
|
|
|
|
|
||||||
Golf Clubs
|
$
|
710,654
|
|
|
$
|
694,489
|
|
|
$
|
726,169
|
|
Golf Balls
|
132,147
|
|
|
139,576
|
|
|
160,359
|
|
|||
|
$
|
842,801
|
|
|
$
|
834,065
|
|
|
$
|
886,528
|
|
Loss before income tax:
|
|
|
|
|
|
||||||
Golf Clubs
(1)
|
$
|
27,684
|
|
|
$
|
(59,827
|
)
|
|
$
|
(3,899
|
)
|
Golf Balls
(1)
|
1,582
|
|
|
(15,019
|
)
|
|
(12,655
|
)
|
|||
Reconciling items
(2)
|
(42,588
|
)
|
|
(43,200
|
)
|
|
(73,707
|
)
|
|||
|
$
|
(13,322
|
)
|
|
$
|
(118,046
|
)
|
|
$
|
(90,261
|
)
|
Identifiable assets:
(3)
|
|
|
|
|
|
||||||
Golf Clubs
|
$
|
374,473
|
|
|
$
|
328,210
|
|
|
$
|
409,074
|
|
Golf Balls
(4)
|
49,261
|
|
|
64,203
|
|
|
92,280
|
|
|||
Reconciling items
(3)
|
240,129
|
|
|
245,223
|
|
|
225,758
|
|
|||
|
$
|
663,863
|
|
|
$
|
637,636
|
|
|
$
|
727,112
|
|
Additions to long-lived assets:
|
|
|
|
|
|
||||||
Golf Clubs
|
$
|
13,250
|
|
|
$
|
16,347
|
|
|
$
|
23,087
|
|
Golf Balls
|
1,163
|
|
|
260
|
|
|
6,680
|
|
|||
|
$
|
14,413
|
|
|
$
|
16,607
|
|
|
$
|
29,767
|
|
Goodwill:
|
|
|
|
|
|
||||||
Golf Clubs
|
$
|
29,212
|
|
|
$
|
29,034
|
|
|
$
|
29,203
|
|
Golf Balls
|
—
|
|
|
—
|
|
|
—
|
|
|||
|
$
|
29,212
|
|
|
$
|
29,034
|
|
|
$
|
29,203
|
|
Depreciation and amortization:
|
|
|
|
|
|
||||||
Golf Clubs
|
$
|
21,019
|
|
|
$
|
21,096
|
|
|
$
|
26,695
|
|
Golf Balls
|
4,524
|
|
|
13,315
|
|
|
11,941
|
|
|||
|
$
|
25,543
|
|
|
$
|
34,411
|
|
|
$
|
38,636
|
|
|
(1)
|
The tables below includes total charges absorbed by the Company’s operating segments from the restructuring initiatives discussed in Note 3 (in thousands):
|
|
Year Ended December 31, 2013
|
|||||||||||||||
|
Golf Clubs
|
|
Golf Balls
|
|
Corporate G&A
(2)
|
|
Total
|
|||||||||
Cost Reduction Initiatives
|
$
|
6,395
|
|
|
$
|
6,973
|
|
|
|
$
|
3,188
|
|
|
$
|
16,556
|
|
|
Year Ended December 31, 2012
|
|||||||||||||||
|
Golf Clubs
|
|
Golf Balls
|
|
Corporate G&A
(2)
|
|
Total
|
|||||||||
Cost Reduction Initiatives
|
$
|
30,398
|
|
|
$
|
16,589
|
|
|
|
$
|
7,074
|
|
|
$
|
54,061
|
|
Reorganization and Reinvestment Initiatives
|
812
|
|
|
240
|
|
|
|
(40
|
)
|
|
1,012
|
|
||||
Total
|
$
|
31,210
|
|
|
$
|
16,829
|
|
|
|
$
|
7,034
|
|
|
$
|
55,073
|
|
|
Year Ended December 31, 2011
|
|||||||||||||||
|
Golf Clubs
|
|
Golf Balls
|
|
Corporate G&A
(2)
|
|
Total
|
|||||||||
Reorganization and Reinvestment Initiatives
|
$
|
5,642
|
|
|
$
|
1,329
|
|
|
|
$
|
9,358
|
|
|
$
|
16,329
|
|
GOS Initiatives
|
15,558
|
|
|
5,038
|
|
|
|
4,084
|
|
|
24,680
|
|
||||
Total
|
$
|
21,200
|
|
|
$
|
6,367
|
|
|
|
$
|
13,442
|
|
|
$
|
41,009
|
|
(2)
|
Reconciling items represent the deduction of corporate general and administration expenses and other income (expenses), which are not utilized by management in determining segment profitability. In addition to the corporate general and administrative expenses identified above in connection with the Company’s Cost Reduction Initiatives and Reorganization and Reinvestment Initiatives, the following charges were included in reconciling items:
|
•
|
Net gains of
$5,943,000
and
$3,248,000
for 2013 and 2012, respectively, and net losses of
$8,153,000
for 2011 related to foreign currency hedging contracts, offset by net foreign currency transaction losses and gains included in other income (expense);
|
•
|
A pre-tax gain of
$6,602,000
in connection with the sale of the Top-Flite and Ben Hogan brands during the year ended December 31, 2012 (see Note 8);
|
•
|
Pre-tax impairment charges of
$6,533,000
for 2011 primarily related to certain trademarks and trade names (see Note 8); and
|
•
|
A pre-tax gain of
$6,170,000
recognized in 2011 in connection with the sale of certain buildings (see Note 7).
|
(3)
|
Identifiable assets are comprised of net inventory, certain property, plant and equipment, intangible assets and goodwill. Reconciling items represent unallocated corporate assets not segregated between the two segments.
|
(4)
|
Includes property classified as available for sale in the amount of
$2,396,000
in 2012. Property held for sale in 2012 represents the net book value of the Company’s golf ball manufacturing facility in Chicopee, Massachusetts (see Note 7).
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Net sales:
|
|
|
|
|
|
||||||
Woods
|
$
|
256,444
|
|
|
$
|
200,588
|
|
|
$
|
211,191
|
|
Irons
|
181,842
|
|
|
170,794
|
|
|
206,817
|
|
|||
Putters
|
89,559
|
|
|
93,325
|
|
|
88,160
|
|
|||
Golf Balls
|
132,147
|
|
|
139,576
|
|
|
160,359
|
|
|||
Accessories and Other
|
182,809
|
|
|
229,782
|
|
|
220,001
|
|
|||
|
$
|
842,801
|
|
|
$
|
834,065
|
|
|
$
|
886,528
|
|
|
Sales
|
|
Long-Lived
Assets
(excluding
deferred tax
assets)
|
||||
|
(In thousands)
|
||||||
2013
|
|
|
|
||||
United States
|
$
|
401,478
|
|
|
$
|
206,111
|
|
Europe
|
121,477
|
|
|
7,905
|
|
||
Japan
|
161,598
|
|
|
6,491
|
|
||
Rest of Asia
|
84,073
|
|
|
3,627
|
|
||
Other foreign countries
|
74,175
|
|
|
15,827
|
|
||
|
$
|
842,801
|
|
|
$
|
239,961
|
|
2012
|
|
|
|
||||
United States
|
$
|
392,087
|
|
|
$
|
212,438
|
|
Europe
|
120,160
|
|
|
7,969
|
|
||
Japan
|
157,315
|
|
|
6,897
|
|
||
Rest of Asia
|
75,035
|
|
|
4,265
|
|
||
Other foreign countries
|
89,468
|
|
|
17,161
|
|
||
|
$
|
834,065
|
|
|
$
|
248,730
|
|
2011
|
|
|
|
||||
United States
|
$
|
419,448
|
|
|
$
|
268,376
|
|
Europe
|
133,572
|
|
|
7,313
|
|
||
Japan
|
149,768
|
|
|
8,386
|
|
||
Rest of Asia
|
82,746
|
|
|
4,581
|
|
||
Other foreign countries
|
100,994
|
|
|
17,740
|
|
||
|
$
|
886,528
|
|
|
$
|
306,396
|
|
|
Fiscal Year 2013 Quarters
|
||||||||||||||||||
|
1st
|
|
2nd
|
|
3rd
|
|
4th
|
|
Total
|
||||||||||
|
(In thousands, except per share data)
|
||||||||||||||||||
Net sales
|
$
|
287,756
|
|
|
$
|
249,646
|
|
|
$
|
178,229
|
|
|
$
|
127,170
|
|
|
$
|
842,801
|
|
Gross profit
(1)
|
$
|
130,436
|
|
|
$
|
95,652
|
|
|
$
|
59,409
|
|
|
$
|
29,261
|
|
|
$
|
314,758
|
|
Net income (loss)
(1)(2)
|
$
|
41,660
|
|
|
$
|
10,071
|
|
|
$
|
(21,153
|
)
|
|
$
|
(49,499
|
)
|
|
$
|
(18,921
|
)
|
Dividends on convertible preferred stock
|
$
|
783
|
|
|
$
|
783
|
|
|
$
|
1,766
|
|
|
$
|
—
|
|
|
$
|
3,332
|
|
Net income (loss) allocable to common shareholders
(1)(2)
|
$
|
40,877
|
|
|
$
|
9,288
|
|
|
$
|
(22,919
|
)
|
|
$
|
(49,499
|
)
|
|
$
|
(22,253
|
)
|
Earnings (loss) per common share
(6)
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
(1)(2)
|
$
|
0.58
|
|
|
$
|
0.13
|
|
|
$
|
(0.32
|
)
|
|
$
|
(0.65
|
)
|
|
$
|
(0.31
|
)
|
Diluted
(1)(2)
|
$
|
0.47
|
|
|
$
|
0.12
|
|
|
$
|
(0.32
|
)
|
|
$
|
(0.65
|
)
|
|
$
|
(0.31
|
)
|
|
Fiscal Year 2012 Quarters
|
||||||||||||||||||
|
1st
|
|
2nd
|
|
3rd
|
|
4th
|
|
Total
|
||||||||||
|
(In thousands, except per share data)
|
||||||||||||||||||
Net sales
|
$
|
285,098
|
|
|
$
|
281,123
|
|
|
$
|
147,906
|
|
|
$
|
119,938
|
|
|
$
|
834,065
|
|
Gross profit
(3)
|
$
|
124,371
|
|
|
$
|
110,653
|
|
|
$
|
3,800
|
|
|
$
|
9,344
|
|
|
$
|
248,168
|
|
Net income (loss)
(3)(4)(5)
|
$
|
31,802
|
|
|
$
|
2,799
|
|
|
$
|
(86,798
|
)
|
|
$
|
(70,749
|
)
|
|
$
|
(122,946
|
)
|
Dividends on convertible preferred stock
|
$
|
2,625
|
|
|
$
|
2,625
|
|
|
$
|
2,414
|
|
|
$
|
783
|
|
|
$
|
8,447
|
|
Net income (loss) allocable to common shareholders
(3)(4)(5)
|
$
|
29,177
|
|
|
$
|
174
|
|
|
$
|
(89,212
|
)
|
|
$
|
(71,532
|
)
|
|
$
|
(131,393
|
)
|
Earnings (loss) per common share
(6)
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
(3)(4)(5)
|
$
|
0.45
|
|
|
$
|
—
|
|
|
$
|
(1.31
|
)
|
|
$
|
(1.01
|
)
|
|
$
|
(1.96
|
)
|
Diluted
(3)(4)(5)
|
$
|
0.37
|
|
|
$
|
—
|
|
|
$
|
(1.31
|
)
|
|
$
|
(1.01
|
)
|
|
$
|
(1.96
|
)
|
|
(1)
|
During the first, second, third and fourth quarters of 2013, the Company recognized charges of
$2,282,000
,
$4,087,000
,
$1,005,000
and
$3,775,000
, respectively, in cost of goods sold in connection with the Company’s Cost Reduction Initiatives (see Note 3).
|
(2)
|
During the first, second, third and fourth quarters of 2013, the Company recognized charges of
$2,158,000
(
$0.03
per share),
$3,074,000
(
$0.04
per share),
$1,142,000
(
$0.02
per share) and
$3,808,000
(
$0.05
per share), respectively, in after-tax charges in connection with the Company's Cost Reduction Initiatives (see Note 3).
|
(3)
|
During the second, third and fourth quarters of 2012, the Company recognized charges of
$961,000
,
$27,302,000
, and
$7,965,000
, respectively, in cost of goods sold in connection with the Company’s Cost Reduction Initiatives (see Note 3).
|
(4)
|
During the first quarter of 2012, the Company recognized an after-tax gain of
$4,069,000
(
$0.06
per share) in connection with the sale of the Top-Flite and Ben Hogan brands (see Note 8).
|
(5)
|
During the second, third and fourth quarters of 2012, the Company recognized after-tax charges of
$2,855,000
(
$0.04
per share),
$21,576,000
(
$0.32
per share), and
$8,798,000
(
$0.13
per share), respectively, in connection with the Company’s Cost Reduction Initiatives (see Note 3).
|
(6)
|
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.
|
Exhibit
|
Description
|
10.5
|
Officer Employment Agreement, effective as of May 1, 2012, by and between Callaway Golf Company and Alan Hocknell, Ph.D.
|
21.1
|
List of Subsidiaries.
|
23.1
|
Consent of Deloitte & Touche LLP.
|
24.1
|
Form of Limited Power of Attorney.
|
31.1
|
Certification of Oliver G. Brewer III pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of Bradley J. Holiday pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Oliver G. Brewer III and Bradley J. Holiday pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.1
|
XBRL Instance Document
|
101.2
|
XBRL Taxonomy Extension Schema Document
|
101.3
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.4
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.5
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.6
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
EMPLOYEE
|
|
COMPANY
|
|
|
Callaway Golf Company, a Delaware corporation
|
|
|
|
/s/ Alan Hocknell, Ph.D.
|
|
By: /s/ Chris Carroll
|
Alan Hocknell, Ph.D.
|
|
Chris Carroll
|
|
|
Senior Vice President, Global Human Resources
|
EMPLOYEE
|
|
COMPANY
|
|
|
Callaway Golf Company, a Delaware corporation
|
|
|
|
|
|
By:
|
[Employee’s Name]
|
|
[Authorized Signature]
|
|
|
|
Dated:
|
|
Dated:
|
EMPLOYEE
|
|
COMPANY
|
|
|
Callaway Golf Company, a Delaware corporation
|
|
|
|
/s/ Alan Hocknell, Ph.D.
|
|
By: /s/ Chris Carroll
|
Alan Hocknell, Ph.D.
|
|
Chris Carroll
|
Dated: February 12, 2014
|
|
Senior Vice President, Global Human Resources
|
|
|
Dated: February 12, 2014
|
Subsidiaries
|
State or country of
Incorporation or
Organization
|
Callaway Golf South Pacific Pty Ltd.
|
Australia
|
Callaway Golf Sales Company
|
California
|
Callaway Golf International Sales Company
|
California
|
Callaway Golf Canada Ltd.
|
Canada
|
Callaway Golf (Shanghai) Trading Co., Ltd.
|
China
|
Callaway Golf (Guangzhou) Technology Service Co., Ltd.
|
China
|
Callaway Golf Ball Operations, Inc.
|
Delaware
|
uPlay, Inc.
|
Delaware
|
Callaway Golf (Germany) GmbH
|
Germany
|
Callaway Golf India Private Ltd.
|
India
|
Callaway Golf Kabushiki Kaisha
|
Japan
|
Callaway Golf Korea Ltd.
|
Korea
|
Callaway Golf Malaysia Sdn. Bhd.
|
Malaysia
|
Callaway de Mexico, S.A. de C.V.
|
Mexico
|
Callaway Golf Interactive, Inc.
|
Texas
|
Callaway Golf (Thailand) Ltd.
|
Thailand
|
Callaway Golf Cyprus Co. Ltd.
|
The Republic of Cyprus
|
Callaway Golf Europe Ltd.
|
United Kingdom
|
Callaway Golf European Holding Company Ltd.
|
United Kingdom
|
|
|
[Name of Director]
|
1.
|
I have reviewed this annual report on Form 10-K of Callaway Golf Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/
S
/ O
LIVER
G. B
REWER
III
|
Oliver G. Brewer III
President and Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K of Callaway Golf Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/
S
/ BRADLEY J. HOLIDAY
|
Bradley J. Holiday
Senior Executive Vice President and
Chief Financial Officer
|
|
/
S
/ O
LIVER
G. B
REWER
III
|
Oliver G. Brewer III
President and Chief Executive Officer
|
|
/
S
/ B
RADLEY
J. H
OLIDAY
|
Bradley J. Holiday
Senior Executive Vice President and
Chief Financial Officer
|