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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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2180 Rutherford Road
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Carlsbad, CA 92008
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(760) 931-1771
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(Address, including zip code, and telephone number, including area code, of principal executive offices)
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Securities registered pursuant to Section 12(b) of the Act:
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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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Securities registered pursuant to Section 12(g) of the Act:
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None
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Large accelerated filer
x
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Accelerated filer
¨
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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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Emerging growth company
¨
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•
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certain risks and uncertainties, including changes in capital market or economic conditions;
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•
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a material impact on the Company's tax provision as a result of the Tax Act;
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•
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delays or difficulties in the integration of the TravisMathew and/or OGIO acquisitions;
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•
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consumer acceptance of and demand for the Company’s products;
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•
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future retailer purchasing activity, which can be significantly affected by adverse industry conditions and overall retail inventory levels;
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•
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any unfavorable changes in U.S. trade, tax or other policies, including restrictions on imports or an increase in import tariffs;
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•
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the level of promotional activity in the marketplace;
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•
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future consumer discretionary purchasing activity, which can be significantly adversely affected by unfavorable economic or market conditions;
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•
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significant fluctuations in foreign currency exchange rates;
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•
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the ability of the Company to manage international business risks;
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•
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future changes in foreign currency exchange rates and the degree of effectiveness of the Company’s hedging programs;
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•
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adverse changes in the credit markets or continued compliance with the terms of the Company’s credit facilities;
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•
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delays, difficulties or increased costs in the supply of components needed to manufacture the Company’s products or in manufacturing the Company’s products, including the Company's dependence on a limited number of suppliers for some of its products;
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•
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adverse weather conditions and seasonality;
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•
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any rule changes or other actions taken by the USGA or other golf association that could have an adverse impact upon demand or supply of the Company’s products;
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•
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the ability of the Company to protect its intellectual property rights;
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•
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a decrease in participation levels in golf;
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•
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the effect of terrorist activity, armed conflict, natural disasters or pandemic diseases on the economy generally, on the level of demand for the Company’s products or on the Company’s ability to manage its supply and delivery logistics in such an environment; and
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•
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the general risks and uncertainties applicable to the Company and its business.
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Years Ended December 31,
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|||||||||||||||||||
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2017
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2016
(1)
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2015
(1)
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(Dollars in millions)
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|||||||||||||||||||
Woods
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$
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307.9
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29.4
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%
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$
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216.1
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25.8
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%
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$
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229.0
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28.1
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%
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Irons
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250.6
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23.9
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%
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278.6
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32.0
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%
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264.5
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31.3
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%
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|||
Putters
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84.6
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8.0
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%
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87.7
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10.1
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%
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88.0
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10.4
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%
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Golf balls
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162.5
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15.5
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%
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152.3
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17.5
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%
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143.1
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17.0
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%
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Gear, accessories and other
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243.1
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23.2
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%
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136.5
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15.7
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%
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119.2
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14.1
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%
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Net sales
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$
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1,048.7
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100.0
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%
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$
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871.2
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100.0
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%
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$
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843.8
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100.0
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%
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(1)
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Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017. For further discussion, see
Note 17
“
Segment Information
” in the Notes to Consolidated Financial Statements in this Form 10-K.
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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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54
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President and Chief Executive Officer, Director
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Brian P. Lynch
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56
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Senior Vice President, Chief Financial Officer, General Counsel & Corporate Secretary
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Alan Hocknell
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46
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Senior Vice President, Research and Development
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Mark F. Leposky
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53
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Senior Vice President, Global Operations
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Richard H. Arnett
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47
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Senior Vice President, Global Marketing & President of OGIO
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Alex M. Boezeman
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58
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President, Asia
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Neil Howie
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55
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Managing Director, Europe, Middle East and Africa
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•
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Golf Club customers accounted for approximately
20%
,
26%
and
28%
of total consolidated Golf Club sales in 2017, 2016 and 2015, respectively;
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•
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Golf Ball customers accounted for approximately
30%
,
28%
and
30%
of total consolidated Golf Ball sales in 2017, 2016 and 2015, respectively; and
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•
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Gear and Accessories customers accounted for approximately
15%
,
18%
and
21%
of total consolidated Gear and Accessories sales in 2017, 2016 and
2015
, respectively.
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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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•
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The Company leases its golf ball manufacturing plant in Chicopee, Massachusetts comprised of approximately 293,000 square feet. The lease term for this facility expires in February 2028.
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•
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The Company leases a golf club manufacturing facility in Monterrey, Mexico comprised of approximately 180,000 square feet. The lease term for this facility expires in May 2025.
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•
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The Company leases a distribution center in Roanoke, Texas comprised of approximately 202,000 square feet. The lease term for this facility expires in September 2020.
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•
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The Company also leases a distribution center in Swindon, England comprised of approximately 101,000 square feet. The lease term for this facility expires in December 2025.
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Year Ended December 31,
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2017
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2016
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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
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Dividend
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||||||||||||
First Quarter
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$
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12.00
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$
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9.93
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$
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0.01
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$
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9.62
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$
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8.27
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$
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0.01
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Second Quarter
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$
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13.35
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$
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10.93
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$
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0.01
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$
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10.58
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$
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9.09
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$
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0.01
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Third Quarter
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$
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14.49
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$
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12.36
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$
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0.01
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$
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11.80
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$
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10.19
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$
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0.01
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Fourth Quarter
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$
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15.63
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$
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13.60
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$
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0.01
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$
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12.50
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$
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9.96
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$
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0.01
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2012
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2013
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2014
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2015
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2016
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2017
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||||||||||||
Callaway Golf (NYSE: ELY)
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$
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100.00
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$
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118.55
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$
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145.08
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$
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168.85
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$
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168.89
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$
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214.70
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S&P 500
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$
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100.00
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$
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129.60
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$
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144.36
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$
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143.31
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$
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156.98
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$
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187.47
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S&P 600 Smallcap
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$
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100.00
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$
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139.60
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$
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145.80
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$
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140.90
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$
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175.77
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$
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196.38
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Three Months Ended December 31, 2017
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||||||||||
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Total Number
of Shares
Purchased
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Weighted
Average Price
Paid per Share
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Total Number of Shares Purchased as Part of Publicly Announced Programs
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Maximum Dollar Value that May Yet Be Purchased Under the Programs
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||||
October 1, 2017—October 31, 2017
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3,472
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$14.79
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3,472
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$
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25,353,111
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November 1, 2017—November 30, 2017
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—
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$—
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—
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$
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25,353,111
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December 1, 2017—December 31, 2017
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6,178
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$14.12
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6,178
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$
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25,265,877
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Total
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9,650
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$28.91
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|
9,650
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$
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25,265,877
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Years Ended December 31,
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||||||||||||||||||
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2017
(1)(2)(4)
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2016
(3)(4)(5)
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2015
(6)
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2014
(6)
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2013
(6)(8)
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||||||||||
Statement of Operations Data:
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(In thousands, except per share data)
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||||||||||||||||||
Net sales
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$
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1,048,736
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$
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871,192
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|
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$
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843,794
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|
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$
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886,945
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|
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$
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842,801
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Cost of sales
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568,288
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|
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486,181
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|
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486,161
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|
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529,019
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|
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528,043
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|||||
Gross profit
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480,448
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385,011
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357,633
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357,926
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|
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314,758
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|
|||||
Selling, general and administrative expenses
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365,043
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|
|
307,525
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|
|
297,477
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|
|
295,893
|
|
|
294,583
|
|
|||||
Research and development expenses
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36,568
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|
|
33,318
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|
|
33,213
|
|
|
31,285
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|
|
30,937
|
|
|||||
Income (loss) from operations
|
78,837
|
|
|
44,168
|
|
|
26,943
|
|
|
30,748
|
|
|
(10,762
|
)
|
|||||
Interest income
|
454
|
|
|
621
|
|
|
388
|
|
|
438
|
|
|
558
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|
|||||
Interest expense
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(4,365
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)
|
|
(2,368
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)
|
|
(8,733
|
)
|
|
(9,499
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)
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|
(9,123
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)
|
|||||
Gain on sale of investments in golf-related ventures
|
—
|
|
|
17,662
|
|
|
—
|
|
|
—
|
|
|
—
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|
|||||
Other income (expense), net
|
(6,871
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)
|
|
(1,690
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)
|
|
1,465
|
|
|
(48
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)
|
|
6,005
|
|
|||||
Income (loss) before income taxes
|
68,055
|
|
|
58,393
|
|
|
20,063
|
|
|
21,639
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|
|
(13,322
|
)
|
|||||
Income tax (benefit) provision
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26,388
|
|
|
(132,561
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)
|
|
5,495
|
|
|
5,631
|
|
|
5,599
|
|
|||||
Net income (loss)
|
41,667
|
|
|
190,954
|
|
|
14,568
|
|
|
16,008
|
|
|
(18,921
|
)
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|||||
Dividends on convertible preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,332
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|
|||||
Less: Net income attributable to non-controlling interests
|
861
|
|
|
1,054
|
|
|
—
|
|
|
—
|
|
|
—
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|
|||||
Net income (loss) allocable to common shareholders
|
$
|
40,806
|
|
|
$
|
189,900
|
|
|
$
|
14,568
|
|
|
$
|
16,008
|
|
|
$
|
(22,253
|
)
|
Earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
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||||||||||
Basic
|
$
|
0.43
|
|
|
$
|
2.02
|
|
|
$
|
0.18
|
|
|
$
|
0.21
|
|
|
$
|
(0.31
|
)
|
Diluted
|
$
|
0.42
|
|
|
$
|
1.98
|
|
|
$
|
0.17
|
|
|
$
|
0.20
|
|
|
$
|
(0.31
|
)
|
Dividends paid per common share
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
December 31,
|
||||||||||||||||||
|
2017
(1)(2)(4)
|
|
2016
(3)(4)(5)(7)
|
|
2015
(6)(7)
|
|
2014
(6)
|
|
2013
(6)(8)
|
||||||||||
Balance Sheet Data:
|
(In thousands)
|
||||||||||||||||||
Cash and cash equivalents
|
$
|
85,674
|
|
|
$
|
125,975
|
|
|
$
|
49,801
|
|
|
$
|
37,635
|
|
|
$
|
36,793
|
|
Working capital
|
$
|
151,610
|
|
|
$
|
273,571
|
|
|
$
|
212,851
|
|
|
$
|
199,905
|
|
|
$
|
195,407
|
|
Total assets
|
$
|
991,157
|
|
|
$
|
801,282
|
|
|
$
|
631,224
|
|
|
$
|
624,811
|
|
|
$
|
663,863
|
|
Long-term liabilities
|
$
|
17,408
|
|
|
$
|
5,828
|
|
|
$
|
39,643
|
|
|
$
|
149,149
|
|
|
$
|
153,048
|
|
Total Callaway Golf Company shareholders’ equity
|
$
|
649,631
|
|
|
$
|
598,906
|
|
|
$
|
412,945
|
|
|
$
|
291,534
|
|
|
$
|
284,619
|
|
|
(1)
|
In 2017, the Company completed the acquisitions of OGIO and TravisMathew. The Company's consolidated statement of operations includes the recognition of $3.1 million and $2.4 million in one-time transaction costs for OGIO and TravisMathew, respectively. The Company's consolidated balance sheet includes the addition of $66.0 million and $124.6 million in total net assets related to OGIO and TravisMathew, respectively.
|
(2)
|
On December 22, 2017, the Tax Act was enacted into legislation, which includes a broad range of provisions affecting businesses. The Tax Act significantly revises how companies compute their U.S corporate tax liability by, among other provisions, reducing the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017. Pursuant to the Tax Act, the Company recorded net tax expense of $7.5 million, which was comprised of $11.1 million of income tax expense related to the revaluation of deferred tax assets, partially offset by a tax benefit of $3.6 million as a result of the mandatory deemed repatriation on earnings and profits of U.S.-owned foreign subsidiaries. For further discussion see
Note 10
"
Income Taxes
" in the Notes to the Consolidated Financial Statements in this Form 10-K.
|
(3)
|
The Company's tax provision, total assets and long-term liabilities were significantly impacted in 2016 by the reversal of the Company's valuation allowance on its U.S. deferred tax assets. In the fourth quarter of 2016, the Company performed an analysis to determine the realization of its deferred tax assets and concluded that it was more likely than not that the majority of its U.S. deferred tax assets will be realized, which resulted in a one-time, non-cash benefit of $156.6 million related to the reversal of the Company's valuation allowance on its U.S. deferred tax assets. This reversal was partially offset by the recognition of $16.0 million in income taxes that were retroactive for all of 2016 on the Company's U.S. business. For further discussion see
Note 10
"
Income Taxes
" in the Notes to the Consolidated Financial Statements in this Form 10-K.
|
(4)
|
In July 2016, the Company contributed
$10.6 million
, primarily in cash, for a
52%
ownership of the new joint venture, Callaway Apparel K.K. (see
Note 8
"
Joint Venture
" in the Notes to the Consolidated Financial Statements in this Form 10-K). The Company is required to consolidate the financial results of the joint venture and, as a result, the Company recorded net income attributable to the non-controlling interest of
$0.9 million
and
$1.1 million
in its consolidated statement of operations during the years ended
December 31, 2017
and 2016, respectively. The Company recognized a non-controlling interest of
$9.7 million
at both
December 31, 2017
and
2016
in its consolidated balance sheets and consolidated statements of shareholders' equity.
|
(5)
|
In April 2016, the Company sold approximately
10.0%
or
$5.8 million
(on a cost basis) of its preferred shares in Topgolf for
$23.4 million
, and recognized a gain of approximately
$17.7 million
in other income (expense) during the second quarter of 2016. See
Note 7
"
Investments
" in the Notes to the Consolidated Financial Statements in this Form 10-K.
|
(6)
|
In August 2012, the Company issued $112.5 million of 3.75% Convertible Senior Notes (the “convertible notes”) in exchange for cash and 0.6 million shares of the Company’s then-outstanding 7.50% Series B Cumulative Perpetual Convertible Preferred Stock in separate, privately negotiated exchange transactions. During the second half of 2015, the convertible notes were eliminated pursuant to certain exchange transactions and shareholder conversions, which resulted, among other things, in the issuance of approximately 15.0 million shares of common stock to the note holders (see
Note 4
“
Financing Arrangements
” in the Notes to Consolidated Financial Statements in this Form 10-K). In connection with the elimination of the convertible notes and the issuance of the 15.0 million shares of common stock, the Company recorded $109.0 million in shareholders' equity as of December 31, 2015, net of the outstanding discount of $3.4 million. The Company recognized interest expense of
$3.2 million
, $5.0 million and $4.9 million for the years ended December 31, 2015, 2014 and 2013, respectively.
|
(7)
|
In December 2015, the Company early adopted Accounting Standards Update No 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes." This update eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet, and instead classify all deferred tax assets and liabilities as noncurrent. The adoption of this update was made on a prospective basis as of December 31, 2015, therefore working capital and long-term liabilities in 2015 as well as 2016 are not comparable to prior periods presented.
|
(8)
|
The Company’s operating statements for the year ended December 31, 2013 include pre-tax charges of
$16.6 million
in connection with the Company's cost-reduction initiatives that were announced in July 2012. 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.
|
•
|
The Company’s results for 2017 include transaction and transition expenses of $11.3 million related to the OGIO and TravisMathew acquisitions completed in January 2017 and August 2017, respectively.
|
•
|
The Company’s results for 2016 include a pre-tax gain of $17.7 million from the sale of approximately 10% of the Company's investment in Topgolf. There was no such sale or gain in 2017.
|
•
|
The Company’s results of operations for 2017 include the operating results from the OGIO and TravisMathew businesses, which are incremental to the results in the comparative periods of 2016. In addition, the Company’s results of operations for 2017 include the incremental operating results from the apparel joint venture in Japan, which was established in July 2016. The Company’s results of operations for 2016 only include the joint venture’s operating results beginning in the third quarter.
|
•
|
In the fourth quarter of 2016, the Company reversed a significant portion of the valuation allowance that was established on its U.S. deferred tax assets, and recognized a one-time income tax benefit of $156.6 million. As a result of this reversal, in 2017, the Company recognized a non-recurring, non-cash tax benefit of $4.1 million related to taxes on intercompany transactions.
|
•
|
In December 2017, the U.S. government enacted the Tax Act into legislation. As a result of the Tax Act, the Company recognized income tax expense of $7.5 million in the fourth quarter of 2017 (see further discussion below in the results of operations for the years ended December 31, 2017 and 2016).
|
•
|
Beginning in January 2017, the Company began reporting three operating segments (namely, Golf Clubs, Golf Balls and Gear, Accessories and Other) as opposed to the two operating segments reported in 2016 (namely, Golf Clubs and Golf Balls). For comparison purposes, the 2016 results have been reclassified to reflect the current year operating segment presentation.
|
|
Years Ended
December 31,
|
|
Growth
|
|||||||||||
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Golf Clubs
|
$
|
643.1
|
|
|
$
|
582.4
|
|
|
$
|
60.7
|
|
|
10.4
|
%
|
Golf Balls
|
162.5
|
|
|
152.3
|
|
|
10.2
|
|
|
6.7
|
%
|
|||
Gear, Accessories and Other
|
243.1
|
|
|
136.5
|
|
|
106.6
|
|
|
78.1
|
%
|
|||
|
$
|
1,048.7
|
|
|
$
|
871.2
|
|
|
$
|
177.5
|
|
|
20.4
|
%
|
|
Years Ended
December 31,
|
|
Growth
|
|||||||||||
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
United States
|
$
|
566.4
|
|
|
$
|
447.6
|
|
|
$
|
118.8
|
|
|
26.5
|
%
|
Europe
|
139.5
|
|
|
122.8
|
|
|
16.7
|
|
|
13.6
|
%
|
|||
Japan
|
199.3
|
|
|
170.8
|
|
|
28.5
|
|
|
16.7
|
%
|
|||
Rest of Asia
|
76.5
|
|
|
67.1
|
|
|
9.4
|
|
|
14.0
|
%
|
|||
Other foreign countries
|
67.0
|
|
|
62.9
|
|
|
4.1
|
|
|
6.5
|
%
|
|||
|
$
|
1,048.7
|
|
|
$
|
871.2
|
|
|
$
|
177.5
|
|
|
20.4
|
%
|
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|||||||||||||||||||||||||||||
|
As Reported
|
|
Acquisition Costs
(1)
|
|
Non-Cash Tax Adjustment
(2)
|
|
Non-GAAP
|
|
As Reported
|
|
Release of Tax VA
(3)
|
|
Topgolf Gain
(4)
|
|
Non-GAAP
|
|||||||||||||||||
Net income (loss) attributable to Callaway Golf Company
|
$
|
40.8
|
|
|
$
|
(7.1
|
)
|
|
$
|
(3.4
|
)
|
|
$
|
51.3
|
|
|
$
|
189.9
|
|
|
$
|
156.6
|
|
|
$
|
10.5
|
|
|
$
|
22.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Diluted earnings (loss) per share
|
$
|
0.42
|
|
|
$
|
(0.07
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
0.53
|
|
|
$
|
1.98
|
|
|
$
|
1.63
|
|
|
$
|
0.11
|
|
|
$
|
0.24
|
|
|
Weighted-average shares outstanding
|
96.6
|
|
|
96.6
|
|
|
96.6
|
|
|
96.6
|
|
|
95.8
|
|
95.8
|
|
95.8
|
|
|
95.8
|
|
|
95.8
|
|
|
(1)
|
Represents transaction and transition costs associated with the acquisition of OGIO in January 2017 and transaction costs associated with the acquisition of TravisMathew in August 2017. The income tax benefit of $3.6 million associated with these costs was based on the Company's statutory tax rate for 2017.
|
(2)
|
Represents the impact of the Tax Act as discussed above, which resulted in $7.5 million of income tax expense, offset by a non-recurring, non-cash $4.1 million tax benefit related to taxes on intercompany transactions, resulting from the 2016 release of the valuation allowance against the Company’s U.S. deferred tax assets.
|
(3)
|
Non-cash tax benefit due to the reversal of a significant portion of the Company's deferred tax valuation allowance in the fourth quarter of 2016.
|
(4)
|
Gain recognized on the sale of approximately 10.0% of the Company's investment in Topgolf in the second quarter of 2016.
|
|
Years Ended
December 31,
|
|
Growth/(Decline)
|
|||||||||||
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Woods
|
$
|
307.9
|
|
|
$
|
216.1
|
|
|
$
|
91.8
|
|
|
42.5
|
%
|
Irons
|
250.6
|
|
|
278.6
|
|
|
(28.0
|
)
|
|
(10.1
|
)%
|
|||
Putters
|
84.6
|
|
|
87.7
|
|
|
(3.1
|
)
|
|
(3.5
|
)%
|
|||
|
$
|
643.1
|
|
|
$
|
582.4
|
|
|
$
|
60.7
|
|
|
10.4
|
%
|
|
Years Ended
December 31, |
|
Growth
|
|||||||||||
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Gear, accessories and other
|
$
|
243.1
|
|
|
$
|
136.5
|
|
|
$
|
106.6
|
|
|
78.1
|
%
|
|
Years Ended
December 31,
|
|
Growth
|
|||||||||||
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
|||||||
Income before income taxes:
|
|
|
|
|
|
|
|
|||||||
Golf clubs
|
$
|
77.0
|
|
|
$
|
48.5
|
|
|
$
|
28.5
|
|
|
58.8
|
%
|
Golf balls
|
26.9
|
|
|
23.9
|
|
|
3.0
|
|
|
12.6
|
%
|
|||
Gear, accessories and other
|
30.6
|
|
|
18.2
|
|
|
12.4
|
|
|
68.1
|
%
|
|||
Reconciling items
(1)
|
(66.4
|
)
|
|
(32.2
|
)
|
|
(34.2
|
)
|
|
106.2
|
%
|
|||
|
$
|
68.1
|
|
|
$
|
58.4
|
|
|
$
|
9.7
|
|
|
16.6
|
%
|
|
(1)
|
Reconciling items represent corporate general and administrative expenses and other income (expense) not included by management in determining segment profitability. The increase in reconciling items in 2017 compared to 2016 was primarily due to
$11.3 million
in one-time transaction and transitional costs associated with the acquisitions of OGIO in January 2017 and TravisMathew in August 2017, a $17.7 million gain recognized in the second quarter of 2016 in connection with the sale of approximately 10.0% of the Company's investment in Topgolf, in addition to increases in employee costs, professional fees and legal expenses. For further discussion, see
Note 7
“
Investments
” in the Notes to Consolidated Financial Statements in this Form 10-K.
|
|
Years Ended
December 31,
|
|
Growth
|
|
Constant Currency Growth vs. 2015
|
|||||||||||
|
2016
(1)
|
|
2015
(1)
|
|
Dollars
|
|
Percent
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|
|
|||||||
Golf clubs
|
$
|
582.4
|
|
|
$
|
581.5
|
|
|
$
|
0.9
|
|
|
0.2
|
%
|
|
(0.4)%
|
Golf balls
|
152.3
|
|
|
143.1
|
|
|
9.2
|
|
|
6.4
|
%
|
|
6.4%
|
|||
Gear, accessories and other
|
136.5
|
|
|
119.2
|
|
|
17.3
|
|
|
14.5
|
%
|
|
10.5%
|
|||
|
$
|
871.2
|
|
|
$
|
843.8
|
|
|
$
|
27.4
|
|
|
3.2
|
%
|
|
2.3%
|
|
(1)
|
Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017. For further discussion, see
Note 17
“
Segment Information
” in the Notes to Consolidated Financial Statements in this Form 10-K.
|
|
Years Ended
December 31,
|
|
Growth / (Decline)
|
|
Constant Currency Growth/(Decline) vs. 2015
|
|||||||||||
|
2016
|
|
2015
|
|
Dollars
|
|
Percent
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|
|
|||||||
United States
|
$
|
447.6
|
|
|
$
|
446.5
|
|
|
$
|
1.1
|
|
|
0.2
|
%
|
|
0.2%
|
Europe
|
122.8
|
|
|
125.1
|
|
|
(2.3
|
)
|
|
(1.8
|
)%
|
|
2.8%
|
|||
Japan
|
170.8
|
|
|
138.0
|
|
|
32.8
|
|
|
23.8
|
%
|
|
10.6%
|
|||
Rest of Asia
|
67.1
|
|
|
70.3
|
|
|
(3.2
|
)
|
|
(4.6
|
)%
|
|
(2.1)%
|
|||
Other foreign countries
|
62.9
|
|
|
63.9
|
|
|
(1.0
|
)
|
|
(1.6
|
)%
|
|
1.9%
|
|||
|
$
|
871.2
|
|
|
$
|
843.8
|
|
|
$
|
27.4
|
|
|
3.2
|
%
|
|
2.3%
|
|
(1)
|
Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017. For further discussion, see
Note 17
“
Segment Information
” in the Notes to Consolidated Financial Statements in this Form 10-K.
|
|
Years Ended
December 31, |
|
Growth
|
|||||||||||
|
2016
(1)
|
|
2015
(1)
|
|
Dollars
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Gear, accessories and other
|
$
|
136.5
|
|
|
$
|
119.2
|
|
|
$
|
17.3
|
|
|
14.5
|
%
|
|
(1)
|
Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017. For further discussion, see
Note 17
“
Segment Information
” in the Notes to Consolidated Financial Statements in this Form 10-K.
|
|
Years Ended
December 31,
|
|
Growth/(Decline)
|
|||||||||||
|
2016
(1)
|
|
2015
(1)
|
|
Dollars
|
|
Percent
|
|||||||
Income before income taxes:
|
|
|
|
|
|
|
|
|||||||
Golf clubs
|
$
|
48.5
|
|
|
$
|
32.6
|
|
|
$
|
15.9
|
|
|
48.8
|
%
|
Golf balls
|
23.9
|
|
|
19.0
|
|
|
4.9
|
|
|
25.8
|
%
|
|||
Gear, accessories and other
|
18.2
|
|
|
19.1
|
|
|
(0.9
|
)
|
|
(4.7
|
)%
|
|||
Reconciling items
(2)
|
(32.2
|
)
|
|
(50.6
|
)
|
|
18.4
|
|
|
(36.4
|
)%
|
|||
|
$
|
58.4
|
|
|
$
|
20.1
|
|
|
$
|
38.3
|
|
|
190.5
|
%
|
|
(1)
|
Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017. For further discussion, see
Note 17
“
Segment Information
” in the Notes to Consolidated Financial Statements in this Form 10-K.
|
(2)
|
Reconciling items represent corporate general and administrative expenses and other income (expense) not included by management in determining segment profitability. The decrease in reconciling items in 2016 compared to 2015 was primarily due to a $17.7 million gain recognized in the second quarter of 2016 in connection with the sale of approximately 10.0% of the Company's investment in Topgolf, combined with decreases of $6.4 million in interest expense and $1.6 million in corporate stock compensation expense, partially offset by a $4.0 million increase in foreign currency exchange losses.
|
|
Payments Due By Period
|
||||||||||||||||||
|
Total
|
|
Less than
1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More than
5 Years
|
||||||||||
ABL Facility
|
$
|
74.0
|
|
|
74.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Japan ABL Facility
|
13.8
|
|
|
13.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Capital Leases
(1)
|
0.3
|
|
|
0.2
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|||||
Operating leases
(2)
|
54.3
|
|
|
8.6
|
|
|
15.8
|
|
|
12.7
|
|
|
17.2
|
|
|||||
Unconditional purchase obligations
(3)
|
72.5
|
|
|
39.3
|
|
|
27.4
|
|
|
5.8
|
|
|
—
|
|
|||||
Uncertain tax contingencies
(4)
|
4.6
|
|
|
0.6
|
|
|
1.4
|
|
|
0.4
|
|
|
2.2
|
|
|||||
Employee incentive compensation
(5)
|
20.9
|
|
|
20.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Equipment Note
(6)
|
11.8
|
|
|
—
|
|
|
—
|
|
|
11.8
|
|
|
—
|
|
|||||
Interest on equipment note
|
1.2
|
|
|
0.4
|
|
|
0.6
|
|
|
0.2
|
|
|
—
|
|
|||||
Other long term liabilities
|
0.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|||||
Total
|
$
|
253.9
|
|
|
$
|
157.8
|
|
|
$
|
45.3
|
|
|
$
|
30.9
|
|
|
$
|
19.9
|
|
|
(1)
|
Amounts represent future minimum lease payments. Capital lease obligations are included in accounts payable and accrued expenses and other long-term liabilities in the accompanying consolidated balance sheets.
|
(2)
|
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.
|
(3)
|
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.
|
(4)
|
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, 2017
. Amount excludes uncertain income tax positions that the Company would be able to offset against deferred taxes. For further discussion, see
Note 10
“
Income Taxes
” in the Notes to Consolidated Financial Statements in this Form 10-K.
|
(5)
|
Amount represents accrued employee incentive compensation expense earned in 2017, and paid in February 2018.
|
(6)
|
In December 2017, the Company entered into a long-term financing agreement (the "Equipment Note") secured by certain equipment at the Company's golf ball manufacturing facility. As of
December 31, 2017
, the Company had
$11,815,000
outstanding under this agreement. For further discussion, see
Note 4
"
Financing Arrangements
" in 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 Restricted Stock Units
and Performance Share
Units
(3)
|
|
Weighted Average
Exercise Price of
Outstanding Options
(4)
|
|
Number of Shares
Remaining
Available for
Future Issuance
|
|||||||||
|
|
(In thousands, except dollar amounts)
|
|
|||||||||||
Equity Compensation Plans Approved by Shareholders
(1)
|
|
3,695
(2)
|
|
|
|
$
|
7.15
|
|
|
|
|
11,622
|
|
|
|
(1)
|
Consists of the following plans: Callaway Golf Company Amended and Restated 2004 Incentive Plan ("2004 Incentive Plan") and 2013 Non-Employee Directors Stock Incentive Plan ("2013 Directors Plan"). The 2004 Incentive Plan permits the award of stock options, restricted stock awards, restricted stock units, performance share units and various other stock-based awards. The 2013 Directors Plan permits the award of stock options, restricted stock and restricted stock units.
|
(2)
|
Includes 60,480 shares underlying restricted stock units issuable under the 2013 Directors Plan, and 979,955 shares underlying stock options, 1,221,811 shares underlying restricted stock units and 1,432,954 shares underlying performance share units issuable under the 2004 Incentive Plan.
|
(3)
|
Outstanding shares underlying restricted stock units granted under the 2004 Incentive Plan and 2013 Directors Plan include 6,267 shares of accrued incremental stock dividend equivalent rights.
|
(4)
|
Does not include shares underlying restricted stock units and performance share units, which do not have an exercise price.
|
2.1
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2.2
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3.1
|
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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).
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3.2
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4.1
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Executive Compensation Contracts/Plans
|
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10.1
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10.2
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10.3
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10.4
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10.5
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10.6
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10.7
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10.8
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10.9
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10.10
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10.11
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10.12
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10.13
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10.14
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10.15
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10.16
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10.17
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10.18
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10.19
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10.20
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10.21
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10.22
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10.23
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10.24
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10.25
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10.26
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10.27
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10.28
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10.29
|
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|
Indemnification Agreement, effective June 7, 2001, between Callaway Golf and Ronald S. Beard, incorporated herein by this reference to Exhibit 10.55 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).
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10.30
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10.31
|
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Other Contracts
|
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10.32
|
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10.33
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10.34
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10.35
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10.36
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10.37
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10.38
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10.39
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10.40
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10.41
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10.42
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10.43
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21.1
|
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23.1
|
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24.1
|
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31.1
|
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31.2
|
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32.1
|
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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 †
|
|
|
|
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, 2018
|
Oliver G. Brewer III
|
|
|
|
|
|
|
|
Principal Financial Officer:
|
|
|
|
|
|
|
|
/S/ BRIAN P. LYNCH
|
|
Senior Vice President, Chief Financial Officer, General Counsel and Corporate Secretary
|
February 27, 2018
|
Brian P. Lynch
|
|
|
|
|
|
|
|
Principal Accounting Officer:
|
|
|
|
|
|
|
|
/S/ JENNIFER THOMAS
|
|
Vice President and Chief Accounting Officer
|
February 27, 2018
|
Jennifer Thomas
|
|
|
|
|
|
|
|
Non-Management Directors:
|
|
|
|
|
|
|
|
*
|
|
Director
|
February 27, 2018
|
Samuel H. Armacost
|
|
|
|
|
|
|
|
*
|
|
Chairman of the Board
|
February 27, 2018
|
Ronald S. Beard
|
|
|
|
|
|
|
|
*
|
|
Director
|
February 27, 2018
|
John C. Cushman, III
|
|
|
|
|
|
|
|
*
|
|
Director
|
February 27, 2018
|
John F. Lundgren
|
|
|
|
|
|
|
|
*
|
|
Director
|
February 27, 2018
|
Adebayo O. Ogunlesi
|
|
|
|
|
|
|
|
*
|
|
Director
|
February 27, 2018
|
Linda B. Segre
|
|
|
|
|
|
|
|
*
|
|
Director
|
February 27, 2018
|
Anthony S. Thornley
|
|
|
|
*By:
|
/S/ BRIAN P. LYNCH
|
|
|
Brian P. Lynch
|
|
|
Attorney-in-fact
|
|
|
December 31,
|
||||||
|
2017
|
|
2016
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
85,674
|
|
|
$
|
125,975
|
|
Accounts receivable, net
|
94,725
|
|
|
127,863
|
|
||
Inventories
|
262,486
|
|
|
189,400
|
|
||
Income taxes receivable
|
542
|
|
|
637
|
|
||
Other current assets
|
22,557
|
|
|
16,550
|
|
||
Total current assets
|
465,984
|
|
|
460,425
|
|
||
Property, plant and equipment, net
|
70,227
|
|
|
54,475
|
|
||
Intangible assets, net
|
225,758
|
|
|
88,731
|
|
||
Goodwill
|
56,429
|
|
|
25,593
|
|
||
Deferred taxes, net
|
91,398
|
|
|
114,707
|
|
||
Investment in golf-related ventures (Note 7)
|
70,495
|
|
|
48,997
|
|
||
Other assets
|
10,866
|
|
|
8,354
|
|
||
Total assets
|
$
|
991,157
|
|
|
$
|
801,282
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
176,127
|
|
|
$
|
132,521
|
|
Accrued employee compensation and benefits
|
40,173
|
|
|
32,568
|
|
||
Asset-based credit facility
|
87,755
|
|
|
11,966
|
|
||
Accrued warranty expense
|
6,657
|
|
|
5,395
|
|
||
Equipment note, short-term
|
2,367
|
|
|
—
|
|
||
Income taxes payable
|
1,295
|
|
|
4,404
|
|
||
Total current liabilities
|
314,374
|
|
|
186,854
|
|
||
Long-term liabilities:
|
|
|
|
||||
Income tax liability
|
4,602
|
|
|
3,608
|
|
||
Deferred taxes, net
|
1,822
|
|
|
1,596
|
|
||
Equipment note, long-term
|
9,448
|
|
|
—
|
|
||
Long-term other
|
1,536
|
|
|
624
|
|
||
Commitments & contingencies (Note 11)
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, $.01 par value, 3,000,000 shares authorized, 0 shares issued and outstanding at both December 31, 2017 and 2016
|
—
|
|
|
—
|
|
||
Common stock, $.01 par value, 240,000,000 shares authorized, 95,042,557 shares and 94,214,295 shares issued at December 31, 2017 and 2016, respectively
|
950
|
|
|
942
|
|
||
Additional paid-in capital
|
335,222
|
|
|
330,206
|
|
||
Retained earnings
|
324,081
|
|
|
287,129
|
|
||
Accumulated other comprehensive loss
|
(6,166
|
)
|
|
(18,466
|
)
|
||
Less: Common stock held in treasury, at cost, 411,013 shares and 97,837 shares at December 31, 2017 and 2016, respectively
|
(4,456
|
)
|
|
(905
|
)
|
||
Total Callaway Golf Company shareholders’ equity
|
649,631
|
|
|
598,906
|
|
||
Non-controlling interest in consolidated entity (Note 8)
|
9,744
|
|
|
9,694
|
|
||
Total shareholders’ equity
|
659,375
|
|
|
608,600
|
|
||
Total liabilities and shareholders’ equity
|
$
|
991,157
|
|
|
$
|
801,282
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Net sales
|
$
|
1,048,736
|
|
|
$
|
871,192
|
|
|
$
|
843,794
|
|
Cost of sales
|
568,288
|
|
|
486,181
|
|
|
486,161
|
|
|||
Gross profit
|
480,448
|
|
|
385,011
|
|
|
357,633
|
|
|||
Selling expenses
|
270,890
|
|
|
235,556
|
|
|
228,910
|
|
|||
General and administrative expenses
|
94,153
|
|
|
71,969
|
|
|
68,567
|
|
|||
Research and development expenses
|
36,568
|
|
|
33,318
|
|
|
33,213
|
|
|||
Total operating expenses
|
401,611
|
|
|
340,843
|
|
|
330,690
|
|
|||
Income from operations
|
78,837
|
|
|
44,168
|
|
|
26,943
|
|
|||
Interest income
|
454
|
|
|
621
|
|
|
388
|
|
|||
Interest expense
|
(4,365
|
)
|
|
(2,368
|
)
|
|
(8,733
|
)
|
|||
Gain on sale of investments in golf-related ventures
|
—
|
|
|
17,662
|
|
|
—
|
|
|||
Other income (expense), net
|
(6,871
|
)
|
|
(1,690
|
)
|
|
1,465
|
|
|||
Income before income taxes
|
68,055
|
|
|
58,393
|
|
|
20,063
|
|
|||
Income tax provision (benefit)
|
26,388
|
|
|
(132,561
|
)
|
|
5,495
|
|
|||
Net income
|
41,667
|
|
|
190,954
|
|
|
14,568
|
|
|||
Less: Net income attributable to non-controlling interests
|
861
|
|
|
1,054
|
|
|
—
|
|
|||
Net income attributable to Callaway Golf Company
|
$
|
40,806
|
|
|
$
|
189,900
|
|
|
$
|
14,568
|
|
Earnings per common share:
|
|
|
|
|
|
||||||
Basic
|
$
|
0.43
|
|
|
$
|
2.02
|
|
|
$
|
0.18
|
|
Diluted
|
$
|
0.42
|
|
|
$
|
1.98
|
|
|
$
|
0.17
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
||||||
Basic
|
94,329
|
|
|
94,045
|
|
|
83,116
|
|
|||
Diluted
|
96,577
|
|
|
95,845
|
|
|
84,611
|
|
|||
|
|
|
|
|
|
||||||
Dividends paid per common share
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
Year Ended December 31,
|
||||||||||
2017
|
|
2016
|
|
2015
|
|||||||
Net income
|
$
|
41,667
|
|
|
$
|
190,954
|
|
|
$
|
14,568
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
||||||
Change in derivative instruments
|
(2,492
|
)
|
|
1,976
|
|
|
525
|
|
|||
Foreign currency translation adjustments
|
14,361
|
|
|
(8,831
|
)
|
|
(11,542
|
)
|
|||
Comprehensive income, before income tax on other comprehensive income items
|
53,536
|
|
|
184,099
|
|
|
3,551
|
|
|||
Income tax expense (benefit) on derivative instruments
|
594
|
|
|
(902
|
)
|
|
—
|
|
|||
Comprehensive income
|
54,130
|
|
|
183,197
|
|
|
3,551
|
|
|||
Less: Comprehensive income (loss) attributable to non-controlling interests
|
163
|
|
|
(1,104
|
)
|
|
—
|
|
|||
Comprehensive income attributable to Callaway Golf Company
|
$
|
53,967
|
|
|
$
|
184,301
|
|
|
$
|
3,551
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
41,667
|
|
|
$
|
190,954
|
|
|
$
|
14,568
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
17,605
|
|
|
16,586
|
|
|
17,379
|
|
|||
Inventory step-up from acquisitions
|
3,112
|
|
|
—
|
|
|
—
|
|
|||
Deferred taxes
|
24,594
|
|
|
(141,447
|
)
|
|
128
|
|
|||
Share-based compensation
|
12,647
|
|
|
8,965
|
|
|
7,542
|
|
|||
Loss (gain) on disposal of long-lived assets and deferred gain amortization
|
1,490
|
|
|
(116
|
)
|
|
(1,006
|
)
|
|||
Gain on sale of investments in golf-related ventures
|
—
|
|
|
(17,662
|
)
|
|
—
|
|
|||
Unrealized losses (gains) on foreign currency forward contracts
|
1,023
|
|
|
(683
|
)
|
|
—
|
|
|||
Discount amortization on convertible notes
|
—
|
|
|
—
|
|
|
531
|
|
|||
Changes in assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
||||||
Accounts receivable, net
|
51,618
|
|
|
(16,965
|
)
|
|
(11,591
|
)
|
|||
Inventories
|
(52,010
|
)
|
|
24,251
|
|
|
(5,347
|
)
|
|||
Other assets
|
(6,533
|
)
|
|
168
|
|
|
7,060
|
|
|||
Accounts payable and accrued expenses
|
15,414
|
|
|
12,553
|
|
|
5,382
|
|
|||
Accrued employee compensation and benefits
|
7,021
|
|
|
(489
|
)
|
|
(3,395
|
)
|
|||
Income taxes receivable and payable
|
(2,155
|
)
|
|
2,493
|
|
|
(370
|
)
|
|||
Accrued warranty expense
|
1,262
|
|
|
(311
|
)
|
|
99
|
|
|||
Other liabilities
|
944
|
|
|
(587
|
)
|
|
(399
|
)
|
|||
Net cash provided by operating activities
|
117,699
|
|
|
77,710
|
|
|
30,581
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Acquisitions, net of cash acquired
|
(183,478
|
)
|
|
—
|
|
|
—
|
|
|||
Capital expenditures
|
(26,203
|
)
|
|
(16,152
|
)
|
|
(14,369
|
)
|
|||
Investment in golf-related ventures
|
(21,499
|
)
|
|
(1,448
|
)
|
|
(940
|
)
|
|||
Proceeds from sale of property, plant and equipment
|
587
|
|
|
20
|
|
|
2
|
|
|||
Proceeds from sale of investments in golf-related ventures
|
—
|
|
|
23,429
|
|
|
—
|
|
|||
Note receivable
|
—
|
|
|
3,104
|
|
|
(3,104
|
)
|
|||
Net cash (used in) provided by investing activities
|
(230,593
|
)
|
|
8,953
|
|
|
(18,411
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Proceeds from (repayment of) asset-based credit facilities, net
|
75,789
|
|
|
(3,003
|
)
|
|
(266
|
)
|
|||
Proceeds from long-term debt
|
11,815
|
|
|
—
|
|
|
—
|
|
|||
Exercise of stock options
|
5,362
|
|
|
2,637
|
|
|
6,565
|
|
|||
Acquisition of treasury stock
|
(16,617
|
)
|
|
(5,144
|
)
|
|
(1,960
|
)
|
|||
Dividends paid, net
|
(3,773
|
)
|
|
(3,764
|
)
|
|
(3,391
|
)
|
|||
Credit facility amendment costs
|
(2,246
|
)
|
|
—
|
|
|
—
|
|
|||
Distributions to non-controlling interest
|
(974
|
)
|
|
—
|
|
|
—
|
|
|||
Other financing activities
|
—
|
|
|
20
|
|
|
—
|
|
|||
Net cash provided by (used in) financing activities
|
69,356
|
|
|
(9,254
|
)
|
|
948
|
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
3,237
|
|
|
(1,235
|
)
|
|
(952
|
)
|
|||
Net (decrease) increase in cash and cash equivalents
|
(40,301
|
)
|
|
76,174
|
|
|
12,166
|
|
|||
Cash and cash equivalents at beginning of year
|
125,975
|
|
|
49,801
|
|
|
37,635
|
|
|||
Cash and cash equivalents at end of year
|
$
|
85,674
|
|
|
$
|
125,975
|
|
|
$
|
49,801
|
|
Supplemental disclosures:
|
|
|
|
|
|
||||||
Cash paid for interest and fees
|
$
|
4,594
|
|
|
$
|
1,626
|
|
|
$
|
6,641
|
|
Cash paid for income taxes, net
|
$
|
10,788
|
|
|
$
|
6,143
|
|
|
$
|
5,454
|
|
Noncash investing and financing activities:
|
|
|
|
|
|
||||||
Accrued capital expenditures at period end
|
$
|
2,007
|
|
|
$
|
736
|
|
|
$
|
2,255
|
|
Issuance of treasury stock and common stock for compensatory stock awards released from restriction
|
$
|
5,813
|
|
|
$
|
920
|
|
|
$
|
3,763
|
|
Conversion of convertible notes to common stock, net of discount (Note 4)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
109,105
|
|
|
Callaway Golf Shareholders
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
|
Common Stock
|
|
Additional Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Treasury Stock
|
|
Total Callaway Golf Company Shareholders' Equity
|
|
Non-controlling
Interest
|
|
Total
|
||||||||||||||||||||||||||||
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
|||||||||||||||||||||||||||||||||
Balance, December 31, 2014
|
78,374
|
|
|
$
|
784
|
|
|
$
|
210,057
|
|
|
$
|
89,932
|
|
|
|
$
|
(796
|
)
|
|
|
(780
|
)
|
|
$
|
(8,443
|
)
|
|
|
$
|
291,534
|
|
|
|
$
|
—
|
|
|
$
|
291,534
|
|
||
Convertible notes to common stock exchange
|
15,000
|
|
|
150
|
|
|
108,955
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
109,105
|
|
|
|
—
|
|
|
109,105
|
|
||||||||||
Acquisition of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
(217
|
)
|
|
(1,960
|
)
|
|
|
(1,960
|
)
|
|
|
—
|
|
|
(1,960
|
)
|
||||||||||
Exercise of stock options
|
277
|
|
|
3
|
|
|
(5
|
)
|
|
—
|
|
|
|
—
|
|
|
|
637
|
|
|
6,567
|
|
|
|
6,565
|
|
|
|
—
|
|
|
6,565
|
|
||||||||||
Tax deficit from exercise of stock options and compensatory stock
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
(1
|
)
|
||||||||||
Compensatory awards released from restriction
|
110
|
|
|
1
|
|
|
(3,763
|
)
|
|
—
|
|
|
|
—
|
|
|
|
353
|
|
|
3,762
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
7,542
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
7,542
|
|
|
|
—
|
|
|
7,542
|
|
||||||||||
Stock dividends
|
8
|
|
|
—
|
|
|
8
|
|
|
(62
|
)
|
|
|
—
|
|
|
|
5
|
|
|
54
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,391
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
(3,391
|
)
|
|
|
—
|
|
|
(3,391
|
)
|
||||||||||
Equity adjustment from foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(11,542
|
)
|
|
|
—
|
|
|
—
|
|
|
|
(11,542
|
)
|
|
|
—
|
|
|
(11,542
|
)
|
||||||||||
Equity adjustment from derivative instruments, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
525
|
|
|
|
—
|
|
|
—
|
|
|
|
525
|
|
|
|
—
|
|
|
525
|
|
||||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
14,568
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
14,568
|
|
|
|
—
|
|
|
14,568
|
|
||||||||||
Balance, December 31, 2015
|
93,769
|
|
|
$
|
938
|
|
|
$
|
322,793
|
|
|
$
|
101,047
|
|
|
|
$
|
(11,813
|
)
|
|
|
(2
|
)
|
|
$
|
(20
|
)
|
|
|
$
|
412,945
|
|
|
|
$
|
—
|
|
|
$
|
412,945
|
|
||
Acquisition of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
(572
|
)
|
|
(5,144
|
)
|
|
|
(5,144
|
)
|
|
|
|
|
|
(5,144
|
)
|
||||||||||
Exercise of stock options
|
—
|
|
|
—
|
|
|
(697
|
)
|
|
—
|
|
|
|
—
|
|
|
|
374
|
|
|
3,334
|
|
|
|
2,637
|
|
|
|
—
|
|
|
2,637
|
|
||||||||||
Tax deficit from exercise of stock options
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
20
|
|
|
|
—
|
|
|
20
|
|
||||||||||
Compensatory awards released from restriction
|
440
|
|
|
4
|
|
|
(920
|
)
|
|
—
|
|
|
|
—
|
|
|
|
101
|
|
|
916
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
8,965
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
8,965
|
|
|
|
—
|
|
|
8,965
|
|
||||||||||
Stock dividends
|
5
|
|
|
—
|
|
|
45
|
|
|
(54
|
)
|
|
|
—
|
|
|
|
1
|
|
|
9
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,764
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
(3,764
|
)
|
|
|
—
|
|
|
(3,764
|
)
|
||||||||||
Equity adjustment from foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(7,727
|
)
|
|
|
|
|
|
—
|
|
|
|
(7,727
|
)
|
|
|
(1,104
|
)
|
|
(8,831
|
)
|
||||||||||
Equity adjustment from derivative instruments, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
1,074
|
|
|
|
—
|
|
|
—
|
|
|
|
1,074
|
|
|
|
—
|
|
|
1,074
|
|
||||||||||
Non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
9,744
|
|
|
9,744
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
189,900
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
189,900
|
|
|
|
1,054
|
|
|
190,954
|
|
||||||||||
Balance, December 31, 2016
|
94,214
|
|
|
$
|
942
|
|
|
$
|
330,206
|
|
|
$
|
287,129
|
|
|
|
$
|
(18,466
|
)
|
|
|
(98
|
)
|
|
$
|
(905
|
)
|
|
|
$
|
598,906
|
|
|
|
$
|
9,694
|
|
|
$
|
608,600
|
|
||
Acquisition of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,536
|
)
|
|
(16,617
|
)
|
|
|
(16,617
|
)
|
|
|
|
|
(16,617
|
)
|
|||||||||||
Exercise of stock options
|
—
|
|
|
—
|
|
|
(1,899
|
)
|
|
—
|
|
|
|
—
|
|
|
|
681
|
|
|
7,261
|
|
|
|
5,362
|
|
|
|
—
|
|
|
5,362
|
|
||||||||||
Tax benefit from exercise of stock options
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|||||||||||
Compensatory awards released from restriction
|
825
|
|
|
8
|
|
|
(5,813
|
)
|
|
—
|
|
|
|
—
|
|
|
|
542
|
|
|
5,805
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
12,647
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
12,647
|
|
|
|
—
|
|
|
12,647
|
|
||||||||||
Stock dividends
|
4
|
|
|
—
|
|
|
81
|
|
|
(81
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,773
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
(3,773
|
)
|
|
|
—
|
|
|
(3,773
|
)
|
||||||||||
Equity adjustment from foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
14,198
|
|
|
|
|
|
—
|
|
|
|
14,198
|
|
|
|
163
|
|
|
14,361
|
|
|||||||||||
Equity adjustment from derivative instruments, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(1,898
|
)
|
|
|
—
|
|
|
—
|
|
|
|
(1,898
|
)
|
|
|
—
|
|
|
(1,898
|
)
|
||||||||||
Distributions to non-controlling interests (see Note 7)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
(974
|
)
|
|
(974
|
)
|
||||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
40,806
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
40,806
|
|
|
|
861
|
|
|
41,667
|
|
||||||||||
Balance, December 31, 2017
|
95,043
|
|
|
$
|
950
|
|
|
$
|
335,222
|
|
|
$
|
324,081
|
|
|
|
$
|
(6,166
|
)
|
|
|
(411
|
)
|
|
$
|
(4,456
|
)
|
|
|
$
|
649,631
|
|
|
|
$
|
9,744
|
|
|
$
|
659,375
|
|
|
Years Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(In thousands)
|
||||||||||
Beginning balance
|
$
|
5,395
|
|
|
$
|
5,706
|
|
|
$
|
5,607
|
|
Provision
|
9,434
|
|
|
5,493
|
|
|
5,220
|
|
|||
Claims paid/costs incurred
|
(8,172
|
)
|
|
(5,804
|
)
|
|
(5,121
|
)
|
|||
Ending balance
|
$
|
6,657
|
|
|
$
|
5,395
|
|
|
$
|
5,706
|
|
|
Years Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(In thousands)
|
||||||||||
Beginning balance
|
$
|
5,728
|
|
|
$
|
5,645
|
|
|
$
|
6,460
|
|
Provision
|
2,335
|
|
|
2,398
|
|
|
992
|
|
|||
Write-off of uncollectible amounts, net of recoveries
|
(3,616
|
)
|
|
(2,315
|
)
|
|
(1,807
|
)
|
|||
Ending balance
|
$
|
4,447
|
|
|
$
|
5,728
|
|
|
$
|
5,645
|
|
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,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(In thousands)
|
||||||||||
Foreign currency forward contract gain (loss), net
|
$
|
(7,688
|
)
|
|
$
|
(2,917
|
)
|
|
$
|
2,877
|
|
Foreign currency transaction gain (loss), net
|
808
|
|
|
226
|
|
|
(1,611
|
)
|
|||
Other
|
9
|
|
|
1,001
|
|
|
199
|
|
|||
|
$
|
(6,871
|
)
|
|
$
|
(1,690
|
)
|
|
$
|
1,465
|
|
|
Derivative Instruments
|
|
Foreign Currency Translation
|
|
Total
|
||||||
Accumulated other comprehensive loss, December 31, 2014
|
$
|
—
|
|
|
$
|
(796
|
)
|
|
$
|
(796
|
)
|
Change in derivative instruments
|
2,892
|
|
|
—
|
|
|
2,892
|
|
|||
Amounts reclassified to other income (expense) due to hedge instrument ineffectiveness
|
(576
|
)
|
|
—
|
|
|
(576
|
)
|
|||
Net gains reclassified to cost of goods sold
|
(1,791
|
)
|
|
—
|
|
|
(1,791
|
)
|
|||
Foreign currency translation adjustments
|
—
|
|
|
(11,542
|
)
|
|
(11,542
|
)
|
|||
Accumulated other comprehensive loss, December 31, 2015
|
525
|
|
|
(12,338
|
)
|
|
(11,813
|
)
|
|||
Change in derivative instruments
|
(567
|
)
|
|
—
|
|
|
(567
|
)
|
|||
Net losses reclassified to cost of goods sold
|
1,500
|
|
|
—
|
|
|
1,500
|
|
|||
Net losses reclassified to net sales
|
1,014
|
|
|
—
|
|
|
1,014
|
|
|||
Foreign currency translation adjustments
|
—
|
|
|
(7,698
|
)
|
|
(7,698
|
)
|
|||
Income tax expense
|
(902
|
)
|
|
—
|
|
|
(902
|
)
|
|||
Accumulated other comprehensive loss, December 31, 2016, after tax
|
1,570
|
|
|
(20,036
|
)
|
|
(18,466
|
)
|
|||
Change in derivative instruments
|
(2,679
|
)
|
|
—
|
|
|
(2,679
|
)
|
|||
Net losses reclassified to cost of goods sold
|
187
|
|
|
—
|
|
|
187
|
|
|||
Foreign currency translation adjustments
|
—
|
|
|
14,198
|
|
|
14,198
|
|
|||
Income tax expense
|
594
|
|
|
—
|
|
|
594
|
|
|||
Accumulated other comprehensive loss, December 31, 2017, after tax
|
$
|
(328
|
)
|
|
$
|
(5,838
|
)
|
|
$
|
(6,166
|
)
|
•
|
Golf Club customers accounted for approximately
20%
,
26%
and
28%
of total consolidated Golf Club sales in 2017, 2016 and 2015, respectively;
|
•
|
Golf Ball customers accounted for approximately
30%
,
28%
and
30%
of total consolidated Golf Ball sales in 2017, 2016 and 2015, respectively; and
|
•
|
Gear and Accessories customers accounted for approximately
15%
,
18%
and
21%
of total consolidated Gear and Accessories sales in 2017, 2016 and
2015
, respectively.
|
|
At January 11, 2017
|
|||
Assets Acquired
|
|
|
||
Cash
|
|
$
|
8,061
|
|
Accounts receivable
|
|
7,696
|
|
|
Inventory
|
|
7,092
|
|
|
Other current assets
|
|
328
|
|
|
Property and equipment
|
|
2,369
|
|
|
Intangibles - trade name
|
|
49,700
|
|
|
Intangibles - customer & distributor relationships
|
|
1,500
|
|
|
Intangibles - non-compete agreements
|
|
150
|
|
|
Goodwill
|
|
5,885
|
|
|
Total assets acquired
|
|
82,781
|
|
|
Liabilities Assumed
|
|
|
||
Accounts Payable and accrued liabilities
|
|
16,830
|
|
|
Net assets acquired
|
|
$
|
65,951
|
|
|
At August 17, 2017
|
|||
Assets Acquired
|
|
|
||
Cash
|
|
$
|
663
|
|
Accounts receivable
|
|
9,715
|
|
|
Inventory
|
|
11,909
|
|
|
Other current assets
|
|
549
|
|
|
Property and equipment
|
|
4,327
|
|
|
Other assets
|
|
117
|
|
|
Intangibles - trade name
|
|
78,400
|
|
|
Intangibles - licensing agreement
|
|
1,100
|
|
|
Intangibles - customer & distributor relationships
|
|
4,450
|
|
|
Intangibles - non-compete agreements
|
|
600
|
|
|
Goodwill
|
|
23,640
|
|
|
Total assets acquired
|
|
135,470
|
|
|
Liabilities Assumed
|
|
|
||
Accounts Payable and accrued liabilities
|
|
10,892
|
|
|
Net assets acquired
|
|
$
|
124,578
|
|
|
Years Ended December 31,
|
||||||
|
2017
|
|
2016
|
||||
(in thousands)
|
|
|
|
||||
Net sales
|
$
|
1,086,593
|
|
|
$
|
964,514
|
|
Net income (loss) attributable to Callaway Golf Company
|
$
|
52,514
|
|
|
$
|
188,117
|
|
|
Years Ended December 31,
|
||||||||||
|
2017
|
|
2016
(1)
|
|
2015
|
||||||
|
(In thousands, except per share data)
|
||||||||||
Earnings per common share—basic
|
|
|
|
|
|
||||||
Net income attributable to Callaway Golf Company
|
$
|
40,806
|
|
|
$
|
189,900
|
|
|
$
|
14,568
|
|
Weighted-average common shares outstanding—basic
|
94,329
|
|
|
94,045
|
|
|
83,116
|
|
|||
Basic earnings per common share
|
$
|
0.43
|
|
|
$
|
2.02
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
||||||
Earnings per common share—diluted
|
|
|
|
|
|
||||||
Net income attributable to Callaway Golf Company
|
$
|
40,806
|
|
|
$
|
189,900
|
|
|
$
|
14,568
|
|
Weighted-average common shares outstanding—basic
|
94,329
|
|
|
94,045
|
|
|
83,116
|
|
|||
Options and restricted stock
|
2,248
|
|
|
1,800
|
|
|
1,495
|
|
|||
Weighted-average common shares outstanding—diluted
|
96,577
|
|
|
95,845
|
|
|
84,611
|
|
|||
Diluted earnings per common share
(1)
|
$
|
0.42
|
|
|
$
|
1.98
|
|
|
$
|
0.17
|
|
|
(1)
|
During the fourth quarter of 2016, the Company reversed a significant portion of the valuation allowance on its U.S. deferred tax assets. This resulted in a favorable impact to net income of
$156,600,000
(
$1.63
per share), partially offset by
$15,974,000
(
$0.16
per share) as the result of the recognition of income taxes that were retroactive for all of 2016 on the Company's U.S. business (see
Note 10
). In addition, net income for 2016 includes a
$17,662,000
(
$0.18
per share) pre-tax gain from the sale of approximately
10.0%
of the Company's investment in Topgolf (see
Note 7
).
|
•
|
For the year ended December 31, 2017, securities outstanding totaling approximately
129,000
, comprised of anti-dilutive options.
|
•
|
For the year ended December 31, 2016, securities outstanding totaling approximately
313,000
, compromised of anti-dilutive options.
|
•
|
For the year ended December 31, 2015, securities outstanding totaling approximately
10,812,000
, including common shares underlying convertible senior notes of
10,248,000
, in addition to anti-dilutive options.
|
|
Useful
Life
(Years)
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||||||||||||||
|
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
|
|
$
|
218,364
|
|
|
|
$
|
—
|
|
|
|
$
|
218,364
|
|
|
$
|
88,590
|
|
|
|
$
|
—
|
|
|
|
$
|
88,590
|
|
Amortizing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Patents
|
2-16
|
|
31,581
|
|
|
|
31,491
|
|
|
|
90
|
|
|
31,581
|
|
|
|
31,440
|
|
|
|
141
|
|
||||||
Developed technology and other
|
1-9
|
|
15,780
|
|
|
|
8,476
|
|
|
|
7,304
|
|
|
7,981
|
|
|
|
7,981
|
|
|
|
—
|
|
||||||
Total intangible assets
|
|
|
$
|
265,725
|
|
|
|
$
|
39,967
|
|
|
|
$
|
225,758
|
|
|
$
|
128,152
|
|
|
|
$
|
39,421
|
|
|
|
$
|
88,731
|
|
2018
|
$
|
1,066
|
|
2019
|
1,053
|
|
|
2020
|
966
|
|
|
2021
|
910
|
|
|
2022
|
734
|
|
|
Thereafter
|
2,665
|
|
|
|
$
|
7,394
|
|
|
December 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(In thousands)
|
||||||
Accounts receivable, net:
|
|
|
|
||||
Trade accounts receivable
|
$
|
114,642
|
|
|
$
|
142,932
|
|
Allowance for sales returns
|
(15,470
|
)
|
|
(9,341
|
)
|
||
Allowance for doubtful accounts
|
(4,447
|
)
|
|
(5,728
|
)
|
||
|
$
|
94,725
|
|
|
$
|
127,863
|
|
Inventories:
|
|
|
|
||||
Raw materials
|
$
|
67,785
|
|
|
$
|
46,451
|
|
Work-in-process
|
868
|
|
|
739
|
|
||
Finished goods
|
193,833
|
|
|
142,210
|
|
||
|
$
|
262,486
|
|
|
$
|
189,400
|
|
Property, plant and equipment, net:
|
|
|
|
||||
Land
|
$
|
7,322
|
|
|
$
|
7,251
|
|
Buildings and improvements
|
71,692
|
|
|
67,945
|
|
||
Machinery and equipment
|
98,116
|
|
|
110,799
|
|
||
Furniture, computers and equipment
|
108,706
|
|
|
102,421
|
|
||
Production molds
|
19,604
|
|
|
19,843
|
|
||
Construction-in-process
|
10,665
|
|
|
4,724
|
|
||
|
316,105
|
|
|
312,983
|
|
||
Accumulated depreciation
|
(245,878
|
)
|
|
(258,508
|
)
|
||
|
$
|
70,227
|
|
|
$
|
54,475
|
|
Accounts payable and accrued expenses:
|
|
|
|
||||
Accounts payable
|
$
|
63,204
|
|
|
$
|
54,574
|
|
Accrued expenses
|
87,925
|
|
|
57,478
|
|
||
Accrued goods in-transit
|
24,998
|
|
|
20,469
|
|
||
|
$
|
176,127
|
|
|
$
|
132,521
|
|
Accrued employee compensation and benefits:
|
|
|
|
||||
Accrued payroll and taxes
|
$
|
29,363
|
|
|
$
|
23,133
|
|
Accrued vacation and sick pay
|
9,781
|
|
|
8,722
|
|
||
Accrued commissions
|
1,029
|
|
|
713
|
|
||
|
$
|
40,173
|
|
|
$
|
32,568
|
|
|
Years Ended December 31,
|
||||||||||
|
2017
|
|
2016
(1)
|
|
2015
|
||||||
United States
|
$
|
50,706
|
|
|
$
|
38,268
|
|
|
$
|
6,864
|
|
Foreign
|
17,349
|
|
|
20,125
|
|
|
13,199
|
|
|||
|
$
|
68,055
|
|
|
$
|
58,393
|
|
|
$
|
20,063
|
|
|
Years Ended December 31,
|
||||||||||
|
2017
|
|
2016
(2)
|
|
2015
|
||||||
Current tax provision:
|
|
|
|
|
|
||||||
Federal
|
$
|
610
|
|
|
$
|
541
|
|
|
$
|
271
|
|
State
|
1,259
|
|
|
543
|
|
|
431
|
|
|||
Foreign
|
6,135
|
|
|
7,289
|
|
|
4,393
|
|
|||
|
8,004
|
|
|
8,373
|
|
|
5,095
|
|
|||
Deferred tax expense (benefit):
|
|
|
|
|
|
||||||
Federal
|
20,746
|
|
|
(129,405
|
)
|
|
(41
|
)
|
|||
State
|
(1,127
|
)
|
|
(10,693
|
)
|
|
113
|
|
|||
Foreign
|
(1,235
|
)
|
|
(836
|
)
|
|
328
|
|
|||
|
18,384
|
|
|
(140,934
|
)
|
|
400
|
|
|||
Income tax provision
|
$
|
26,388
|
|
|
$
|
(132,561
|
)
|
|
$
|
5,495
|
|
|
(1)
|
Income before income taxes in 2016 includes a gain of
$17,662,000
that was recognized in connection with the sale of preferred shares of the Company's investment in Topgolf. See Note 7 for further discussion.
|
(2)
|
The income tax benefit for 2016 includes the reversal of a significant portion of the valuation allowance on the Company's deferred tax assets in the U.S. See further discussion below.
|
|
December 31,
|
||||||
|
2017
|
|
2016
|
||||
Deferred tax assets:
|
|
|
|
||||
Reserves and allowances not currently deductible for tax purposes
|
$
|
12,783
|
|
|
$
|
15,506
|
|
Basis difference related to fixed assets
|
5,946
|
|
|
9,697
|
|
||
Compensation and benefits
|
7,807
|
|
|
9,273
|
|
||
Basis difference for inventory valuation
|
1,612
|
|
|
2,100
|
|
||
Compensatory stock options and rights
|
3,869
|
|
|
5,715
|
|
||
Deferred revenue and other
|
175
|
|
|
226
|
|
||
Operating loss carryforwards
|
21,799
|
|
|
75,110
|
|
||
Tax credit carryforwards
|
62,668
|
|
|
32,730
|
|
||
Basis difference related to intangible assets with a definite life
|
7,061
|
|
|
13,993
|
|
||
Other
|
634
|
|
|
389
|
|
||
Total deferred tax assets
|
124,354
|
|
|
164,739
|
|
||
Valuation allowance for deferred tax assets
|
(11,114
|
)
|
|
(16,515
|
)
|
||
Deferred tax assets, net of valuation allowance
|
$
|
113,240
|
|
|
$
|
148,224
|
|
Deferred tax liabilities:
|
|
|
|
||||
Prepaid expenses
|
(773
|
)
|
|
(1,082
|
)
|
||
Basis difference related to intangible assets with an indefinite life
|
(22,891
|
)
|
|
(34,031
|
)
|
||
Total deferred tax liabilities
|
(23,664
|
)
|
|
(35,113
|
)
|
||
Net deferred tax assets
|
$
|
89,576
|
|
|
$
|
113,111
|
|
Net deferred tax assets (liabilities) are shown on the accompanying consolidated balance sheets as follows:
|
|
|
|
||||
Non-current deferred tax assets
|
$
|
91,398
|
|
|
$
|
114,707
|
|
Non-current deferred tax liabilities
|
(1,822
|
)
|
|
(1,596
|
)
|
||
Net deferred tax assets
|
$
|
89,576
|
|
|
$
|
113,111
|
|
U.S. foreign tax credit
|
$
|
46,639
|
|
|
2021 - 2037
|
U.S. research tax credit
|
$
|
9,623
|
|
|
2031 - 2037
|
U.S. business tax credits
|
$
|
23
|
|
|
2031 - 2037
|
State investment tax credits
|
$
|
858
|
|
|
Do not expire
|
State research tax credits
|
$
|
14,641
|
|
|
Do not expire
|
U.S. loss carryforwards
|
$
|
63,493
|
|
|
2032 - 2035
|
State loss carryforwards
|
$
|
124,466
|
|
|
2018 - 2037
|
|
Years Ended December 31,
|
|||||||
|
2017
|
|
2016
|
|
2015
|
|||
Statutory U.S. tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income taxes, net of U.S. tax benefit
|
2.6
|
%
|
|
3.1
|
%
|
|
3.5
|
%
|
Federal and State tax credits, net of U.S. tax benefit
|
(4.1
|
)%
|
|
(5.0
|
)%
|
|
(11.5
|
)%
|
Foreign income taxed at other than U.S. statutory rate
|
(0.2
|
)%
|
|
1.8
|
%
|
|
(2.4
|
)%
|
Effect of foreign rate changes
|
0.2
|
%
|
|
0.5
|
%
|
|
0.9
|
%
|
Foreign tax credit
|
(1.3
|
)%
|
|
(11.3
|
)%
|
|
(12.0
|
)%
|
Basis differences of intangibles with an indefinite life
|
0.1
|
%
|
|
0.1
|
%
|
|
0.1
|
%
|
Change in deferred tax valuation allowance
|
(1.9
|
)%
|
|
(262.4
|
)%
|
|
0.3
|
%
|
Accrual for interest and income taxes related to uncertain tax positions
|
2.2
|
%
|
|
2.9
|
%
|
|
(0.3
|
)%
|
Income (loss) from flowthrough entities
|
1.0
|
%
|
|
(0.2
|
)%
|
|
(2.0
|
)%
|
Meals and entertainment
|
1.1
|
%
|
|
1.5
|
%
|
|
3.4
|
%
|
Group loss relief
|
(0.6
|
)%
|
|
(1.6
|
)%
|
|
(3.7
|
)%
|
Stock option compensation
|
(2.0
|
)%
|
|
0.2
|
%
|
|
(1.9
|
)%
|
Foreign dividends and earnings inclusion
|
0.7
|
%
|
|
9.9
|
%
|
|
7.1
|
%
|
Foreign tax withholding
|
0.9
|
%
|
|
0.6
|
%
|
|
1.4
|
%
|
Executive compensation limitation
|
0.5
|
%
|
|
0.7
|
%
|
|
4.3
|
%
|
Intra-entity asset transfers
|
(6.3
|
)%
|
|
—
|
%
|
|
—
|
%
|
Enactment of the Tax Cuts and Jobs Act
|
11.1
|
%
|
|
—
|
%
|
|
—
|
%
|
Other
|
(0.2
|
)%
|
|
(2.8
|
)%
|
|
5.2
|
%
|
Effective tax rate
|
38.8
|
%
|
|
(227.0
|
)%
|
|
27.4
|
%
|
|
2017
|
|
2016
|
|
2015
|
||||||
Balance at January 1
|
$
|
8,256
|
|
|
$
|
7,090
|
|
|
$
|
6,559
|
|
Additions based on tax positions related to the current year
|
1,061
|
|
|
969
|
|
|
1,120
|
|
|||
Additions for tax positions of prior years
|
233
|
|
|
542
|
|
|
132
|
|
|||
Reductions for tax positions of prior years
|
(192
|
)
|
|
(80
|
)
|
|
(255
|
)
|
|||
Settlement of tax audits
|
(33
|
)
|
|
—
|
|
|
—
|
|
|||
Reductions due to lapsed statute of limitations
|
(25
|
)
|
|
(265
|
)
|
|
(466
|
)
|
|||
Balance at December 31
|
$
|
9,300
|
|
|
$
|
8,256
|
|
|
$
|
7,090
|
|
|
Operating Leases
|
|
Capital Leases
|
||||
2018
|
$
|
8,538
|
|
|
$
|
230
|
|
2019
|
8,437
|
|
|
71
|
|
||
2020
|
7,409
|
|
|
14
|
|
||
2021
|
6,458
|
|
|
7
|
|
||
2022
|
6,220
|
|
|
4
|
|
||
Thereafter
|
17,206
|
|
|
—
|
|
||
|
$
|
54,268
|
|
|
$
|
326
|
|
2018
|
$
|
39,338
|
|
2019
|
18,841
|
|
|
2020
|
8,519
|
|
|
2021
|
4,093
|
|
|
2022
|
1,668
|
|
|
|
$
|
72,459
|
|
|
Authorized
|
|
Available
|
|
Outstanding
(1)
|
|||
|
(In thousands)
|
|||||||
2004 Incentive Plan
|
33,000
|
|
|
10,875
|
|
|
3,635
|
|
2013 Directors Plan
|
1,000
|
|
|
747
|
|
|
60
|
|
Total
|
34,000
|
|
|
11,622
|
|
|
3,695
|
|
|
(1)
|
Includes
6,000
shares of accrued incremental dividend equivalent rights on outstanding shares underlying restricted stock units granted under the 2004 Incentive Plan and 2013 Directors Plan.
|
Options
|
Number of
Shares
|
|
Weighted-
Average
Exercise Price
Per Share
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
Outstanding at January 1, 2017
|
1,783
|
|
|
$
|
7.92
|
|
|
|
|
|
||
Granted
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Exercised
|
(681
|
)
|
|
$
|
7.87
|
|
|
|
|
|
||
Forfeited
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Expired
|
(122
|
)
|
|
$
|
14.37
|
|
|
|
|
|
||
Outstanding at December 31, 2017
|
980
|
|
|
$
|
7.15
|
|
|
4.44
|
|
$
|
6,702
|
|
Vested and expected to vest in the future at December 31, 2017
|
980
|
|
|
$
|
7.15
|
|
|
4.44
|
|
$
|
6,701
|
|
Exercisable at December 31, 2017
|
968
|
|
|
$
|
7.15
|
|
|
4.43
|
|
$
|
6,619
|
|
Restricted Stock Units
|
Units
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|||
Nonvested at January 1, 2017
|
1,419
|
|
|
$
|
8.81
|
|
Granted
|
680
|
|
|
10.94
|
|
|
Vested
|
(797
|
)
|
|
8.54
|
|
|
Forfeited
|
(26
|
)
|
|
9.47
|
|
|
Nonvested at December 31, 2017
1
|
1,276
|
|
|
$
|
10.09
|
|
|
(1)
|
Excludes
6,000
shares of accrued incremental dividend equivalent rights on outstanding shares underlying restricted stock units granted under the 2004 Incentive Plan and 2013 Directors Plan.
|
|
(1)
|
Nonvested performance share units as of January 1, 2017, are comprised of
1,306,000
shares at the target award rate adjusted for shares earned by participants at
130.2%
and
131.5%
for awards granted in 2015 and 2014, respectively.
|
Stock Appreciation Rights
|
Units
|
|
Weighted-
Average Exercise Price Per Share |
|||
Nonvested and Outstanding at January 1, 2017
|
50
|
|
|
$
|
6.48
|
|
Granted
|
—
|
|
|
—
|
|
|
Exercised
|
(50
|
)
|
|
6.48
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
Outstanding at December 31, 2017
|
—
|
|
|
$
|
—
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
Cost of sales
|
$
|
907
|
|
|
$
|
704
|
|
|
$
|
754
|
|
Operating expenses
|
11,708
|
|
|
8,581
|
|
|
10,466
|
|
|||
Total cost of employee share-based compensation included in income before income tax
|
$
|
12,615
|
|
|
$
|
9,285
|
|
|
$
|
11,220
|
|
|
Fair
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
2017
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts —asset position
|
$
|
179
|
|
|
$
|
—
|
|
|
$
|
179
|
|
|
$
|
—
|
|
Foreign currency forward contracts —liability position
|
(239
|
)
|
|
—
|
|
|
(239
|
)
|
|
—
|
|
||||
|
$
|
(60
|
)
|
|
$
|
—
|
|
|
$
|
(60
|
)
|
|
$
|
—
|
|
2016
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts —asset position
|
$
|
3,524
|
|
|
$
|
—
|
|
|
$
|
3,524
|
|
|
$
|
—
|
|
Foreign currency forward contracts —liability position
|
(85
|
)
|
|
—
|
|
|
(85
|
)
|
|
—
|
|
||||
|
$
|
3,439
|
|
|
$
|
—
|
|
|
$
|
3,439
|
|
|
$
|
—
|
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||
|
Carrying
Value
|
|
Fair Value
|
|
Carrying
Value
|
|
Fair Value
|
||||||||
Primary Asset-Based Revolving Credit Facility
(2)
|
$
|
74,000
|
|
|
$
|
74,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Japan ABL Facility
(2)
|
$
|
13,755
|
|
|
$
|
13,755
|
|
|
$
|
11,966
|
|
|
$
|
11,966
|
|
Equipment Note
(3)
|
$
|
11,815
|
|
|
$
|
11,815
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Standby letters of credit
(4)
|
$
|
887
|
|
|
$
|
887
|
|
|
$
|
823
|
|
|
$
|
823
|
|
Money market funds
(5)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
69,081
|
|
|
$
|
69,081
|
|
|
(1)
|
The carrying value of amounts outstanding under the Primary Asset-Based Revolving and the Japan ABL credit facilities approximate the fair value due to the short term nature of these obligations. The fair value of this debt is categorized within Level 2 of the fair value hierarchy. See
Note 4
for information on the Company's credit facilities, including certain risks and uncertainties related thereto.
|
(2)
|
In December 2017, the Company entered into the Equipment Note secured by certain equipment at the Company's golf ball manufacturing facility. As of
December 31, 2017
, the Company had
$11,815,000
outstanding under the Equipment Note. The fair value of this debt is categorized within Level 2 of the fair value hierarchy. See
Note 4
for further information.
|
(3)
|
The carrying value of the Company's standby letters of credit approximates the fair value as they represent the Company’s contingent obligation to perform in accordance with the underlying contracts. The fair value of this contingent obligation is categorized within Level 2 of the fair value hierarchy.
|
(4)
|
The carrying value of the money market funds approximates fair value as the funds are highly liquid and short-term in nature. The funds seek to maintain a stable net asset value of
$1.00
per share, and the market value per share of these funds are available in active markets. As such, they are categorized within Level 1 of the fair value hierarchy. The money market funds accrued dividends, which were reinvested and reflected in the carrying value as of December 31, 2016. There were no money market funds outstanding as of December 30, 2017.
|
|
Asset Derivatives
|
||||||||||
|
December 31, 2017
|
|
December 31, 2016
|
||||||||
|
Balance Sheet Location
|
|
Fair Value
|
|
Balance Sheet Location
|
|
Fair Value
|
||||
Derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
Other current assets
|
|
$
|
168
|
|
|
Other current assets
|
|
$
|
2,660
|
|
|
|
|
|
|
|
|
|
||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
Other current assets
|
|
$
|
11
|
|
|
Other current assets
|
|
$
|
864
|
|
|
Liability Derivatives
|
||||||||||
|
December 31, 2017
|
|
December 31, 2016
|
||||||||
|
Balance Sheet Location
|
|
Fair Value
|
|
Balance Sheet Location
|
|
Fair Value
|
||||
Derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
Accounts payable and
accrued expenses
|
|
$
|
194
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
Accounts payable and
accrued expenses
|
|
$
|
45
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
57
|
|
|
|
Net Gain (Loss) Recognized in Other Comprehensive Income
(Effective Portion)
|
||||||||||
|
|
Year Ended December 31,
|
||||||||||
Derivatives designated as cash flow hedging instruments
|
|
2017
|
|
2016
|
|
2015
|
||||||
Foreign currency forward contracts
|
|
$
|
(2,679
|
)
|
|
$
|
(538
|
)
|
|
$
|
2,316
|
|
|
|
Net Gain (Loss) Reclassified from Other Comprehensive Income into Earnings
(Effective Portion)
|
||||||||||
|
|
Year Ended December 31,
|
||||||||||
Derivatives designated as cash flow hedging instruments
|
|
2017
|
|
2016
|
|
2015
|
||||||
Foreign currency forward contracts
|
|
$
|
(187
|
)
|
|
$
|
(2,514
|
)
|
|
$
|
1,791
|
|
|
|
Net Gain Recognized in Other Income (Expense)
(Ineffective Portion)
|
||||||||||
|
|
Year Ended December 31,
|
||||||||||
Derivatives designated as cash flow hedging instruments
|
|
2017
|
|
2016
|
|
2015
|
||||||
Foreign currency forward contracts
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,149
|
|
|
|
|
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,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||||
Foreign currency forward contracts
|
Other income (expense), net
|
|
$
|
(7,985
|
)
|
|
$
|
(6,563
|
)
|
|
$
|
1,322
|
|
|
Years Ended December 31,
|
||||||||||
|
2017
|
|
2016
(1)
|
|
2015
(1)
|
||||||
|
(In thousands)
|
||||||||||
Net sales:
|
|
|
|
|
|
||||||
Golf Clubs
|
$
|
643,096
|
|
|
$
|
582,381
|
|
|
$
|
581,450
|
|
Golf Balls
|
162,546
|
|
|
152,261
|
|
|
143,173
|
|
|||
Gear, Accessories and Other
|
243,094
|
|
|
136,550
|
|
|
119,171
|
|
|||
|
$
|
1,048,736
|
|
|
$
|
871,192
|
|
|
$
|
843,794
|
|
Income (loss) before income tax:
|
|
|
|
|
|
||||||
Golf Clubs
|
$
|
77,018
|
|
|
$
|
48,489
|
|
|
$
|
32,630
|
|
Golf Balls
|
26,854
|
|
|
23,953
|
|
|
18,956
|
|
|||
Gear, Accessories and Other
|
30,631
|
|
|
18,223
|
|
|
19,137
|
|
|||
Reconciling items
(2)
|
(66,448
|
)
|
|
(32,272
|
)
|
|
(50,660
|
)
|
|||
|
$
|
68,055
|
|
|
$
|
58,393
|
|
|
$
|
20,063
|
|
Identifiable assets:
(3)
|
|
|
|
|
|
||||||
Golf Clubs
|
$
|
321,265
|
|
|
$
|
276,654
|
|
|
$
|
295,659
|
|
Golf Balls
|
57,120
|
|
|
45,758
|
|
|
47,884
|
|
|||
Gear, Accessories and Other
|
236,515
|
|
|
35,788
|
|
|
36,429
|
|
|||
Reconciling items
(3)
|
376,257
|
|
|
443,082
|
|
|
251,252
|
|
|||
|
$
|
991,157
|
|
|
$
|
801,282
|
|
|
$
|
631,224
|
|
Additions to long-lived assets:
(4)
|
|
|
|
|
|
||||||
Golf Clubs
|
$
|
11,396
|
|
|
$
|
6,163
|
|
|
$
|
6,774
|
|
Golf Balls
|
12,178
|
|
|
6,585
|
|
|
7,238
|
|
|||
Gear, Accessories and Other
|
3,790
|
|
|
2,050
|
|
|
2,253
|
|
|||
|
$
|
27,364
|
|
|
$
|
14,798
|
|
|
$
|
16,265
|
|
Goodwill:
|
|
|
|
|
|
||||||
Golf Clubs
|
$
|
26,904
|
|
|
$
|
25,593
|
|
|
$
|
26,500
|
|
Golf Balls
|
—
|
|
|
—
|
|
|
—
|
|
|||
Gear, Accessories and Other
(5)
|
29,525
|
|
|
—
|
|
|
—
|
|
|||
|
$
|
56,429
|
|
|
$
|
25,593
|
|
|
$
|
26,500
|
|
Depreciation and amortization:
|
|
|
|
|
|
||||||
Golf Clubs
|
$
|
8,769
|
|
|
$
|
8,509
|
|
|
$
|
8,907
|
|
Golf Balls
|
4,496
|
|
|
4,355
|
|
|
4,566
|
|
|||
Gear, Accessories and Other
|
4,340
|
|
|
3,722
|
|
|
3,906
|
|
|||
|
$
|
17,605
|
|
|
$
|
16,586
|
|
|
$
|
17,379
|
|
|
(1)
|
Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017.
|
(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. The
$34,176,000
increase in reconciling items in
2017
compared to
2016
was primarily due
$11,264,000
in one-time transaction and transitional costs associated with the acquisitions of OGIO in January 2017 and TravisMathew in August 2017, a
$17,662,000
gain recognized in the second quarter of 2016 in connection with the sale of approximately
10.0%
of the Company's investment in Topgolf (see Note 7), combined with increases of
$2,286,000
in corporate stock compensation expense and
$2,164,000
in interest expense, partially offset by a
$4,189,000
increase in foreign currency exchange losses.
|
(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
three
segments including cash and cash equivalents, net accounts receivable, and deferred tax assets. The
$66,825,000
decrease in reconciling items in 2017 compared to 2016 was primarily due Topgolf investment. The
$191,830,000
increase in reconciling items in 2016 compared to 2015
|
(4)
|
Additions to long-lived assets are comprised of purchases of property, plant and equipment.
|
(5)
|
The
$30,836,000
increase in goodwill in 2017 compared to 2016 was primarily as a result of the acquisitions of OGIO and TravisMathew in 2017.
|
|
Years Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(In thousands)
|
||||||||||
Net sales:
|
|
|
|
|
|
||||||
Woods
|
$
|
307,865
|
|
|
$
|
216,094
|
|
|
$
|
222,193
|
|
Irons
|
250,636
|
|
|
278,562
|
|
|
205,522
|
|
|||
Putters
|
84,595
|
|
|
87,725
|
|
|
86,293
|
|
|||
Golf Balls
|
162,546
|
|
|
152,261
|
|
|
143,145
|
|
|||
Accessories and Other
|
243,094
|
|
|
136,550
|
|
|
186,641
|
|
|||
|
$
|
1,048,736
|
|
|
$
|
871,192
|
|
|
$
|
843,794
|
|
|
Sales
|
|
Long-Lived
Assets
(1)
|
||||
|
(In thousands)
|
||||||
2017
|
|
|
|
||||
United States
|
$
|
566,365
|
|
|
$
|
403,493
|
|
Europe
|
139,515
|
|
|
7,681
|
|
||
Japan
|
199,331
|
|
|
7,635
|
|
||
Rest of Asia
|
76,540
|
|
|
3,717
|
|
||
Other foreign countries
|
66,985
|
|
|
11,248
|
|
||
|
$
|
1,048,736
|
|
|
$
|
433,774
|
|
2016
|
|
|
|
||||
United States
|
$
|
447,613
|
|
|
$
|
199,617
|
|
Europe
|
122,805
|
|
|
7,260
|
|
||
Japan
|
170,760
|
|
|
6,201
|
|
||
Rest of Asia
|
67,099
|
|
|
2,668
|
|
||
Other foreign countries
|
62,915
|
|
|
10,405
|
|
||
|
$
|
871,192
|
|
|
$
|
226,151
|
|
2015
|
|
|
|
||||
United States
|
$
|
446,474
|
|
|
$
|
205,952
|
|
Europe
|
125,116
|
|
|
8,414
|
|
||
Japan
|
138,031
|
|
|
4,445
|
|
||
Rest of Asia
|
70,315
|
|
|
2,868
|
|
||
Other foreign countries
|
63,858
|
|
|
11,096
|
|
||
|
$
|
843,794
|
|
|
$
|
232,775
|
|
|
(1)
|
Long-lived assets include all non-current assets of the Company except deferred tax assets.
|
|
Fiscal Year 2017 Quarters
|
||||||||||||||||||
|
1st
|
|
2nd
|
|
3rd
|
|
4th
|
|
Total
(2)
|
||||||||||
|
(In thousands, except per share data)
|
||||||||||||||||||
Net sales
|
$
|
308,927
|
|
|
$
|
304,548
|
|
|
$
|
243,604
|
|
|
$
|
191,657
|
|
|
$
|
1,048,736
|
|
Gross profit
|
$
|
147,715
|
|
|
$
|
148,165
|
|
|
$
|
104,902
|
|
|
$
|
79,666
|
|
|
$
|
480,448
|
|
Net income (loss)
|
$
|
25,880
|
|
|
$
|
31,474
|
|
|
$
|
3,089
|
|
|
$
|
(18,776
|
)
|
|
$
|
41,667
|
|
Less: Net income attributable to non-controlling interests
|
$
|
191
|
|
|
$
|
31
|
|
|
$
|
29
|
|
|
$
|
610
|
|
|
$
|
861
|
|
Net income (loss) attributable to Callaway Golf Company
|
$
|
25,689
|
|
|
$
|
31,443
|
|
|
$
|
3,060
|
|
|
$
|
(19,386
|
)
|
|
$
|
40,806
|
|
Earnings (loss) per common share
(1)
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
0.27
|
|
|
$
|
0.33
|
|
|
$
|
0.03
|
|
|
$
|
(0.20
|
)
|
|
$
|
0.43
|
|
Diluted
|
$
|
0.27
|
|
|
$
|
0.33
|
|
|
$
|
0.03
|
|
|
$
|
(0.20
|
)
|
|
$
|
0.42
|
|
|
Fiscal Year 2016 Quarters
|
||||||||||||||||||
|
1st
|
|
2nd
|
|
3rd
|
|
4th
(2)
|
|
Total
(2)
|
||||||||||
|
(In thousands, except per share data)
|
||||||||||||||||||
Net sales
|
$
|
274,053
|
|
|
$
|
245,594
|
|
|
$
|
187,850
|
|
|
$
|
163,695
|
|
|
$
|
871,192
|
|
Gross profit
|
$
|
132,392
|
|
|
$
|
110,633
|
|
|
$
|
78,875
|
|
|
$
|
63,111
|
|
|
$
|
385,011
|
|
Net income (loss)
|
$
|
38,390
|
|
|
$
|
34,105
|
|
|
$
|
(5,739
|
)
|
|
$
|
124,198
|
|
|
$
|
190,954
|
|
Less: Net income attributable to non-controlling interests
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
127
|
|
|
$
|
927
|
|
|
$
|
1,054
|
|
Net income (loss) attributable to Callaway Golf Company
|
$
|
38,390
|
|
|
$
|
34,105
|
|
|
$
|
(5,866
|
)
|
|
$
|
123,271
|
|
|
$
|
189,900
|
|
Earnings (loss) per common share
(1)
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
0.41
|
|
|
$
|
0.36
|
|
|
$
|
(0.06
|
)
|
|
$
|
1.31
|
|
|
$
|
2.02
|
|
Diluted
|
$
|
0.40
|
|
|
$
|
0.36
|
|
|
$
|
(0.06
|
)
|
|
$
|
1.28
|
|
|
$
|
1.98
|
|
|
(1)
|
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.
|
(2)
|
During the fourth quarter of 2016, the Company reversed a significant portion of the valuation allowance on its U.S. deferred tax assets. This resulted in a favorable impact to net income of
$156,600,000
(
$1.63
per share), partially offset by
$15,974,000
(
$0.16
per share) in income taxes that were retroactive for all of 2016 on the Company's U.S. business (see
Note 10
). In addition, net income for 2016 includes a
$17,662,000
(
$0.18
per share) pre-tax gain from the sale of approximately
10.0%
of the Company's investment in Topgolf (see
Note 7
).
|
Callaway Golf Company
|
Recipient:
|
Performance Unit Grant
|
Effective Grant Date:
|
|
Number of Units:
|
|
Plan:
Amended and Restated 2004 Incentive Plan
|
1.
|
Governing Plan
.
Recipient hereby acknowledges receipt of a copy of the Plan and the prospectus for the Plan (the “
Plan Prospectus
”). This Performance Unit Grant is subject in all respects to the applicable provisions of the Plan, which are incorporated herein by this reference. In the case of any conflict between the provisions of the Plan and this Performance Unit Grant Agreement (the “
Agreement
”), the provisions of the Plan will control.
|
2.
|
Grant of Performance Unit
.
Effective as of the Effective Grant Date identified above, the Company has granted and issued to Recipient the Number of Performance Units with respect to the Company's Common Stock identified above (the “
PSUs
”), representing an unfunded, unsecured promise of the Company to deliver shares of Common Stock in the future, subject to the claims of the Company’s creditors and the terms, conditions and restrictions set forth in this Agreement. Nothing contained in this Agreement, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between Recipient and the Company or any other person.
|
3.
|
Restrictions on the PSU
.
The PSU is subject to the following restrictions:
|
(a)
|
No Transfer
.
The PSU and the shares of Common Stock it represents may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of or encumbered until shares are actually issued, and any additional requirements or restrictions contained in this Agreement have been satisfied, terminated or waived by the Company in writing.
|
(b)
|
Cancellation of Unvested Shares
.
In the event Recipient ceases to provide “Continuous Service” (as defined below) for any reason before the PSU vests pursuant to
paragraph 4
and the restrictions set forth in
paragraph 3
expire, this award shall be cancelled with respect to any then unvested PSUs and no additional shares of Common Stock shall vest; provided, however, that the Committee may, in its discretion, determine not to cancel and void all or part of such unvested award, in which case the Board may impose whatever conditions it considers appropriate with respect to such portion of the unvested award.
|
4.
|
Lapse of Restrictions
.
The restrictions imposed under
paragraph 3
will lapse and expire, and the PSU will vest, in accordance with the following:
|
(a)
|
Vesting Schedule
.
Subject to earlier cancellation, and subject to the vesting provisions, if any, set forth in any agreement between Recipient and the Company or its Affiliate, as the same may be amended, modified, extended or renewed from time to time, the restrictions imposed under
paragraph 3
will lapse and be removed with respect to the number of PSUs, and in accordance with the vesting schedule, set forth in
Exhibit B
(the “
Vesting Schedule
”).
|
(b)
|
Effect of Vesting
.
The Company will deliver to Recipient a number of shares of Common Stock equal to the number of vested shares of Common Stock subject to the PSU within ten (10) days following the vesting date or dates provided herein. Notwithstanding the foregoing, in the event that the Company (i) does not withhold shares otherwise issuable to Recipient to satisfy the Company’s tax withholding obligation and (ii) determines that Recipient’s sale of shares of Common Stock on the date the shares subject to the award
|
(c)
|
Payment of Taxes
.
If applicable, upon vesting and/or issuance of Common Stock in accordance with the foregoing, Recipient must pay in the form of a check or cash or other cash equivalents to the Company such amount as the Company determines it is required to withhold under applicable laws as a result of such vesting and/or issuance. In this regard, the Company may withhold from the shares of Common Stock otherwise issuable to Recipient upon the vesting of the PSU that number of shares having an aggregate Fair Market Value (as defined in the Plan), determined as of the date the withholding tax obligation arises, equal to the amount of the total withholding tax obligation; provided, however, that in no event shall the aggregate Fair Market Value of the shares of Common Stock so withheld exceed the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the United States of America); provided, further, that the number of shares withheld by the Company to satisfy the tax withholding with respect to the PSUs shall be rounded up to the nearest whole share to the extent rounding up to the nearest whole share does not result in the liability classification of the PSUs under generally accepted accounting principles in the United States of America. Alternatively, a Recipient who is subject to Section 16 of the Exchange Act at the time the tax withholding obligation arises may request to satisfy his or her tax withholding obligation directly through an immediate payment to the Company equal to the amount of the tax withholding obligation. If such a Recipient does not satisfy the tax withholding obligation pursuant to the preceding sentence, Recipient authorizes and directs the Company to withhold from the shares of Common Stock otherwise issuable to Recipient upon vesting of the SUs that number of shares having an aggregate Fair Market Value (as defined in the Plan), determined as of the date the withholding tax obligation arises, equal to the amount of the total withholding tax obligation. Recipient acknowledges that the ultimate liability for all tax-related items legally due by Recipient is and remains Recipient’s responsibility and that Company and/or its Affiliates (1) make no representations or undertakings regarding the treatment of any tax-related items in connection with any aspect of the PSU grant, including the grant or vesting of the PSU, the subsequent sale of shares of Common Stock and the receipt of any dividends; and (2) do not commit to structure the terms of the grant or any aspect of the PSU to reduce or eliminate Recipient’s liability for tax-related items.
|
5.
|
Voting and Other Rights
.
Notwithstanding anything to the contrary in the foregoing, until the issuance of shares of Common Stock pursuant to
paragraph 4(b)
, Recipient shall not have any right in, to or with respect to any of the shares of Common Stock (including any voting rights or rights with respect to dividends) issuable under this Agreement until the shares are actually issued to Recipient.
|
6.
|
No Dividends or Dividend Equivalent Rights
.
Recipient shall not be entitled to any dividends or dividend equivalent rights unless and until the PSUs vest and the shares underlying the PSUs are issued to Recipient.
|
7.
|
Nature of Grant
.
In accepting the grant, Recipient acknowledges that:
|
(a)
|
the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this Agreement;
|
(b)
|
the grant of the PSU is voluntary and occasional and does not create any contractual or other right to receive future grants of PSUs, or benefits in lieu of PSUs, even if PSUs have been granted repeatedly in the past, and all decisions with respect to future PSU grants, if any, will be at the sole discretion of the Company;
|
(c)
|
Recipient’s participation in the Plan shall not create a right to Continued Service with the Company or an Affiliate and shall not interfere with the ability the Company or an Affiliate to terminate Recipient’s service relationship at any time with or without cause;
|
(d)
|
Recipient is voluntarily participating in the Plan;
|
(e)
|
the PSU is an extraordinary benefit and is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or an Affiliate;
|
(f)
|
the future value of the underlying shares of Common Stock is unknown and cannot be predicted with certainty, and if Recipient vests in the PSU and obtains shares of Common Stock, the value of those shares may increase or decrease in value; and
|
(g)
|
in consideration of the grant of the PSU, no claim or entitlement to compensation or damages shall arise from termination of the PSU or diminution in value of the PSU or shares of Common Stock acquired through vesting of the PSU resulting from termination of Recipient’s Continuous Service by the Company or an Affiliate (for any reason whatsoever) and Recipient irrevocably releases the Company and its Affiliates from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, Recipient shall be deemed irrevocably to have waived his or her entitlement to pursue such claim.
|
8.
|
Electronic Delivery.
The Company may, in its sole discretion, decide to deliver any documents related to the PSU and participation in the Plan or future PSUs that may be granted under the Plan by electronic means or to request Recipient consent to participate in the Plan by electronic means. Recipient hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
|
9.
|
Taxable Event
. Recipient acknowledges that the issuance/vesting/settlement of the PSUs will have significant tax consequences to Recipient and Recipient is hereby advised to consult with Recipient’s own tax advisors concerning such tax consequences.
A general description of the U.S. federal income tax consequences related to the PSUs is set forth in the Plan prospectus.
|
10.
|
Amendment
.
Except as otherwise provided in the Plan, this Agreement may be amended only by a writing executed by the Company and Recipient which specifically states that it is amending this Agreement. Notwithstanding the foregoing, and except as otherwise provided in the Plan, this Agreement may be amended solely by the Committee by a writing which specifically states that it is amending this Agreement, so long as a copy of such amendment is delivered to Recipient, and provided that no such amendment adversely affecting Recipient’s rights hereunder may be made without Recipient’s written consent. Without limiting the foregoing, the Committee reserves the right to change, by written notice to Recipient, the provisions of this Agreement in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable laws or regulations or any future law, regulation, ruling, or judicial decision, provided that any such change will be applicable only to rights relating to that portion of the Award which is then subject to restrictions as provided herein.
|
11.
|
Miscellaneous
.
|
(a)
|
The rights and obligations of the Company under this Agreement will be transferable by the Company to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by the Company’s successors and assigns.
|
(b)
|
Recipient agrees upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of this Agreement.
|
(c)
|
Recipient acknowledges that the PSU award granted to Recipient under the Plan, and its underlying shares of Common Stock, are subject to all general Company policies as amended from time to time, including the Company’s insider trading policies.
|
(d)
|
To the extent applicable, this Agreement and the PSUs shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. The PSUs are not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance issued thereunder. For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that Recipient may be eligible to receive under this Agreement shall be treated as a separate and distinct payment. Notwithstanding anything to the contrary in the Plan, if the PSUs constitute “deferred compensation” under Section 409A of the Code and Recipient is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount that is due because of Recipient’s “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) will be issued or paid (a) unless Recipient’s termination of Continuous Service is a “separation from service” and (b) before the date this six (6) months following the date of Recipient’s “separation from service” or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A of the Code, and any amounts so deferred will be paid in a lump sum on the day after such six (6) month period elapses.
|
12.
|
Severability
.
The provisions of this Agreement shall be deemed to be severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any person or any circumstance, is held to be invalid or unenforceable under present or future laws effective
|
13.
|
Governing Law
.
This Agreement will be governed by and construed in accordance with the laws of the State of Delaware and applicable federal law.
|
14.
|
Irrevocable Arbitration of Disputes.
|
(a)
|
You and the Company agree that any dispute, controversy or claim arising hereunder or in any way related to this Agreement, its interpretation, enforceability, or applicability, that cannot be resolved by mutual agreement of the parties shall be submitted to binding arbitration. The parties agree that arbitration is the parties’ only recourse for such claims and hereby waive the right to pursue such claims in any other forum, unless otherwise provided by law. Any court action involving a dispute which is not subject to arbitration shall be stayed pending arbitration of arbitrable disputes.
|
(b)
|
You and the Company agree that the arbitrator shall have the authority to issue provisional relief. You and the Company further agree that each has the right, pursuant to California Code of Civil Procedure Section 1281.8, to apply to a court for a provisional remedy in connection with an arbitrable dispute so as to prevent the arbitration from being rendered ineffective.
|
(c)
|
Any demand for arbitration shall be in writing and must be communicated to the other party prior to the expiration of the applicable statute of limitations.
|
(d)
|
The arbitration shall be administered by JAMS pursuant to its Employment Arbitration Rules and Procedures. The rules may be found online at
www.jamsadr.org
. The arbitration shall be conducted in San Diego by a former or retired judge or attorney with at least ten (10) years’ experience in employment-related disputes, or a non-attorney with like experience in the area of dispute, who shall have the power to hear motions, control discovery, conduct hearings and otherwise do all that is necessary to resolve the matter. The parties must mutually agree on the arbitrator. If the parties cannot agree on the arbitrator after their best efforts, an arbitrator will be selected from JAMS pursuant to its Employment Arbitration Rules and Procedures. The Company shall pay the costs of the arbitrator’s fees and all administrative costs of the arbitration in excess of any court filing fee Recipient would have incurred to initiate suit in court.
|
(e)
|
The arbitration will be decided upon a written decision of the arbitrator stating the essential findings and conclusions upon which the award is based. The arbitrator shall have the authority to award damages, if any, and attorneys’ fees and costs to the extent that they are available under applicable law(s). The arbitration award shall be final and binding, and may be entered as a judgment in any court having competent jurisdiction. Either party may seek review pursuant to California Code of Civil Procedure Section 1286, et seq.
|
(f)
|
It is expressly understood that the parties irrevocably agree to arbitrate any dispute identified above and have chosen arbitration to avoid the burdens, costs and publicity of a court proceeding, and the arbitrator is expected to handle all aspects of the matter, including discovery and any hearings, in such a way as to minimize the expense, time, burden and publicity of the process, while assuring a fair and just result. In particular, the parties expect that the arbitrator will limit discovery
|
(g)
|
The provisions of this paragraph shall survive the expiration or termination of the Agreement, and shall be binding upon the parties.
|
15.
|
Data Privacy.
Recipient hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of his or her personal data as described in this document by and among, as applicable, the Company and its Affiliates for the exclusive purpose of implementing, administering and managing Recipient’s participation in the Plan.
|
16.
|
Language.
If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control.
|
(i)
|
a reorganization or merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto (or, in the case of a reorganization or merger or consolidation that is preceded or accomplished by an acquisition or series of related acquisitions by any Person, by tender or exchange offer or otherwise, of voting securities representing 5% or more of the combined voting power of all securities of the Company, immediately prior to such acquisition or the first acquisition in such series of acquisitions) continuing to represent, either by remaining outstanding or by being converted into voting securities of another entity, more than 50% of the combined voting power of the voting securities of the Company or such other entity outstanding immediately after such reorganization or merger or consolidation (or series of related transactions involving such a reorganization or merger or consolidation), or
|
(ii)
|
a reorganization or merger or consolidation effected to implement a recapitalization or reincorporation of the Company (or similar transaction) that does not result in a material change in beneficial ownership of the voting securities of the Company or its successor; or
|
Budgeted Currencies
|
|||||
Type
|
1 Local = USD
|
1 US = Local
|
Type
|
1 Local = USD
|
1 US = Local
|
AUD
|
|
|
KRW
|
|
|
CAD
|
|
|
MXN
|
|
|
CNY
|
|
|
MYR
|
|
|
EUR
|
|
|
SEK
|
|
|
GBP
|
|
|
THB
|
|
|
JPY
|
|
|
|
|
|
Currency Neutral Adjusted EPS Metrics
|
|||||||
|
|
|
|
|
|
|
|
Year
|
Annual Currency Neutral Adjusted EPS Target
|
Cumulative Currency Neutral Adjusted EPS Goals and Award Levels
(1)
|
Maximum Cumulative Award
|
||||
Threshold
(50% Award) |
Target
(100% Award) |
Maximum
(2)
(200% Award) |
|||||
1 – 2018
|
|
|
|
n/a
|
50%
|
||
2 – 2019
|
|
|
|
n/a
|
80%
|
||
3 – 2020
|
|
|
|
|
200%
|
•
|
If actual currency neutral adjusted EPS performance does not reach the threshold currency neutral adjusted EPS level for year 1, no performance award is earned for year 1
|
•
|
Actual currency neutral adjusted EPS Performance at or above the threshold level will determine the performance award level for year 1, with performance above target not rewarded in year 1
|
•
|
The interpolated year 1 performance achievement level will be multiplied by cumulative payout cap for year 1 of 50% and then by the target number of units
|
•
|
If actual cumulative currency neutral adjusted EPS performance through year 2 does not exceed the threshold cumulative currency neutral adjusted EPS level for year 2, no incremental performance award is earned for year 2
|
•
|
Actual cumulative currency neutral adjusted EPS Performance through year 2 at or above threshold cumulative currency neutral adjusted EPS level will determine the cumulative performance award level through year 2, with performance above target not rewarded in year 2
|
•
|
The interpolated year 2 cumulative performance level will be multiplied by the cumulative award cap for year 2 of 80% and then by the target number of shares, to determine the cumulative performance award through year 2.
|
•
|
If cumulative performance award through year 2 is less than or equal to the performance award earned in year 1, no additional incremental performance award is earned in year 2
|
•
|
If cumulative performance award through year 2 exceeds the performance award earned in year 1, the performance award earned in year 1 will be subtracted from the calculated cumulative award through year 2 to determine the incremental performance award earned in year 2
|
•
|
The cumulative performance award earned through year 2 cannot exceed 80% of the three-year target award
|
•
|
If actual cumulative currency neutral adjusted EPS performance through year 3 does not exceed the threshold cumulative currency neutral adjusted EPS level for year 3, no incremental performance award is earned for year 3, and the cumulative performance award earned through year 2 is the final number of shares earned under the plan
|
•
|
Actual cumulative currency neutral adjusted EPS Performance through year 3 at or above threshold cumulative currency neutral adjusted EPS level will determine the cumulative award payout level through year 3, up to a maximum of 200%
|
•
|
The interpolated year 3 cumulative performance payout level will be multiplied by the target number of shares to determine the cumulative performance award through year 3
|
•
|
If cumulative performance award through year 3 is less than or equal to the cumulative performance award earned through year 2, no additional incremental performance award is earned in year 3, and the cumulative performance award earned through year 2 is the final number of shares earned under the plan
|
•
|
If cumulative performance award through year 3 exceeds the cumulative performance award earned through year 2, the cumulative performance award earned through year 2 will be subtracted from the calculated cumulative award through year 3 to determine the incremental performance award earned in year 3
|
•
|
Cumulative performance award earned through year 3 cannot exceed 200% of the three-year target number of shares
|
Callaway Golf Company
|
Recipient:
|
Employee/Consultant
|
Effective Grant Date:
|
Stock Unit Grant
|
Number of Stock Units/Equivalent Shares:
|
|
Plan:
Amended and Restated 2004 Incentive Plan
|
1.
|
Governing Plan
. Recipient hereby acknowledges receipt of a copy of the Plan and the prospectus for the Plan (the “
Plan Prospectus
”). This Stock Unit award is subject in all respects to the applicable provisions of the Plan, which are incorporated herein by this reference. In the case of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan will control.
|
2.
|
Grant of Stock Unit
. Effective as of the Effective Grant Date identified above, the Company has granted and issued to Recipient the Number of Stock Units with respect to the Company’s Common Stock identified above (the “
SUs
”), representing an unfunded, unsecured promise of the Company to deliver shares of Common Stock in the future, subject to the claims of the Company’s creditors and the terms, conditions and restrictions set forth in this Agreement. Nothing contained in this Agreement, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between Recipient and the Company or any other person.
|
3.
|
Restrictions on the SU
. The SU is subject to the following restrictions:
|
(a)
|
No Transfer
. The SU and the shares of Common Stock it represents may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of or encumbered until shares are actually issued, and any additional requirements or restrictions contained in this Agreement have been satisfied, terminated or waived by the Company in writing.
|
(b)
|
Cancellation of Unvested Shares
. In the event Recipient ceases to provide “Continuous Service” (as defined below) for any reason before the SU vests pursuant to
paragraph 4
and the restrictions set forth in
paragraph 3
expire, this award shall be cancelled with respect to any then unvested SUs (and any related unvested Dividend SUs (as defined below)) and no additional shares of Common Stock shall vest; provided, however, that the Committee may, in its discretion, determine not to cancel and void all or part of such unvested award, in which case the Committee may impose whatever conditions it considers appropriate with respect to such portion of the unvested award.
|
4.
|
Lapse of Restrictions
. The restrictions imposed under paragraph 3 will lapse and expire, and the SU will vest, in accordance with the following:
|
(a)
|
Vesting Schedule
. Subject to earlier cancellation, and subject to the accelerated vesting provisions, if any, set forth in any agreement between Recipient and the Company or its Affiliate, as the same may be amended, modified, extended or renewed from time to time, the restrictions imposed under
paragraph 3
will lapse and be removed with respect to the number of SUs set forth below in accordance with the vesting schedule set forth below (the “
Vesting Schedule
”):
|
(b)
|
Effect of Vesting
. The Company will deliver to Recipient a number of shares of Common Stock equal to the number of vested shares of Common Stock subject to the SU within ten (10) days following the vesting date or dates provided herein. Notwithstanding the foregoing, in the event that the Company (i) does not withhold shares otherwise issuable to Recipient to satisfy the Company’s tax withholding obligation and (ii) determines that Recipient’s sale of shares of Common Stock on the date the shares subject to the award are scheduled to be delivered (the “
Original Distribution Date
”), would violate its policy regarding insider trading of the Common Stock, as determined by the Company in accordance with such policy, then such shares shall not be delivered on such Original Distribution Date and shall instead be delivered as soon as practicable following the next date that Recipient could sell such shares pursuant to such policy; provided, however, that (A) if the Original Distribution Date occurs before a Change in Control, then in no event shall the delivery of the shares be delayed pursuant to this provision beyond the later of: (1) December 31
st
of the same calendar year of the Original Distribution Date, or (2) the 15
th
day of the third calendar month following the Original Distribution Date, and (B) if the Original Distribution Date occurs on or after a Change in Control then in no event shall the delivery of the shares be delayed pursuant to this provision beyond the 15
th
day of the third calendar month following the Original Distribution Date.
|
(c)
|
Payment of Taxes
. If applicable, upon vesting and/or issuance of Common Stock in accordance with the foregoing, Recipient must pay in the form of a check or cash or other cash equivalents to the Company such amount as the Company determines it is required to withhold under applicable laws as a result of such vesting and/or issuance. In this regard, the Company may withhold from the shares of Common Stock otherwise issuable to Recipient upon vesting of the SUs that number of shares having an aggregate Fair Market Value (as defined in the Plan), determined as of the date the withholding tax obligation arises, equal to the amount of the total withholding tax obligation; provided, however, that in no event shall the aggregate Fair Market Value of the shares of Common Stock so withheld exceed the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the United States of America); provided, further, that the number of shares withheld by the Company to satisfy the tax withholding with respect to the SUs shall be rounded up to the nearest whole share to the extent rounding up to the nearest whole share does not result in the liability classification of the SUs under generally accepted accounting principles in the United States of America. Alternatively, a Recipient who is subject to Section 16 of the Exchange Act at the time the tax withholding obligation arises may request to satisfy his or her tax withholding obligation directly through an immediate payment to the Company equal to the amount of the tax withholding obligation. If such a Recipient does not satisfy the tax withholding obligation pursuant to the preceding sentence, Recipient authorizes and directs the Company to withhold from the shares of Common Stock otherwise issuable to Recipient upon vesting of the SUs that number of shares having an aggregate Fair Market Value (as defined in the Plan), determined as of the date the withholding tax obligation arises, equal to the amount of the total withholding tax obligation. Recipient acknowledges that the ultimate liability for all tax-related items legally due by Recipient is and remains Recipient’s responsibility and that Company and/or its Affiliates (1) make no representations or undertakings regarding the
|
a.
|
Voting and Other Rights
. Notwithstanding anything to the contrary in the foregoing, until the issuance of shares of Common Stock pursuant to
paragraph 4(b)
, Recipient shall not have any right in, to or with respect to any of the shares of Common Stock (including any voting rights or rights with respect to Dividend SUs (as defined below (except as provided in
paragraph 6
below) issuable under this Agreement until the shares are actually issued to Recipient.
|
b.
|
Dividend Equivalents
. If a cash dividend is paid with respect to shares of Common Stock, Recipient shall be credited with additional SUs as dividend equivalent payments (“
Dividend SUs
”) on unissued SUs which will be earned upon the vesting of the SUs on which the Dividend SUs were credited, and paid out upon issuance of the Common Stock represented by the SUs on which the Dividend SUs were credited. Any credited Dividend SUs will be included in future calculations of unissued SUs that are eligible to receive additional SUs as dividend equivalent payments in connection with subsequent cash dividend payments. Dividend SUs shall be paid in additional shares of Common Stock at the time of settlement of the related SUs pursuant to
paragraph 4
, except that any fractional Dividend SUs shall be paid in cash.
|
5.
|
Nature of Grant
. In accepting the grant, Recipient acknowledges that:
|
(a)
|
the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this Agreement;
|
(b)
|
the grant of the SU is voluntary and occasional and does not create any contractual or other right to receive future grants of SUs, or benefits in lieu of SUs, even if SUs have been granted repeatedly in the past, and all decisions with respect to future SU grants, if any, will be at the sole discretion of the Company;
|
(c)
|
Recipient’s participation in the Plan shall not create a right to Continued Service with the Company or an Affiliate and shall not interfere with the ability the Company or an Affiliate to terminate Recipient’s service relationship at any time with or without cause;
|
(d)
|
Recipient is voluntarily participating in the Plan;
|
(e)
|
the SU is an extraordinary benefit and is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or an Affiliate;
|
(f)
|
the future value of the underlying shares of Common Stock is unknown and cannot be predicted with certainty, and if Recipient vests in the SU and obtains shares of Common Stock, the value of those shares may increase or decrease in value; and
|
(g)
|
in consideration of the grant of the SU, no claim or entitlement to compensation or damages shall arise from termination of the SU or diminution in value of the SU or shares of Common Stock acquired through vesting of the SU resulting from termination of Recipient’s Continuous Service by the Company or an Affiliate (for any reason whatsoever) and Recipient irrevocably releases the Company and its Affiliates from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, Recipient shall be deemed irrevocably to have waived his or her entitlement to pursue such claim.
|
6.
|
Electronic Delivery
. The Company may, in its sole discretion, decide to deliver any documents related to the SU and participation in the Plan or future SUs that may be granted under the Plan by electronic means or to request Recipient consent to participate in the Plan by electronic means. Recipient hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
|
7.
|
Taxable Event
.
Recipient acknowledges that the issuance/vesting/settlement of the SUs will have significant tax consequences to Recipient and Recipient is hereby advised to consult with Recipient’s own tax advisors concerning such tax consequences.
A general description of the U.S. federal income tax consequences related to SUs is set forth in the Plan prospectus.
|
8.
|
Amendment
. Except as otherwise provided in the Plan, this Agreement may be amended only by a writing executed by the Company and Recipient which specifically states that it is amending this Agreement. Notwithstanding the foregoing, and except as otherwise provided in the Plan, this Agreement may be amended solely by the Committee by a writing which specifically states that it is amending this Agreement, so long as a copy of such amendment is delivered to Recipient, and provided that no such amendment adversely affecting Recipient’s rights hereunder may be made without Recipient’s written consent. Without limiting the foregoing, the Committee reserves the right to change, by written notice to Recipient, the provisions of this Agreement in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable laws or regulations or any future law, regulation, ruling, or judicial decision, provided that any such change will be applicable only to rights relating to that portion of the award which is then subject to restrictions as provided herein.
|
9.
|
Miscellaneous
.
|
(a)
|
The rights and obligations of the Company under this Agreement will be transferable by the Company to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by the Company’s successors and assigns.
|
(b)
|
Recipient agrees upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of this Agreement.
|
(c)
|
Recipient acknowledges that the SU award granted to Recipient under the Plan, and its underlying shares of Common Stock, are subject to all general Company policies as amended from time to time, including the Company’s insider trading policies.
|
(d)
|
To the extent applicable, this Agreement and the SUs shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. The SUs are not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance issued thereunder. For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that Recipient may be eligible to receive under this Agreement shall be treated as a separate and distinct payment. Notwithstanding anything to the contrary in the Plan, if the SUs constitute “deferred compensation” under Section 409A of the Code and Recipient is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount that is due because of Recipient’s “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) will be issued or paid (a) unless Recipient’s termination of Continuous Service is a “separation from service” and (b) before the date this six (6) months following the date of Recipient’s “separation from service” or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A of the Code, and any amounts so deferred will be paid in a lump sum on the day after such six (6) month period elapses.
|
10.
|
Severability
. The provisions of this Agreement shall be deemed to be severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any person or any circumstance, is held to be invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severed, and in lieu thereof there shall automatically be added as part of this Agreement a suitable and equitable provision in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision.
|
11.
|
Governing Law
. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware and applicable federal law.
|
12.
|
Irrevocable Arbitration of Disputes
.
|
(a)
|
You and the Company agree that any dispute, controversy or claim arising hereunder or in any way related to this Agreement, its interpretation, enforceability, or applicability, that cannot be resolved by mutual agreement of the parties shall be submitted to binding arbitration. The parties agree that arbitration is the parties’ only recourse for such claims and hereby waive the right to pursue such claims in any other forum, unless otherwise provided by law. Any court action involving a dispute which is not subject to arbitration shall be stayed pending arbitration of arbitrable disputes.
|
(b)
|
You and the Company agree that the arbitrator shall have the authority to issue provisional relief. You and the Company further agree that each has the right, pursuant to California Code of Civil Procedure Section 1281.8, to apply to a court for a provisional
|
(c)
|
Any demand for arbitration shall be in writing and must be communicated to the other party prior to the expiration of the applicable statute of limitations.
|
(d)
|
The arbitration shall be administered by JAMS pursuant to its Employment Arbitration Rules and Procedures. The rules may be found online at
www.jamsadr.org
. The arbitration shall be conducted in San Diego by a former or retired judge or attorney with at least ten (10) years’ experience in employment-related disputes, or a non-attorney with like experience in the area of dispute, who shall have the power to hear motions, control discovery, conduct hearings and otherwise do all that is necessary to resolve the matter. The parties must mutually agree on the arbitrator. If the parties cannot agree on the arbitrator after their best efforts, an arbitrator will be selected from JAMS pursuant to its Employment Arbitration Rules and Procedures. The Company shall pay the costs of the arbitrator’s fees and all administrative costs of the arbitration in excess of any court filing fee Recipient would have incurred to initiate suit in court.
|
(e)
|
The arbitration will be decided upon a written decision of the arbitrator stating the essential findings and conclusions upon which the award is based. The arbitrator shall have the authority to award damages, if any, and attorneys’ fees and costs to the extent that they are available under applicable law(s). The arbitration award shall be final and binding, and may be entered as a judgment in any court having competent jurisdiction. Either party may seek review pursuant to California Code of Civil Procedure Section 1286, et seq.
|
(f)
|
It is expressly understood that the parties irrevocably agree to arbitrate any dispute identified above and have chosen arbitration to avoid the burdens, costs and publicity of a court proceeding, and the arbitrator is expected to handle all aspects of the matter, including discovery and any hearings, in such a way as to minimize the expense, time, burden and publicity of the process, while assuring a fair and just result. In particular, the parties expect that the arbitrator will limit discovery by controlling the amount of discovery that may be taken (e.g., the number of depositions or interrogatories) and by restricting the scope of discovery only to those matters clearly relevant to the dispute. However, at a minimum, each party will be entitled to at least one (1) deposition and shall have access to essential documents and witnesses as determined by the arbitrator.
|
(g)
|
The provisions of this paragraph shall survive the expiration or termination of the Agreement, and shall be binding upon the parties.
|
13.
|
Data Privacy
.
Recipient hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of his or her personal data as described in this document by and among, as applicable, the Company and its Affiliates for the exclusive purpose of implementing, administering and managing Recipient’s participation in the Plan.
|
14.
|
Language
. If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control.
|
(i)
|
a reorganization or merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto (or, in the case of a reorganization or merger or consolidation that is preceded or accomplished by an acquisition or series of related acquisitions by any Person, by tender or exchange offer or otherwise, of voting securities representing 5% or more of the combined voting power of all securities of the Company, immediately prior to such acquisition or the first acquisition in such series of acquisitions) continuing to represent, either by remaining outstanding or by being converted into voting securities of another entity, more than 50% of the combined voting power of the voting securities of the Company or such other entity outstanding immediately after such reorganization or merger or consolidation (or series of related transactions involving such a reorganization or merger or consolidation), or
|
(ii)
|
a reorganization or merger or consolidation effected to implement a recapitalization or reincorporation of the Company (or similar transaction) that does not result in a material change in beneficial ownership of the voting securities of the Company or its successor; or
|
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
|
travisMathew, LLC
|
California
|
Travis Mathew Retail, LLC
|
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
|
Callaway Golf (Germany) GmbH
|
Germany
|
Callaway Golf India Private Ltd.
|
India
|
Callaway Golf Kabushiki Kaisha
|
Japan
|
Callaway Golf Korea Ltd.
|
Korea
|
Callaway de Mexico, S.A. de C.V.
|
Mexico
|
Callaway Golf Interactive, Inc.
|
Texas
|
Callaway Golf (Thailand) Ltd.
|
Thailand
|
Callaway Golf Europe Ltd.
|
United Kingdom
|
Callaway Golf European Holding Company Ltd.
|
United Kingdom
|
Callaway Golf (Barbados) SRL
|
United Kingdom
|
OGIO International, Inc.
|
Utah
|
|
|
[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
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(b)
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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.
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/S/ BRIAN P. LYNCH
|
Brian P. Lynch
Senior Vice President, Chief Financial Officer, General Counsel and Corporate Secretary
|
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/S/ O
LIVER
G. B
REWER
III
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Oliver G. Brewer III
President and Chief Executive Officer
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/S/ BRIAN P. LYNCH
|
Brian P. Lynch
Senior Vice President, Chief Financial Officer, General Counsel and Corporate Secretary |