|
Form
|
10-Q
|
☒
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
☐
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
|
|
Callaway Golf Company
|
||
(Exact name of registrant as specified in its charter)
|
||
|
|
|
Delaware
|
|
95-3797580
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
Title of Each Class
|
Trading Symbol(s)
|
Name of Each Exchange on which Registered
|
Common Stock, $0.01 par value per share
|
ELY
|
The New York Stock Exchange
|
Large accelerated filer
|
☒
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☐
|
|
|
Emerging growth company
|
☐
|
|
•
|
certain risks and uncertainties, including changes in capital market or economic conditions;
|
•
|
a material impact on the Company's tax provision as a result of the Tax Act;
|
•
|
consumer acceptance of and demand for the Company’s products;
|
•
|
future retailer purchasing activity, which can be significantly affected by adverse industry conditions and overall retail inventory levels;
|
•
|
any unfavorable changes in U.S. trade, tax or other policies, including restrictions on imports or an increase in import tariffs;
|
•
|
the level of promotional activity in the marketplace;
|
•
|
future consumer discretionary purchasing activity, which can be significantly adversely affected by unfavorable economic or market conditions;
|
•
|
future changes in foreign currency exchange rates and the degree of effectiveness of the Company’s hedging programs;
|
•
|
the ability of the Company to manage international business risks;
|
•
|
the Company's ability to recognize operational synergies across its global business platform;
|
•
|
the costs and disruption associated with activist investors;
|
•
|
significant developments stemming from the U.K.’s decision to withdraw from the European Union, which could have a material adverse effect on the Company;
|
•
|
adverse changes in the credit markets or continued compliance with the terms of the Company’s credit facilities;
|
•
|
the Company's ability to monetize its investments;
|
•
|
the Company's ability to successfully integrate, operate and expand the retail stores of the acquired TravisMathew and Jack Wolfskin businesses;
|
•
|
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;
|
•
|
adverse weather conditions and seasonality;
|
•
|
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;
|
•
|
the ability of the Company to protect its intellectual property rights;
|
•
|
a decrease in participation levels in golf;
|
•
|
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
|
•
|
the general risks and uncertainties applicable to the Company and its business.
|
|
|
|
Item 1.
|
||
|
||
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
||
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
|
||
Item 6.
|
|
September 30,
2019 |
|
December 31,
2018 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
88,216
|
|
|
$
|
63,981
|
|
Accounts receivable, net
|
223,385
|
|
|
71,374
|
|
||
Inventories
|
340,314
|
|
|
338,057
|
|
||
Income taxes receivable
|
15,996
|
|
|
713
|
|
||
Other current assets
|
63,934
|
|
|
50,781
|
|
||
Total current assets
|
731,845
|
|
|
524,906
|
|
||
Property, plant and equipment, net
|
127,077
|
|
|
88,472
|
|
||
Operating lease right-of-use assets, net
|
154,351
|
|
|
—
|
|
||
Intangible assets, net
|
487,049
|
|
|
224,692
|
|
||
Goodwill
|
201,044
|
|
|
55,816
|
|
||
Deferred taxes, net
|
69,597
|
|
|
75,079
|
|
||
Investment in golf-related venture
|
72,238
|
|
|
72,238
|
|
||
Other assets
|
16,447
|
|
|
11,741
|
|
||
Total assets
|
$
|
1,859,648
|
|
|
$
|
1,052,944
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
200,352
|
|
|
$
|
208,653
|
|
Accrued employee compensation and benefits
|
43,210
|
|
|
43,172
|
|
||
Asset-based credit facilities
|
110,711
|
|
|
40,300
|
|
||
Accrued warranty expense
|
10,121
|
|
|
7,610
|
|
||
Operating lease liabilities, short-term
|
25,112
|
|
|
—
|
|
||
Current portion of long-term debt
|
7,296
|
|
|
2,411
|
|
||
Income taxes payable
|
11,103
|
|
|
1,091
|
|
||
Total current liabilities
|
407,905
|
|
|
303,237
|
|
||
Long-term liabilities:
|
|
|
|
||||
Operating lease liabilities, long-term
|
133,189
|
|
|
—
|
|
||
Long-term debt (Note 5)
|
445,019
|
|
|
7,218
|
|
||
Income tax liability
|
4,072
|
|
|
4,430
|
|
||
Deferred taxes, net
|
82,252
|
|
|
1,796
|
|
||
Other long-term liabilities
|
9,855
|
|
|
1,955
|
|
||
Commitments and contingencies (Note 13)
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, $0.01 par value, 3,000,000 shares authorized, none issued and outstanding at September 30, 2019 and December 31, 2018
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value, 240,000,000 shares authorized, 95,648,648 shares issued at both September 30, 2019 and December 31, 2018, respectively
|
956
|
|
|
956
|
|
||
Additional paid-in capital
|
321,782
|
|
|
341,241
|
|
||
Retained earnings
|
519,551
|
|
|
413,799
|
|
||
Accumulated other comprehensive loss
|
(39,359
|
)
|
|
(13,700
|
)
|
||
Less: Common stock held in treasury, at cost, 1,542,122 and 1,137,470 shares at September 30, 2019 and December 31, 2018, respectively
|
(25,574
|
)
|
|
(17,722
|
)
|
||
Total Callaway Golf Company shareholders’ equity
|
777,356
|
|
|
724,574
|
|
||
Non-controlling interest in consolidated entity (Note 9)
|
—
|
|
|
9,734
|
|
||
Total shareholders’ equity
|
777,356
|
|
|
734,308
|
|
||
Total liabilities and shareholders’ equity
|
$
|
1,859,648
|
|
|
$
|
1,052,944
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net sales
|
$
|
426,217
|
|
|
$
|
262,654
|
|
|
$
|
1,389,122
|
|
|
$
|
1,062,156
|
|
Cost of sales
|
234,828
|
|
|
147,415
|
|
|
752,483
|
|
|
553,758
|
|
||||
Gross profit
|
191,389
|
|
|
115,239
|
|
|
636,639
|
|
|
508,398
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Selling expense
|
101,984
|
|
|
68,605
|
|
|
334,418
|
|
|
234,826
|
|
||||
General and administrative expense
|
36,378
|
|
|
26,706
|
|
|
108,739
|
|
|
73,008
|
|
||||
Research and development expense
|
12,538
|
|
|
9,229
|
|
|
38,158
|
|
|
29,561
|
|
||||
Total operating expenses
|
150,900
|
|
|
104,540
|
|
|
481,315
|
|
|
337,395
|
|
||||
Income from operations
|
40,489
|
|
|
10,699
|
|
|
155,324
|
|
|
171,003
|
|
||||
Interest income
|
94
|
|
|
70
|
|
|
759
|
|
|
485
|
|
||||
Interest expense
|
(9,639
|
)
|
|
(1,126
|
)
|
|
(30,203
|
)
|
|
(4,730
|
)
|
||||
Other income, net
|
2,232
|
|
|
1,432
|
|
|
1,459
|
|
|
2,448
|
|
||||
Income before income taxes
|
33,176
|
|
|
11,075
|
|
|
127,339
|
|
|
169,206
|
|
||||
Income tax provision
|
2,128
|
|
|
1,335
|
|
|
18,892
|
|
|
35,801
|
|
||||
Net income
|
31,048
|
|
|
9,740
|
|
|
108,447
|
|
|
133,405
|
|
||||
Less: Net income (loss) attributable to non-controlling interest
|
—
|
|
|
223
|
|
|
(179
|
)
|
|
166
|
|
||||
Net income attributable to Callaway Golf Company
|
$
|
31,048
|
|
|
$
|
9,517
|
|
|
$
|
108,626
|
|
|
$
|
133,239
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.33
|
|
|
$
|
0.10
|
|
|
$
|
1.15
|
|
|
$
|
1.41
|
|
Diluted
|
$
|
0.32
|
|
|
$
|
0.10
|
|
|
$
|
1.13
|
|
|
$
|
1.37
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
94,100
|
|
|
94,477
|
|
|
94,284
|
|
|
94,605
|
|
||||
Diluted
|
96,287
|
|
|
97,320
|
|
|
96,197
|
|
|
97,076
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net income
|
$
|
31,048
|
|
|
$
|
9,740
|
|
|
$
|
108,447
|
|
|
$
|
133,405
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
||||||||
Change in derivative instruments
|
661
|
|
|
88
|
|
|
(8,080
|
)
|
|
426
|
|
||||
Foreign currency translation adjustments
|
(17,083
|
)
|
|
(2,457
|
)
|
|
(18,740
|
)
|
|
(7,447
|
)
|
||||
Comprehensive income, before income tax on other comprehensive income items
|
14,626
|
|
|
7,371
|
|
|
81,627
|
|
|
126,384
|
|
||||
Income tax (provision) benefit on derivative instruments
|
(666
|
)
|
|
(216
|
)
|
|
822
|
|
|
(386
|
)
|
||||
Comprehensive income
|
13,960
|
|
|
7,155
|
|
|
82,449
|
|
|
125,998
|
|
||||
Less: Comprehensive loss attributable to non-controlling interests
|
—
|
|
|
(240
|
)
|
|
(339
|
)
|
|
(52
|
)
|
||||
Comprehensive income attributable to Callaway Golf Company
|
$
|
13,960
|
|
|
$
|
7,395
|
|
|
$
|
82,788
|
|
|
$
|
126,050
|
|
|
Nine Months Ended
September 30, |
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
108,447
|
|
|
$
|
133,405
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
25,471
|
|
|
14,762
|
|
||
Lease amortization expense
|
23,615
|
|
|
—
|
|
||
Amortization of debt issuance costs
|
2,428
|
|
|
—
|
|
||
Inventory step-up on acquisition
|
10,703
|
|
|
—
|
|
||
Deferred taxes, net
|
8,407
|
|
|
30,123
|
|
||
Non-cash share-based compensation
|
9,476
|
|
|
9,975
|
|
||
Loss/(gain) on disposal of long-lived assets
|
649
|
|
|
(30
|
)
|
||
Unrealized foreign currency loss/(gain)
|
999
|
|
|
(1,138
|
)
|
||
Change in assets and liabilities, net of effect from acquisitions:
|
|
|
|
||||
Accounts receivable, net
|
(123,560
|
)
|
|
(54,559
|
)
|
||
Inventories
|
71,246
|
|
|
21,257
|
|
||
Other assets
|
3,547
|
|
|
1,585
|
|
||
Accounts payable and accrued expenses
|
(37,392
|
)
|
|
(31,358
|
)
|
||
Accrued employee compensation and benefits
|
(5,558
|
)
|
|
(1,636
|
)
|
||
Accrued warranty expense
|
412
|
|
|
1,875
|
|
||
Change in operating and financing leases, net
|
(22,463
|
)
|
|
—
|
|
||
Income taxes receivable/payable, net
|
(11,573
|
)
|
|
(3,437
|
)
|
||
Other liabilities
|
(1,001
|
)
|
|
75
|
|
||
Net cash provided by operating activities
|
63,853
|
|
|
120,899
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Capital expenditures
|
(36,843
|
)
|
|
(26,103
|
)
|
||
Investments in golf related ventures
|
—
|
|
|
(282
|
)
|
||
Acquisition, net of cash acquired
|
(463,105
|
)
|
|
—
|
|
||
Proceeds from sales of property and equipment
|
43
|
|
|
43
|
|
||
Net cash used in investing activities
|
(499,905
|
)
|
|
(26,342
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from (repayments of) credit facilities, net
|
70,411
|
|
|
(83,455
|
)
|
||
Proceeds from issuance of long-term debt
|
493,167
|
|
|
—
|
|
||
Repayments of long-term debt
|
(34,298
|
)
|
|
(1,632
|
)
|
||
Debt issuance cost
|
(19,088
|
)
|
|
—
|
|
||
Principal payments on finance leases
|
(583
|
)
|
|
—
|
|
||
Acquisition of treasury stock
|
(27,505
|
)
|
|
(22,373
|
)
|
||
Dividends paid, net
|
(2,834
|
)
|
|
(2,841
|
)
|
||
Exercise of stock options
|
—
|
|
|
1,636
|
|
||
Purchase of non-controlling interest
|
(18,538
|
)
|
|
—
|
|
||
Distributions to non-controlling interest
|
—
|
|
|
(821
|
)
|
||
Net cash provided by (used in) financing activities
|
460,732
|
|
|
(109,486
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(445
|
)
|
|
76
|
|
||
Net increase (decrease) in cash and cash equivalents
|
24,235
|
|
|
(14,853
|
)
|
||
Cash and cash equivalents at beginning of period
|
63,981
|
|
|
85,674
|
|
||
Cash and cash equivalents at end of period
|
$
|
88,216
|
|
|
$
|
70,821
|
|
Supplemental disclosures:
|
|
|
|
||||
Cash paid for income taxes, net
|
$
|
14,874
|
|
|
$
|
8,216
|
|
Cash paid for interest and fees
|
$
|
25,184
|
|
|
$
|
4,419
|
|
Non-cash investing and financing activities:
|
|
|
|
||||
Issuance of treasury stock and common stock for compensatory stock awards released from restriction
|
$
|
19,613
|
|
|
$
|
5,521
|
|
Accrued capital expenditures at period-end
|
$
|
2,283
|
|
|
$
|
2,073
|
|
|
Shareholders' Equity Callaway Golf Company
|
|
|
|
|
||||||||||||||||||||||||||||||||||||
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Treasury Stock
|
|
Total Callaway Golf Company Shareholders' Equity
|
|
Non-
Controlling Interest
|
|
|
|
|||||||||||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Total
|
|||||||||||||||||||||||||||
Balance at June 30, 2019
|
95,649
|
|
|
$
|
956
|
|
|
$
|
319,579
|
|
|
$
|
489,445
|
|
|
|
$
|
(22,271
|
)
|
|
|
(1,555
|
)
|
|
$
|
(25,773
|
)
|
|
|
$
|
761,936
|
|
|
|
$
|
—
|
|
|
$
|
761,936
|
|
Acquisition of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
(7
|
)
|
|
(111
|
)
|
|
|
(111
|
)
|
|
|
—
|
|
|
(111
|
)
|
||||||||
Compensatory awards released from restriction
|
—
|
|
|
—
|
|
|
(309
|
)
|
|
—
|
|
|
|
—
|
|
|
|
19
|
|
|
309
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
2,512
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
2,512
|
|
|
|
—
|
|
|
2,512
|
|
||||||||
Stock dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||
Cash dividends ($0.01 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(941
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
(941
|
)
|
|
|
—
|
|
|
(941
|
)
|
||||||||
Equity adjustment from foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(17,083
|
)
|
|
|
—
|
|
|
—
|
|
|
|
(17,083
|
)
|
|
|
—
|
|
|
(17,083
|
)
|
||||||||
Change in fair value of derivative instruments, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
—
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
—
|
|
|
(5
|
)
|
||||||||
Acquisition of non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
31,048
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
31,048
|
|
|
|
—
|
|
|
31,048
|
|
||||||||
Balance at September 30, 2019
|
95,649
|
|
|
$
|
956
|
|
|
$
|
321,782
|
|
|
$
|
519,551
|
|
|
|
$
|
(39,359
|
)
|
|
|
(1,543
|
)
|
|
$
|
(25,574
|
)
|
|
|
$
|
777,356
|
|
|
|
$
|
—
|
|
|
$
|
777,356
|
|
|
Shareholders' Equity Callaway Golf Company
|
|
|
|
|
||||||||||||||||||||||||||||||||||||
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Treasury Stock
|
|
Total Callaway Golf Company Shareholders' Equity
|
|
Non-
Controlling Interest
|
|
|
|
|||||||||||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Total
|
|||||||||||||||||||||||||||
Balance at December 31, 2018
|
95,649
|
|
|
$
|
956
|
|
|
$
|
341,241
|
|
|
$
|
413,799
|
|
|
|
$
|
(13,700
|
)
|
|
|
(1,138
|
)
|
|
$
|
(17,722
|
)
|
|
|
$
|
724,574
|
|
|
|
$
|
9,734
|
|
|
$
|
734,308
|
|
Acquisition of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,662
|
)
|
|
(27,505
|
)
|
|
|
(27,505
|
)
|
|
|
—
|
|
|
(27,505
|
)
|
||||||||
Compensatory awards released from restriction
|
—
|
|
|
—
|
|
|
(19,613
|
)
|
|
—
|
|
|
|
—
|
|
|
|
872
|
|
|
19,613
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
9,476
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
9,476
|
|
|
|
—
|
|
|
9,476
|
|
||||||||
Stock dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
|
|
—
|
|
|
|
385
|
|
|
40
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||
Cash dividends ($0.01 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,834
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
(2,834
|
)
|
|
|
—
|
|
|
(2,834
|
)
|
||||||||
Equity adjustment from foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(18,401
|
)
|
|
|
—
|
|
|
—
|
|
|
|
(18,401
|
)
|
|
|
(339
|
)
|
|
(18,740
|
)
|
||||||||
Change in fair value of derivative instruments, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(7,258
|
)
|
|
|
—
|
|
|
—
|
|
|
|
(7,258
|
)
|
|
|
—
|
|
|
(7,258
|
)
|
||||||||
Acquisition of non-controlling interest
|
—
|
|
|
—
|
|
|
(9,322
|
)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
(9,322
|
)
|
|
|
(9,216
|
)
|
|
(18,538
|
)
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
108,626
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
108,626
|
|
|
|
(179
|
)
|
|
108,447
|
|
||||||||
Balance at September 30, 2019
|
95,649
|
|
|
$
|
956
|
|
|
$
|
321,782
|
|
|
$
|
519,551
|
|
|
|
$
|
(39,359
|
)
|
|
|
(1,543
|
)
|
|
$
|
(25,574
|
)
|
|
|
$
|
777,356
|
|
|
|
$
|
—
|
|
|
$
|
777,356
|
|
|
Shareholders' Equity Callaway Golf Company
|
|
|
|
|
||||||||||||||||||||||||||||||||||||
|
Common Stock
|
|
Additional Paid-in
Capital |
|
Retained
Earnings |
|
Accumulated
Other
Comprehensive
Loss
|
|
Treasury Stock
|
|
Total Callaway Golf Company Shareholders' Equity
|
|
Non-
Controlling Interest
|
|
|
|
|||||||||||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Total
|
|||||||||||||||||||||||||||
Balance, June 30, 2018
|
95,649
|
|
|
$
|
956
|
|
|
$
|
335,025
|
|
|
$
|
434,674
|
|
|
|
$
|
(11,176
|
)
|
|
|
(1,209
|
)
|
|
$
|
(18,797
|
)
|
|
|
$
|
740,682
|
|
|
|
$
|
9,054
|
|
|
$
|
749,736
|
|
Acquisition of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
(72
|
)
|
|
|
(72
|
)
|
|
|
—
|
|
|
(72
|
)
|
||||||||
Exercise of stock options
|
—
|
|
|
—
|
|
|
(493
|
)
|
|
—
|
|
|
|
—
|
|
|
|
56
|
|
|
871
|
|
|
|
378
|
|
|
|
—
|
|
|
378
|
|
||||||||
Compensatory awards released from restriction
|
—
|
|
|
—
|
|
|
(107
|
)
|
|
47
|
|
|
|
—
|
|
|
|
6
|
|
|
60
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
3,511
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
3,511
|
|
|
|
—
|
|
|
3,511
|
|
||||||||
Stock dividends
|
—
|
|
|
—
|
|
|
(34
|
)
|
|
(47
|
)
|
|
|
—
|
|
|
|
3
|
|
|
81
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||
Cash dividends ($0.01 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(944
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
(944
|
)
|
|
|
—
|
|
|
(944
|
)
|
||||||||
Equity adjustment from foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(2,217
|
)
|
|
|
—
|
|
|
—
|
|
|
|
(2,217
|
)
|
|
|
(240
|
)
|
|
(2,457
|
)
|
||||||||
Change in fair value of derivative instruments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(128
|
)
|
|
|
—
|
|
|
—
|
|
|
|
(128
|
)
|
|
|
—
|
|
|
(128
|
)
|
||||||||
Distributions to non-controlling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||
Net Income
|
—
|
|
|
—
|
|
|
—
|
|
|
9,517
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
9,517
|
|
|
|
223
|
|
|
9,740
|
|
||||||||
Balance, September 30, 2018
|
95,649
|
|
|
$
|
956
|
|
|
$
|
337,902
|
|
|
$
|
443,247
|
|
|
|
$
|
(13,521
|
)
|
|
|
(1,147
|
)
|
|
$
|
(17,857
|
)
|
|
|
$
|
750,727
|
|
|
|
$
|
9,037
|
|
|
$
|
759,764
|
|
|
Shareholders' Equity Callaway Golf Company
|
|
|
|
|
||||||||||||||||||||||||||||||||||||
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Treasury Stock
|
|
Total Callaway Golf Company Shareholders' Equity
|
|
Non-
Controlling Interest
|
|
|
|
|||||||||||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Total
|
|||||||||||||||||||||||||||
Balance, December 31, 2017
|
95,043
|
|
|
$
|
950
|
|
|
$
|
335,222
|
|
|
$
|
324,081
|
|
|
|
$
|
(6,166
|
)
|
|
|
(411
|
)
|
|
$
|
(4,456
|
)
|
|
|
$
|
649,631
|
|
|
|
$
|
9,744
|
|
|
$
|
659,375
|
|
Adoption of accounting standard
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,185
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
(11,185
|
)
|
|
|
—
|
|
|
(11,185
|
)
|
||||||||
Acquisition of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,407
|
)
|
|
(22,373
|
)
|
|
|
(22,373
|
)
|
|
|
—
|
|
|
(22,373
|
)
|
||||||||
Exercise of stock options
|
—
|
|
|
—
|
|
|
(1,734
|
)
|
|
—
|
|
|
|
—
|
|
|
|
231
|
|
|
3,370
|
|
|
|
1,636
|
|
|
|
—
|
|
|
1,636
|
|
||||||||
Compensatory awards released from restriction
|
606
|
|
|
6
|
|
|
(5,527
|
)
|
|
—
|
|
|
|
—
|
|
|
|
437
|
|
|
5,521
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
9,975
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
9,975
|
|
|
|
—
|
|
|
9,975
|
|
||||||||
Stock dividends
|
|
|
|
—
|
|
|
(34
|
)
|
|
(47
|
)
|
|
|
—
|
|
|
|
3
|
|
|
81
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
||||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,841
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
(2,841
|
)
|
|
|
—
|
|
|
(2,841
|
)
|
||||||||
Equity adjustment from foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(7,395
|
)
|
|
|
—
|
|
|
—
|
|
|
|
(7,395
|
)
|
|
|
(52
|
)
|
|
(7,447
|
)
|
||||||||
Change in fair value of derivative instruments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
40
|
|
|
|
—
|
|
|
—
|
|
|
|
40
|
|
|
|
—
|
|
|
40
|
|
||||||||
Distributions to non-controlling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
(821
|
)
|
|
(821
|
)
|
||||||||
Net Income
|
—
|
|
|
—
|
|
|
—
|
|
|
133,239
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
133,239
|
|
|
|
166
|
|
|
133,405
|
|
||||||||
Balance, September 30, 2018
|
95,649
|
|
|
$
|
956
|
|
|
$
|
337,902
|
|
|
$
|
443,247
|
|
|
|
$
|
(13,521
|
)
|
|
|
(1,147
|
)
|
|
$
|
(17,857
|
)
|
|
|
$
|
750,727
|
|
|
|
$
|
9,037
|
|
|
$
|
759,764
|
|
|
Balance Sheet Location
|
|
September 30, 2019
|
||
Operating leases
|
|
|
|
||
ROU assets, net
|
Operating lease ROU assets, net
|
|
$
|
154,351
|
|
Lease liabilities, short-term
|
Operating lease liabilities, short-term
|
|
$
|
25,112
|
|
Lease liabilities, long-term
|
Operating lease liabilities, long-term
|
|
$
|
133,189
|
|
|
|
|
|
||
Finance Leases
|
|
|
|
||
ROU assets, net,
|
Other assets
|
|
$
|
1,384
|
|
Lease liabilities, short-term
|
Accounts payable and accrued expenses
|
|
$
|
618
|
|
Lease liabilities, long-term
|
Long-term other
|
|
$
|
588
|
|
|
Three Months Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2019 |
||||||||
Operating lease costs
|
|
$
|
8,758
|
|
|
|
|
$
|
28,357
|
|
|
Financing lease costs:
|
|
|
|
|
|
|
|
||||
Amortization of right-of-use assets
|
|
180
|
|
|
|
|
657
|
|
|
||
Interest on lease liabilities
|
|
14
|
|
|
|
|
69
|
|
|
||
Total financing lease costs
|
|
194
|
|
|
|
|
726
|
|
|
||
Variable lease costs
|
|
1,091
|
|
|
|
|
3,277
|
|
|
||
Total lease costs
|
|
$
|
10,043
|
|
|
|
|
$
|
32,360
|
|
|
Supplemental Cash Flows Information
|
|
September 30,
2019 |
||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
||
Operating cash flows - operating leases
|
|
$
|
29,783
|
|
Operating cash flows from finance leases
|
|
$
|
69
|
|
Financing cash flows from finance leases
|
|
$
|
583
|
|
|
|
|
||
Lease liabilities arising from new ROU assets:
|
|
|
||
Operating leases
|
|
$
|
8,819
|
|
Finance leases
|
|
$
|
172
|
|
|
|
|
||
Weighted average remaining lease term (years):
|
|
|
||
Operating leases
|
|
9.6
|
|
|
Finance leases
|
|
2.9
|
|
|
|
|
|
||
Weighted average discount rate:
|
|
|
||
Operating leases
|
|
5.7
|
%
|
|
Finance leases
|
|
4.2
|
%
|
|
Operating Leases
|
|
Finance Leases
|
||||
Remainder of 2019
|
$
|
9,355
|
|
|
$
|
126
|
|
2020
|
31,683
|
|
|
610
|
|
||
2021
|
26,163
|
|
|
228
|
|
||
2022
|
22,152
|
|
|
188
|
|
||
2023
|
20,336
|
|
|
83
|
|
||
Thereafter
|
98,108
|
|
|
38
|
|
||
Total future lease payments
|
207,797
|
|
|
1,273
|
|
||
Less: imputed interest
|
49,496
|
|
|
67
|
|
||
Total
|
$
|
158,301
|
|
|
$
|
1,206
|
|
|
Operating Segments(1)
|
||||||||||
For the Three Months Ended September 30,
|
Golf Equipment
|
|
Apparel, Gear
& Other
|
|
Total
|
||||||
2019
|
|
||||||||||
Golf Clubs
|
$
|
168,005
|
|
|
$
|
—
|
|
|
$
|
168,005
|
|
Golf Balls
|
42,497
|
|
|
—
|
|
|
42,497
|
|
|||
Apparel
|
—
|
|
|
139,998
|
|
|
139,998
|
|
|||
Gear, Accessories & Other
|
—
|
|
|
75,717
|
|
|
75,717
|
|
|||
|
$
|
210,502
|
|
|
$
|
215,715
|
|
|
$
|
426,217
|
|
2018
|
|
|
|
|
|
||||||
Golf Clubs
|
$
|
142,396
|
|
|
$
|
—
|
|
|
$
|
142,396
|
|
Golf Balls
|
44,661
|
|
|
—
|
|
|
44,661
|
|
|||
Apparel
|
—
|
|
|
27,340
|
|
|
27,340
|
|
|||
Gear, Accessories & Other
|
—
|
|
|
48,257
|
|
|
48,257
|
|
|||
|
$
|
187,057
|
|
|
$
|
75,597
|
|
|
$
|
262,654
|
|
|
Operating Segments(1)
|
||||||||||
For the Nine Months Ended September 30,
|
Golf Equipment
|
|
Apparel, Gear
& Other
|
|
Total
|
||||||
2019
|
|
||||||||||
Golf Clubs
|
$
|
653,531
|
|
|
$
|
—
|
|
|
$
|
653,531
|
|
Golf Balls
|
172,943
|
|
|
—
|
|
|
172,943
|
|
|||
Apparel
|
—
|
|
|
309,439
|
|
|
309,439
|
|
|||
Gear, Accessories & Other
|
—
|
|
|
253,209
|
|
|
253,209
|
|
|||
|
$
|
826,474
|
|
|
$
|
562,648
|
|
|
$
|
1,389,122
|
|
2018
|
|
|
|
|
|
||||||
Golf Clubs
|
$
|
632,639
|
|
|
$
|
—
|
|
|
$
|
632,639
|
|
Golf Balls
|
165,465
|
|
|
—
|
|
|
165,465
|
|
|||
Apparel
|
—
|
|
|
84,460
|
|
|
84,460
|
|
|||
Gear, Accessories & Other
|
—
|
|
|
179,592
|
|
|
179,592
|
|
|||
|
$
|
798,104
|
|
|
$
|
264,052
|
|
|
$
|
1,062,156
|
|
|
(1)
|
The Company changed its operating segments as of January 1, 2019 (see Note 18). Accordingly, prior period amounts have been reclassified to conform with the current period presentation.
|
|
Three Months Ended
September 30, |
||||||
|
2019
|
|
2018
|
||||
Major Geographic Region:(1)
|
|
|
|
||||
United States
|
$
|
161,631
|
|
|
$
|
142,263
|
|
Europe
|
133,351
|
|
|
33,086
|
|
||
Japan
|
64,176
|
|
|
54,434
|
|
||
Rest of World
|
67,059
|
|
|
32,871
|
|
||
|
$
|
426,217
|
|
|
$
|
262,654
|
|
|
Nine Months Ended
September 30, |
||||||
|
2019
|
|
2018
|
||||
Major Geographic Region:(1)
|
|
|
|
||||
United States
|
$
|
658,051
|
|
|
$
|
610,797
|
|
Europe
|
341,594
|
|
|
130,613
|
|
||
Japan
|
193,080
|
|
|
183,375
|
|
||
Rest of World
|
196,397
|
|
|
137,371
|
|
||
|
$
|
1,389,122
|
|
|
$
|
1,062,156
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
(in thousands)
|
||||||||||
Beginning balance
|
$
|
5,499
|
|
|
$
|
3,675
|
|
|
$
|
5,610
|
|
|
$
|
4,447
|
|
Provision for credit losses
|
778
|
|
|
2,270
|
|
|
920
|
|
|
1,986
|
|
||||
Write-off of uncollectible amounts, net of recoveries
|
(155
|
)
|
|
(307
|
)
|
|
(408
|
)
|
|
(795
|
)
|
||||
Ending balance
|
$
|
6,122
|
|
|
$
|
5,638
|
|
|
$
|
6,122
|
|
|
$
|
5,638
|
|
|
At January 4, 2019
|
|||
Assets Acquired
|
|
|
||
Cash
|
|
$
|
58,096
|
|
Accounts receivable
|
|
33,491
|
|
|
Inventories
|
|
90,849
|
|
|
Other current assets
|
|
10,287
|
|
|
Property and equipment
|
|
26,180
|
|
|
Deferred tax assets
|
|
2,557
|
|
|
Other assets
|
|
23
|
|
|
Intangibles - trade name
|
|
239,295
|
|
|
Intangibles - franchisee & distributor relationships
|
|
38,743
|
|
|
Goodwill
|
|
152,237
|
|
|
Total assets acquired
|
|
651,758
|
|
|
Liabilities Assumed
|
|
|
||
Accounts Payable and accrued liabilities
|
|
46,347
|
|
|
Deferred tax liabilities
|
|
84,210
|
|
|
Net assets acquired
|
|
$
|
521,201
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in thousands)
|
||||||||||||||
Net sales
|
$
|
426,217
|
|
|
$
|
407,453
|
|
|
$
|
1,389,122
|
|
|
$
|
1,354,836
|
|
Net income attributable to Callaway Golf Company
|
$
|
32,366
|
|
|
$
|
26,781
|
|
|
$
|
124,478
|
|
|
$
|
104,545
|
|
|
|
(in thousands)
|
||
Remainder of 2019
|
|
$
|
2,387
|
|
2020
|
|
9,653
|
|
|
2021
|
|
9,825
|
|
|
2022
|
|
10,003
|
|
|
2023
|
|
7,546
|
|
|
2024
|
|
6,680
|
|
|
Thereafter
|
|
422,400
|
|
|
|
|
$
|
468,494
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Earnings per common share—basic
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Callaway Golf Company
|
$
|
31,048
|
|
|
$
|
9,517
|
|
|
$
|
108,626
|
|
|
$
|
133,239
|
|
Weighted-average common shares outstanding—basic
|
94,100
|
|
|
94,477
|
|
|
94,284
|
|
|
94,605
|
|
||||
Basic earnings per common share
|
$
|
0.33
|
|
|
$
|
0.10
|
|
|
$
|
1.15
|
|
|
$
|
1.41
|
|
Earnings per common share—diluted
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Callaway Golf Company
|
$
|
31,048
|
|
|
$
|
9,517
|
|
|
$
|
108,626
|
|
|
$
|
133,239
|
|
Weighted-average common shares outstanding—basic
|
94,100
|
|
|
94,477
|
|
|
94,284
|
|
|
94,605
|
|
||||
Outstanding options, restricted stock units and performance share units
|
2,187
|
|
|
2,843
|
|
|
1,913
|
|
|
2,471
|
|
||||
Weighted-average common shares outstanding—diluted
|
96,287
|
|
|
97,320
|
|
|
96,197
|
|
|
97,076
|
|
||||
Dilutive earnings per common share
|
$
|
0.32
|
|
|
$
|
0.10
|
|
|
$
|
1.13
|
|
|
$
|
1.37
|
|
|
September 30,
2019 |
|
December 31, 2018
|
||||
Inventories:
|
|
|
|
||||
Raw materials
|
$
|
60,693
|
|
|
$
|
80,474
|
|
Work-in-process
|
1,039
|
|
|
815
|
|
||
Finished goods
|
278,582
|
|
|
256,768
|
|
||
|
$
|
340,314
|
|
|
$
|
338,057
|
|
|
Useful
Life
(Years)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||||||||||||
|
Gross
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
||||||||||||||||||
Non-Amortizing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trade name, trademark and trade dress and other
|
NA
|
|
$
|
447,243
|
|
|
|
$
|
—
|
|
|
|
$
|
447,243
|
|
|
$
|
218,364
|
|
|
|
$
|
—
|
|
|
|
$
|
218,364
|
|
Amortizing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Patents
|
2-16
|
|
31,581
|
|
|
|
31,581
|
|
|
|
—
|
|
|
31,581
|
|
|
|
31,543
|
|
|
|
38
|
|
||||||
Distributor, customer relationships and other
|
1-10
|
|
52,837
|
|
|
|
13,031
|
|
|
|
39,806
|
|
|
15,780
|
|
|
|
9,490
|
|
|
|
6,290
|
|
||||||
Total intangible assets
|
|
|
$
|
531,661
|
|
|
|
$
|
44,612
|
|
|
|
$
|
487,049
|
|
|
$
|
265,725
|
|
|
|
$
|
41,033
|
|
|
|
$
|
224,692
|
|
Remainder of 2019
|
$
|
1,207
|
|
2020
|
4,780
|
|
|
2021
|
4,724
|
|
|
2022
|
4,548
|
|
|
2023
|
4,409
|
|
|
Thereafter
|
20,138
|
|
|
|
$
|
39,806
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Beginning balance
|
$
|
10,976
|
|
|
$
|
8,035
|
|
|
$
|
7,610
|
|
|
$
|
6,657
|
|
Provision
|
1,494
|
|
|
3,110
|
|
|
6,492
|
|
|
8,633
|
|
||||
Provision liability assumed from acquisition
|
—
|
|
|
—
|
|
|
2,208
|
|
|
—
|
|
||||
Claims paid/costs incurred
|
(2,349
|
)
|
|
(2,613
|
)
|
|
(6,189
|
)
|
|
(6,758
|
)
|
||||
Ending balance
|
$
|
10,121
|
|
|
$
|
8,532
|
|
|
$
|
10,121
|
|
|
$
|
8,532
|
|
Tax Jurisdiction
|
|
Years No Longer Subject to Audit
|
U.S. federal
|
|
2010 and prior
|
California (United States)
|
|
2008 and prior
|
Canada
|
|
2011 and prior
|
Japan
|
|
2012 and prior
|
South Korea
|
|
2013 and prior
|
United Kingdom
|
|
2014 and prior
|
Remainder of 2019
|
$
|
44,768
|
|
2020
|
22,789
|
|
|
2021
|
13,131
|
|
|
2022
|
5,376
|
|
|
2023
|
843
|
|
|
|
$
|
86,907
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
||||||||||||
Cost of sales
|
$
|
213
|
|
|
$
|
253
|
|
|
$
|
715
|
|
|
$
|
722
|
|
Operating expenses
|
2,300
|
|
|
3,259
|
|
|
8,763
|
|
|
9,253
|
|
||||
Total cost of share-based compensation included in income, before income tax
|
$
|
2,513
|
|
|
$
|
3,512
|
|
|
$
|
9,478
|
|
|
$
|
9,975
|
|
|
Fair
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
September 30, 2019
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts—asset position
|
$
|
3,174
|
|
|
$
|
—
|
|
|
$
|
3,174
|
|
|
$
|
—
|
|
Foreign currency forward contracts—liability position
|
(367
|
)
|
|
—
|
|
|
(367
|
)
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cross-currency debt swap agreements—asset position
|
10,442
|
|
|
—
|
|
|
10,442
|
|
|
—
|
|
||||
Cross-currency debt swap agreements—liability position
|
(151
|
)
|
|
—
|
|
|
(151
|
)
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Interest rate hedge agreements—asset position
|
285
|
|
|
—
|
|
|
285
|
|
|
—
|
|
||||
Interest rate hedge agreements—liability position
|
(10,375
|
)
|
|
—
|
|
|
(10,375
|
)
|
|
—
|
|
||||
|
$
|
3,008
|
|
|
$
|
—
|
|
|
$
|
3,008
|
|
|
$
|
—
|
|
December 31, 2018
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts—asset position
|
$
|
4,539
|
|
|
$
|
—
|
|
|
$
|
4,539
|
|
|
$
|
—
|
|
Foreign currency forward contracts—liability position
|
(236
|
)
|
|
—
|
|
|
(236
|
)
|
|
—
|
|
||||
|
$
|
4,303
|
|
|
$
|
—
|
|
|
$
|
4,303
|
|
|
$
|
—
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
||||||||
Term Loan Facility(1)
|
$
|
447,600
|
|
|
$
|
447,600
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Primary Asset-Based Revolving Credit Facility(2)
|
$
|
62,596
|
|
|
$
|
62,596
|
|
|
$
|
40,300
|
|
|
$
|
40,300
|
|
Japan ABL Facility(2)
|
$
|
48,115
|
|
|
$
|
48,115
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equipment notes(3)
|
$
|
20,902
|
|
|
$
|
20,902
|
|
|
$
|
9,629
|
|
|
$
|
9,629
|
|
Standby letters of credit(4)
|
$
|
1,014
|
|
|
$
|
1,014
|
|
|
$
|
1,187
|
|
|
$
|
1,187
|
|
|
(1)
|
In January 2019, the Company entered into the Term Loan Facility. The fair value of this debt is categorized within Level 2 of the fair value hierarchy. See Note 5 for further information.
|
(2)
|
The carrying value of the amounts outstanding under the Company's ABL Facility and Japan ABL Facility approximates 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 5 for information on the Company's credit facilities, including certain risks and uncertainties related thereto.
|
(3)
|
In December 2017, the Company entered into the 2017 Equipment Note and in August 2019, entered into the 2019 Equipment Note, both secured by certain equipment at the Company's golf ball manufacturing facility. The fair value of this debt is categorized within Level 2 of the fair value hierarchy. See Note 5 for further information.
|
(4)
|
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.
|
|
Balance Sheet Location
|
|
Fair Value of
Asset Derivatives
|
||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||
Derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
Other current assets
|
|
$
|
370
|
|
|
$
|
54
|
|
|
|
|
|
|
|
||||
Cross-currency debt swap agreements
|
Other current assets
|
|
5,429
|
|
|
—
|
|
||
|
Other assets
|
|
5,013
|
|
|
—
|
|
||
|
|
|
|
|
|
||||
Interest rate hedge agreements
|
Other current assets
|
|
285
|
|
|
—
|
|
||
Total
|
|
|
$
|
11,097
|
|
|
$
|
54
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
Other current assets
|
|
$
|
2,804
|
|
|
$
|
4,485
|
|
|
Balance Sheet Location
|
|
Fair Value of
Liability Derivatives
|
||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||
Derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
Accounts payable and accrued expenses
|
|
$
|
30
|
|
|
$
|
39
|
|
|
|
|
|
|
|
||||
Cross-currency debt swap agreements
|
Accounts payable and accrued expenses
|
|
151
|
|
|
—
|
|
||
|
|
|
|
|
|
||||
Interest rate hedge agreements
|
Accounts payable and accrued expenses
|
|
1,727
|
|
|
—
|
|
||
|
Other long-term liabilities
|
|
8,648
|
|
|
—
|
|
||
Total
|
|
|
$
|
10,556
|
|
|
$
|
39
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
Accounts payable and accrued expenses
|
|
$
|
337
|
|
|
$
|
197
|
|
|
|
Gain/(Loss) Recognized in Other Comprehensive Income
(Effective Portion) |
||||||||||||||
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
Derivatives designated as cash flow hedging instruments
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Foreign currency forward contracts
|
|
$
|
464
|
|
|
$
|
256
|
|
|
$
|
1,037
|
|
|
$
|
394
|
|
Cross-currency debt swap agreements
|
|
13,133
|
|
|
—
|
|
|
14,297
|
|
|
—
|
|
||||
Interest rate hedge agreements
|
|
(2,662
|
)
|
|
—
|
|
|
(10,559
|
)
|
|
—
|
|
||||
|
|
$
|
10,935
|
|
|
$
|
256
|
|
|
$
|
4,775
|
|
|
$
|
394
|
|
|
|
Gain/(Loss) Reclassified from Other Comprehensive Income into Earnings
(Effective Portion)
|
||||||||||||||
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
Derivatives designated as cash flow hedging instruments
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Foreign currency forward contracts
|
|
$
|
556
|
|
|
$
|
168
|
|
|
$
|
930
|
|
|
$
|
(32
|
)
|
Cross-currency debt swap agreements
|
|
9,868
|
|
|
—
|
|
|
12,119
|
|
|
—
|
|
||||
Interest rate hedge agreements
|
|
(150
|
)
|
|
—
|
|
|
(194
|
)
|
|
—
|
|
||||
|
|
$
|
10,274
|
|
|
$
|
168
|
|
|
$
|
12,855
|
|
|
$
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Location of Net Gain Recognized in Income on Derivative Instruments
|
|
Amount of Net Gain Recognized in Income on
Derivative Instruments
|
||||||||||||||
Derivatives not designated as hedging instruments
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|||||||||||
Foreign currency forward contracts
|
|
Other expense, net
|
|
$
|
4,035
|
|
|
$
|
1,802
|
|
|
$
|
5,476
|
|
|
$
|
5,161
|
|
|
|
Derivative Instruments
|
|
Foreign Currency Translation
|
|
Total
|
||||||
Accumulated other comprehensive loss, June 30, 2019, after tax
|
|
$
|
(7,146
|
)
|
|
$
|
(15,125
|
)
|
|
$
|
(22,271
|
)
|
Change in derivative instruments
|
|
10,935
|
|
|
—
|
|
|
10,935
|
|
|||
Net gains from derivative instruments reclassified to cost of goods sold
|
|
(10,274
|
)
|
|
—
|
|
|
(10,274
|
)
|
|||
Income tax benefit on derivative instruments
|
|
(666
|
)
|
|
—
|
|
|
(666
|
)
|
|||
Foreign currency translation adjustments
|
|
—
|
|
|
(17,083
|
)
|
|
(17,083
|
)
|
|||
Accumulated other comprehensive loss, September 30, 2019, after tax
|
|
$
|
(7,151
|
)
|
|
$
|
(32,208
|
)
|
|
$
|
(39,359
|
)
|
|
|
Derivative Instruments
|
|
Foreign Currency Translation
|
|
Total
|
||||||
Accumulated other comprehensive loss, December 31, 2018, after tax
|
|
$
|
107
|
|
|
$
|
(13,807
|
)
|
|
$
|
(13,700
|
)
|
Change in derivative instruments
|
|
4,775
|
|
|
—
|
|
|
4,775
|
|
|||
Net gains from derivative instruments reclassified to cost of goods sold
|
|
(12,855
|
)
|
|
—
|
|
|
(12,855
|
)
|
|||
Income tax benefit on derivative instruments
|
|
822
|
|
|
—
|
|
|
822
|
|
|||
Foreign currency translation adjustments
|
|
—
|
|
|
(18,401
|
)
|
|
(18,401
|
)
|
|||
Accumulated other comprehensive loss, September 30, 2019, after tax
|
|
$
|
(7,151
|
)
|
|
$
|
(32,208
|
)
|
|
$
|
(39,359
|
)
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018(1)
|
|
2019
|
|
2018(1)
|
||||||||
Net sales:
|
|
|
|
|
|
|
|
||||||||
Golf Equipment
|
$
|
210,502
|
|
|
$
|
187,057
|
|
|
$
|
826,474
|
|
|
$
|
798,104
|
|
Apparel, Gear and Other
|
215,715
|
|
|
75,597
|
|
|
562,648
|
|
|
264,052
|
|
||||
|
$
|
426,217
|
|
|
$
|
262,654
|
|
|
$
|
1,389,122
|
|
|
$
|
1,062,156
|
|
Income before income taxes:
|
|
|
|
|
|
|
|
||||||||
Golf Equipment
|
$
|
23,124
|
|
|
$
|
17,003
|
|
|
$
|
148,782
|
|
|
$
|
158,460
|
|
Apparel, Gear and Other
|
34,877
|
|
|
8,016
|
|
|
68,909
|
|
|
51,547
|
|
||||
Reconciling items(2)
|
(24,825
|
)
|
|
(13,944
|
)
|
|
(90,352
|
)
|
|
(40,801
|
)
|
||||
|
$
|
33,176
|
|
|
$
|
11,075
|
|
|
$
|
127,339
|
|
|
$
|
169,206
|
|
Additions to long-lived assets:
|
|
|
|
|
|
|
|
||||||||
Golf Equipment
|
$
|
7,648
|
|
|
$
|
6,220
|
|
|
$
|
20,989
|
|
|
$
|
20,490
|
|
Apparel, Gear and Other
|
6,783
|
|
|
3,121
|
|
|
15,465
|
|
|
5,679
|
|
||||
|
$
|
14,431
|
|
|
$
|
9,341
|
|
|
$
|
36,454
|
|
|
$
|
26,169
|
|
|
(1)
|
The Company changed its operating segments as of January 1, 2019. Accordingly, prior period amounts have been reclassified to conform with the current period presentation.
|
(2)
|
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 for the three and nine months ended September 30, 2019 compared to 2018 includes incremental corporate general and administrative expenses associated with the addition of the Jack Wolfskin business in January 2019, as well as incremental costs of $2,442,000 and $25,275,000 for the three and nine months ended September 30, 2019, respectively, primarily related to transaction and transition costs associated with the acquisition of Jack Wolfskin that was completed in January 2019, combined with the amortization of intangible assets related to the Jack Wolfskin acquisition. Reconciling items also include incremental interest expense of $7,902,000 and $24,449,000, for the three and nine months ended September 30, 2019, respectively, primarily due to the new Term Loan Facility to fund the purchase of Jack Wolfskin, combined with higher outstanding borrowings on the Company's credit facilities period over period. See Note 5 for information on the Company's credit facilities and long-term debt obligations.
|
|
September 30, 2019
|
|
December 31, 2018(1)
|
||||
Total Assets:
|
|
|
|
||||
Golf Equipment
|
$
|
404,117
|
|
|
$
|
437,604
|
|
Apparel, Gear and Other
|
907,102
|
|
|
269,432
|
|
||
Reconciling items(2)
|
548,429
|
|
|
345,908
|
|
||
|
$
|
1,859,648
|
|
|
$
|
1,052,944
|
|
Goodwill:
|
|
|
|
||||
Golf Equipment
|
$
|
25,801
|
|
|
$
|
26,183
|
|
Apparel, Gear and Other
|
175,243
|
|
|
29,633
|
|
||
|
$
|
201,044
|
|
|
$
|
55,816
|
|
|
(1)
|
The Company changed its operating and reportable segments as of January 1, 2019. Accordingly, prior period amounts have been reclassified to conform with the current period presentation.
|
(2)
|
Total assets by operating segment are comprised of net inventory, certain property, plant and equipment, intangible assets and goodwill. Reconciling items represent unallocated corporate assets not segregated between the two reportable operating segments including cash and cash equivalents, net accounts receivable, deferred tax assets and derivative instruments.
|
|
Three Months Ended September 30,
|
|
Growth
|
|||||||||||
|
2019
|
|
2018(1)
|
|
Dollars
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Golf Equipment
|
$
|
210.5
|
|
|
$
|
187.1
|
|
|
$
|
23.4
|
|
|
12.5
|
%
|
Apparel, Gear and Other
|
215.7
|
|
|
75.6
|
|
|
140.1
|
|
|
185.3
|
%
|
|||
|
$
|
426.2
|
|
|
$
|
262.7
|
|
|
$
|
163.5
|
|
|
62.2
|
%
|
|
(1)
|
The Company changed its operating segments as of January 1, 2019. Accordingly, prior period amounts have been reclassified to conform with the current period presentation.
|
|
Three Months Ended September 30,
|
|
Growth
|
|
Constant Currency Growth vs. 2018
|
|||||||||||
|
2019
|
|
2018(1)
|
|
Dollars
|
|
Percent
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|
|
|||||||
United States
|
$
|
161.6
|
|
|
$
|
142.3
|
|
|
$
|
19.3
|
|
|
13.6
|
%
|
|
13.6%
|
Europe
|
133.4
|
|
|
33.1
|
|
|
100.3
|
|
|
303.0
|
%
|
|
320.8%
|
|||
Japan
|
64.2
|
|
|
54.4
|
|
|
9.8
|
|
|
18.0
|
%
|
|
13.3%
|
|||
Rest of World
|
67.0
|
|
|
32.9
|
|
|
34.1
|
|
|
103.6
|
%
|
|
111.9%
|
|||
|
$
|
426.2
|
|
|
$
|
262.7
|
|
|
$
|
163.5
|
|
|
62.2
|
%
|
|
64.5%
|
|
•
|
In the United States, the increase was primarily due to the launch of Epic Forged irons and MD5 Jaws wedges in the third quarter of 2019, combined with an increase in apparel sales as a result of the continued growth of the TravisMathew business.
|
•
|
Net sales in Europe increased primarily due to incremental apparel sales resulting from the Jack Wolfskin acquisition completed in January 2019, partially offset by the unfavorable impact of foreign currency fluctuations on net sales.
|
•
|
The increase in Japan was primarily due to a shift in product launch timing due to the launch of region-specific woods and irons models in the third quarter of 2019. In 2018, these models were launched during the first half of the year.
|
•
|
The increase in Rest of World was primarily driven by an increase in apparel sales in China resulting from the Jack Wolfskin acquisition, partially offset by the unfavorable impact of foreign currency fluctuations on net sales.
|
|
Three Months Ended September 30, 2019
|
|
Three Months Ended September 30, 2018
|
||||||||||||||||||||||||||||
|
GAAP
|
|
Acquisition and Other Non-Recurring Expenses(1)
|
|
Non-Cash Purchase Accounting Adjustments(2)
|
|
Non-GAAP
|
|
GAAP
|
|
Acquisition and Other Non-Recurring Expenses(1)
|
|
Non-Cash Purchase Accounting Adjustments(2)
|
|
Non-GAAP
|
||||||||||||||||
Net income (loss) attributable to Callaway Golf Company
|
$
|
31.0
|
|
|
$
|
(2.3
|
)
|
|
$
|
(1.0
|
)
|
|
$
|
34.3
|
|
|
$
|
9.5
|
|
|
$
|
(1.2
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
10.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Diluted earnings (loss) per share
|
$
|
0.32
|
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
0.36
|
|
|
$
|
0.10
|
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
0.11
|
|
Weighted-average shares outstanding
|
96.3
|
|
|
96.3
|
|
|
96.3
|
|
|
96.3
|
|
|
97.3
|
|
|
97.3
|
|
|
97.3
|
|
|
97.3
|
|
|
(1)
|
Represents non-recurring transaction fees, including banker’s fees, legal fees, consulting and travel, and transition costs, including consulting, audit fees and valuations services, associated with the acquisition of Jack Wolfskin completed in January 2019, as well as other non-recurring advisory fees.
|
(2)
|
Represents the amortization of intangible assets related to the Company's OGIO and TravisMathew acquisitions in January 2017 and August 2017, respectively, as well as the amortization of intangible assets and the cost impact associated with a change in valuation of inventory (inventory step-up) related to the Company's Jack Wolfskin acquisition in January 2019.
|
|
Three Months Ended
September 30, |
|
Growth/(Decline)
|
|||||||||||
|
2019
|
|
2018
|
|
Dollars
|
|
Percent
|
|
||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Golf Clubs
|
$
|
168.0
|
|
|
$
|
142.4
|
|
|
$
|
25.6
|
|
|
18.0
|
%
|
Golf Balls
|
42.5
|
|
|
44.7
|
|
|
(2.2
|
)
|
|
(4.9
|
)%
|
|||
|
$
|
210.5
|
|
|
$
|
187.1
|
|
|
$
|
23.4
|
|
|
12.5
|
%
|
|
Three Months Ended
September 30, |
|
Growth
|
|||||||||||
|
2019
|
|
2018
|
|
Dollars
|
|
|
Percent
|
|
|||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Apparel
|
$
|
140.0
|
|
|
$
|
27.3
|
|
|
$
|
112.7
|
|
|
412.8
|
%
|
Gear, Accessories, & Other
|
75.7
|
|
|
48.3
|
|
|
27.4
|
|
|
56.7
|
%
|
|||
|
$
|
215.7
|
|
|
$
|
75.6
|
|
|
$
|
140.1
|
|
|
185.3
|
%
|
|
Three Months Ended
September 30, |
|
Growth/(Decline)
|
|||||||||||
|
2019
|
|
2018
|
|
Dollars
|
|
Percent
|
|||||||
Income before income taxes:
|
|
|
|
|
|
|
|
|||||||
Golf Equipment
|
$
|
23.1
|
|
|
$
|
17.0
|
|
|
$
|
6.1
|
|
|
35.9
|
%
|
Apparel, Gear and Other
|
34.9
|
|
|
8.0
|
|
|
26.9
|
|
|
336.3
|
%
|
|||
Reconciling items(1)
|
(24.8
|
)
|
|
(13.9
|
)
|
|
(10.9
|
)
|
|
78.4
|
%
|
|||
|
$
|
33.2
|
|
|
$
|
11.1
|
|
|
$
|
22.1
|
|
|
199.1
|
%
|
|
(1)
|
Reconciling items represent corporate general and administrative expenses and other income (expense) not included by management in determining segment profitability. The $10.9 million increase in reconciling items in the third quarter of 2019 compared to the third quarter of 2018 was primarily due to incremental corporate general and administrative expenses due to the addition of the Jack Wolfskin business in 2019, in addition to incremental interest expense of $7.9 million due to the new Term Loan Facility to fund the purchase of Jack Wolfskin and $2.4 million, which was primarily related to incremental transition costs combined with the amortization of intangible assets related to the Jack Wolfskin acquisition.
|
|
Nine Months Ended
September 30, |
|
Growth
|
|||||||||||
|
2019
|
|
2018(1)
|
|
Dollars
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Golf Equipment
|
$
|
826.5
|
|
|
$
|
798.1
|
|
|
$
|
28.4
|
|
|
3.6
|
%
|
Apparel, Gear and Other
|
562.6
|
|
|
264.1
|
|
|
298.5
|
|
|
113.0
|
%
|
|||
|
$
|
1,389.1
|
|
|
$
|
1,062.2
|
|
|
$
|
326.9
|
|
|
30.8
|
%
|
|
(1)
|
The Company changed its operating segments as of January 1, 2019. Accordingly, prior period amounts have been reclassified to conform with the current period presentation.
|
|
Nine Months Ended
September 30, |
|
Growth
|
|
Constant Currency Growth vs. 2018
|
|||||||||||
|
2019
|
|
2018(1)
|
|
Dollars
|
|
Percent
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|
|
|||||||
United States
|
$
|
658.1
|
|
|
$
|
610.8
|
|
|
$
|
47.3
|
|
|
7.7
|
%
|
|
7.7%
|
Europe
|
341.6
|
|
|
130.6
|
|
|
211.0
|
|
|
161.6
|
%
|
|
177.6%
|
|||
Japan
|
193.1
|
|
|
183.4
|
|
|
9.7
|
|
|
5.3
|
%
|
|
4.9%
|
|||
Rest of World
|
196.3
|
|
|
137.4
|
|
|
58.9
|
|
|
42.9
|
%
|
|
50.2%
|
|||
|
$
|
1,389.1
|
|
|
$
|
1,062.2
|
|
|
$
|
326.9
|
|
|
30.8
|
%
|
|
33.6%
|
|
•
|
In the United States, the increase was primarily due to an increase in sales of golf equipment combined with an increase in apparel sales due to the continued growth of the TravisMathew business.
|
•
|
In Europe, the increase was primarily due to incremental apparel sales resulting from the Jack Wolfskin acquisition completed in January 2019, combined with an increase in sales of golf equipment, partially offset by the unfavorable impact of foreign currency fluctuations on sales.
|
•
|
The increase in Japan was primarily due to the success of region-specific irons models launched in the third quarter of 2019, combined with the success of the Apex line of irons launched earlier in 2019.
|
•
|
The increase in Rest of World was primarily driven by incremental apparel sales in China resulting from the Jack Wolfskin acquisition completed in January 2019, partially offset by the unfavorable impact of foreign currency fluctuations on sales.
|
|
Nine Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||||||||||||||||
|
GAAP
|
|
Acquisition and Transition Expenses(1)
|
|
Non-Cash Purchase Accounting Adjustments(2)
|
|
Non-GAAP
|
|
GAAP
|
|
Acquisition and Transition Expenses(1)
|
|
Non-Cash Purchase Accounting Adjustments(2)
|
|
Non-GAAP
|
||||||||||||||||
Net income (loss) attributable to Callaway Golf Company
|
$
|
108.6
|
|
|
$
|
(10.2
|
)
|
|
$
|
(11.0
|
)
|
|
$
|
129.8
|
|
|
$
|
133.2
|
|
|
$
|
(1.2
|
)
|
|
$
|
(0.6
|
)
|
|
$
|
135.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Diluted earnings (loss) per share
|
$
|
1.13
|
|
|
$
|
(0.11
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
1.35
|
|
|
$
|
1.37
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
1.39
|
|
Weighted-average shares outstanding
|
96.2
|
|
|
96.2
|
|
|
96.2
|
|
|
96.2
|
|
|
97.1
|
|
|
97.1
|
|
|
97.1
|
|
|
97.1
|
|
|
(1)
|
Represents non-recurring transaction fees, including banker’s fees, legal fees, consulting and travel, and transition costs, including consulting, audit fees and valuations services, associated with the acquisition of Jack Wolfskin completed in January 2019, as well as other non-recurring advisory fees.
|
(2)
|
Represents the amortization of intangible assets related to the Company's OGIO and TravisMathew acquisitions in January 2017 and August 2017, respectively, as well as the amortization of intangible assets and the cost impact associated with a change in valuation of inventory (inventory step-up) related to the Company's Jack Wolfskin acquisition in January 2019.
|
|
Nine Months Ended
September 30, |
|
Growth
|
|||||||||||
|
2019
|
|
2018
|
|
Dollars
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Golf Clubs
|
$
|
653.6
|
|
|
$
|
632.6
|
|
|
$
|
21.0
|
|
|
3.3
|
%
|
Golf Balls
|
172.9
|
|
|
165.5
|
|
|
7.4
|
|
|
4.5
|
%
|
|||
|
$
|
826.5
|
|
|
$
|
798.1
|
|
|
$
|
28.4
|
|
|
3.6
|
%
|
|
Nine Months Ended
September 30, |
|
Growth
|
|||||||||||
|
2019
|
|
2018
|
|
Dollars
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Apparel
|
$
|
309.4
|
|
|
$
|
84.5
|
|
|
$
|
224.9
|
|
|
266.2
|
%
|
Gear, Accessories, & Other
|
253.2
|
|
|
179.6
|
|
|
73.6
|
|
|
41.0
|
%
|
|||
|
$
|
562.6
|
|
|
$
|
264.1
|
|
|
$
|
298.5
|
|
|
113.0
|
%
|
|
Nine Months Ended
September 30, |
|
Growth/(Decline)
|
|||||||||||
|
2019
|
|
2018
|
|
Dollars
|
|
Percent
|
|||||||
Income before income taxes:
|
|
|
|
|
|
|
|
|||||||
Golf Equipment
|
$
|
148.8
|
|
|
$
|
158.5
|
|
|
$
|
(9.7
|
)
|
|
(6.1
|
)%
|
Apparel, Gear and Other
|
68.9
|
|
|
51.5
|
|
|
17.4
|
|
|
33.8
|
%
|
|||
Reconciling items(1)
|
(90.4
|
)
|
|
(40.8
|
)
|
|
(49.6
|
)
|
|
121.6
|
%
|
|||
|
$
|
127.3
|
|
|
$
|
169.2
|
|
|
$
|
(41.9
|
)
|
|
(24.8
|
)%
|
|
(1)
|
Reconciling items represent corporate general and administrative expenses and other income (expense) not included by management in determining segment profitability. The $49.6 million increase in reconciling items in the first nine months of 2019 compared to the same period in 2018 includes incremental corporate general and administrative expenses associated with the addition of the Jack Wolfskin business in January 2019, as well as $25.3 million, which was primarily related to transaction and transition costs in connection with the Jack Wolfskin acquisition, and the amortization of intangible assets associated with the acquisition of Jack Wolfskin. Reconciling items also include incremental interest expense of $24.4 million due to the new Term Loan Facility to fund the purchase of Jack Wolfskin. For information on the acquisition of Jack Wolfskin and the Company's credit facilities and long-term debt obligations see Note 4 "Business Combinations" and Note 5 “Financing Arrangements” to the Notes to Consolidated Condensed Financial Statements included in Part I, Item 1, of this Form 10-Q.
|
|
Payments Due By Period
|
||||||||||||||||||
|
Total
|
|
Less than
1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More than
5 Years
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Term Loan Facility(1)
|
$
|
447.6
|
|
|
$
|
1.2
|
|
|
$
|
9.6
|
|
|
$
|
9.6
|
|
|
$
|
427.2
|
|
Interest on term loan facility
|
192.0
|
|
|
31.3
|
|
|
62.3
|
|
|
61.0
|
|
|
37.4
|
|
|||||
Equipment notes(2)
|
20.9
|
|
|
4.8
|
|
|
10.1
|
|
|
6.0
|
|
|
—
|
|
|||||
Interest on equipment notes
|
1.6
|
|
|
0.7
|
|
|
0.7
|
|
|
0.2
|
|
|
—
|
|
|||||
ABL Facility
|
62.6
|
|
|
62.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Japan ABL Facility
|
48.1
|
|
|
48.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Finance leases, including imputed interest(3)
|
1.3
|
|
|
0.1
|
|
|
0.8
|
|
|
0.4
|
|
|
—
|
|
|||||
Operating leases, including imputed interest(4)
|
208.2
|
|
|
9.4
|
|
|
57.8
|
|
|
42.5
|
|
|
98.5
|
|
|||||
Unconditional purchase obligations(5)
|
86.9
|
|
|
44.8
|
|
|
35.9
|
|
|
6.2
|
|
|
—
|
|
|||||
Uncertain tax contingencies(6)
|
4.2
|
|
|
0.1
|
|
|
0.1
|
|
|
0.7
|
|
|
3.3
|
|
|||||
Total
|
$
|
1,073.4
|
|
|
$
|
203.1
|
|
|
$
|
177.3
|
|
|
$
|
126.6
|
|
|
$
|
566.4
|
|
|
(1)
|
In January 2019, to fund the purchase price of the Jack Wolfskin acquisition, the Company entered into a Credit Agreement which provides for a Term Loan B facility in an aggregate principal of $480.0 million, which was issued less $9.6 million in original issue discount and other transaction fees. As of September 30, 2019, the Company had $447.6 million outstanding under the Term Loan Facility, which is offset by unamortized debt issuance costs of $16.2 million. For further discussion, see Note 5 "Financing Arrangements" to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q.
|
(2)
|
In December 2017, the Company entered into the 2017 Equipment Note secured by certain equipment at the Company's golf ball manufacturing facility. In August 2019, the Company entered into the 2019 Equipment Note, and as of September 30, 2019, the Company had a combined $20.9 million outstanding under these notes. For further discussion, see Note 5 "Financing Arrangements" to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q.
|
(3)
|
Amounts represent future minimum payments under financing leases. At September 30, 2019, finance lease liabilities of $0.6 million and $0.6 million were reordered in accounts payable and accrued expenses and other long-term liabilities, respectively, in the accompanying consolidated condensed balance sheets. For further discussion, see Note 2 "Leases" to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q.
|
(4)
|
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. At September 30, 2019, short-term and long-term operating lease liabilities of $25.1 million and $133.2 million, respectively, were recorded in the accompanying consolidated condensed balance sheets. For further discussion, see Note 2 "Leases" to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q.
|
(5)
|
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
|
(6)
|
Amount represents the current and non-current portions of uncertain income tax positions as recorded on the Company's consolidated condensed balance sheet as of September 30, 2019. Amounts exclude uncertain income tax positions that the Company would be able to offset against deferred taxes. For further discussion, see Note 12 “Income Taxes” to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q.
|
|
Three Months Ended September 30, 2019
|
||||||||||||||||||||
|
Total Number
of Shares Purchased |
|
Weighted
Average Price Paid per Share |
|
Total Number of Shares Purchased as Part of Publicly Announced Program
|
|
Maximum Dollar Value that May Yet Be Purchased Under the Program
|
||||||||||||||
|
(in thousands, except per share data)
|
||||||||||||||||||||
July 1, 2019-July 31, 2019
|
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
—
|
|
|
|
|
$
|
22,325
|
|
|
August 1, 2019-August 31, 2019
|
|
6
|
|
|
|
|
$
|
17.32
|
|
|
|
|
6
|
|
|
|
|
$
|
99,889
|
|
(1)
|
September 1, 2019-September 30, 2019
|
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
—
|
|
|
|
|
$
|
99,889
|
|
|
Total
|
|
6
|
|
|
|
|
$
|
17.32
|
|
|
|
|
6
|
|
|
|
|
$
|
99,889
|
|
|
|
(1)
|
In August 2019, the Company canceled the remaining $22.3 million authorized under the 2018 Repurchase Program and implemented the new $100.0 million 2019 Repurchase Program as noted above.
|
3.1
|
|
|
Certificate of Incorporation, incorporated herein by this reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, as filed with the Commission on July 1, 1999 (file no. 1-10962).
|
|
|
|
|
3.2
|
|
|
|
|
|
|
|
10.1
|
|
|
|
|
|
|
|
31.1
|
|
|
|
|
|
|
|
31.2
|
|
|
|
|
|
|
|
32.1
|
|
|
|
|
|
|
|
101.1
|
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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 †
|
|
|
|
|
104
|
|
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
|
CALLAWAY GOLF COMPANY
|
|
|
|
By:
|
/s/ Jennifer Thomas
|
|
Jennifer Thomas
|
|
Vice President and
Chief Accounting Officer
|
Article I Corporate Offices
|
1
|
|
||
|
|
|
|
|
|
1.1
|
Registered Office
|
1
|
|
|
1.2
|
Other Offices
|
1
|
|
|
|
|
|
|
Article II Meetings of Stockholders
|
1
|
|
||
|
|
|
|
|
|
2.1
|
Place of Meetings
|
1
|
|
|
2.2
|
Annual Meeting
|
1
|
|
|
2.3
|
Special Meeting
|
1
|
|
|
2.4
|
Notice of Business to be Brought Before a Meeting
|
1
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2.5
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Notice of Nominations for Election to the Board of Directors
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5
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2.6
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Additional Requirements for Valid Nomination of Candidates to Serve as Director and, if Elected, to be Seated as Directors
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8
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2.7
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Notice of Stockholders’ Meetings
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9
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2.8
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Conduct of Meeting
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10
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2.9
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Manner of Giving Notice; Affidavit of Notice
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10
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2.10
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Quorum
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10
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2.11
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Adjourned Meeting; Notice
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11
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2.12
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Voting
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11
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2.13
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Waiver of Notice
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11
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2.14
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Stockholder Action By Written Consent
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12
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2.15
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Record Date for Stockholder Notice; Voting
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13
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2.16
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Proxies
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14
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2.17
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List of Stockholders Entitled to Vote
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14
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2.18
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Meeting By Remote Communications
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14
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Article III Directors
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15
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||
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3.1
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Powers
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15
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3.2
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Number of Directors; Independence
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15
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3.3
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Election and Term of Office of Directors
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15
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3.4
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Resignation and Vacancies
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15
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3.5
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Place of Meetings; Meetings by Telephone
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16
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3.6
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Regular Meetings
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16
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3.7
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Special Meetings; Notice
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16
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3.8
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Quorum
|
17
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|
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3.9
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Waiver of Notice
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17
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3.10
|
Adjournment
|
17
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3.11
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Notice of Adjournment
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17
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3.12
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Board Action by Written Consent Without a Meeting
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17
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3.13
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Fees and Compensation of Directors
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17
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3.14
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Approval of Loans to Officers
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18
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/S/ OLIVER G. BREWER III
|
Oliver G. Brewer III
President and Chief Executive Officer
|
/S/ BRIAN P. LYNCH
|
Brian P. Lynch
Executive Vice President and Chief Financial Officer |
/S/ OLIVER G. BREWER III
|
Oliver G. Brewer III
President and Chief Executive Officer
|
/S/ BRIAN P. LYNCH
|
Brian P. Lynch
Executive Vice President and Chief Financial Officer |