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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Callaway Golf Co | NYSE:ELY | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 21.33 | 0 | 01:00:00 |
|
Form 10-Q
|
ý
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
o
|
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.)
|
|
Large accelerated filer
|
|
o
|
|
Accelerated filer
|
|
ý
|
|
|
|
|
|
|
|
Non-accelerated filer
|
|
o
(Do not check if a smaller reporting company)
|
|
Smaller reporting company
|
|
o
|
|
•
|
certain risks and uncertainties, including changes in capital market or economic conditions;
|
•
|
delays, difficulties, changed strategies, or increased costs in implementing the Company’s turnaround plans;
|
•
|
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;
|
•
|
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;
|
•
|
the ability of the Company to manage international business risks;
|
•
|
future changes in foreign currency exchange rates and the degree of effectiveness of the Company’s hedging programs;
|
•
|
adverse changes in the credit markets or continued compliance with the terms of the Company’s credit facilities;
|
•
|
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.
|
||
|
Consolidated Condensed Balance Sheets as of June 30, 2016 and December 31, 2015
|
|
|
Consolidated Condensed Statements of Operations for the three and six months ended June 30, 2016 and 2015
|
|
|
Consolidated Condensed Statements of Comprehensive Income for the three and six months ended June 30, 2016 and 2015
|
|
|
Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2016 and 2015
|
|
|
Consolidated Condensed Statement of Shareholders’ Equity for the six months ended June 30, 2016
|
|
|
||
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
|
Item 3.
|
||
Item 4.
|
||
|
||
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
|
||
Item 6.
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
67,619
|
|
|
$
|
49,801
|
|
Accounts receivable, net
|
205,058
|
|
|
115,607
|
|
||
Inventories
|
151,446
|
|
|
208,883
|
|
||
Income taxes receivable
|
2,382
|
|
|
487
|
|
||
Other current assets
|
12,670
|
|
|
16,709
|
|
||
Total current assets
|
439,175
|
|
|
391,487
|
|
||
Property, plant and equipment, net
|
53,399
|
|
|
55,808
|
|
||
Intangible assets, net
|
88,757
|
|
|
88,782
|
|
||
Goodwill
|
26,306
|
|
|
26,500
|
|
||
Deferred taxes, net
|
7,255
|
|
|
6,962
|
|
||
Investment in golf-related ventures (Note 6)
|
49,108
|
|
|
53,315
|
|
||
Other assets
|
8,525
|
|
|
8,370
|
|
||
Total assets
|
$
|
672,525
|
|
|
$
|
631,224
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
106,482
|
|
|
$
|
122,620
|
|
Accrued employee compensation and benefits
|
25,433
|
|
|
33,518
|
|
||
Asset-based credit facilities
|
5,331
|
|
|
14,969
|
|
||
Accrued warranty expense
|
6,172
|
|
|
5,706
|
|
||
Income tax liability
|
3,769
|
|
|
1,823
|
|
||
Total current liabilities
|
147,187
|
|
|
178,636
|
|
||
Long-term liabilities:
|
|
|
|
||||
Income tax payable
|
3,325
|
|
|
3,476
|
|
||
Deferred taxes, net
|
34,824
|
|
|
35,093
|
|
||
Long-term incentive compensation and other
|
882
|
|
|
1,074
|
|
||
Commitments and contingencies (Note 9)
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, $0.01 par value, 3,000,000 shares authorized, none issued and outstanding at June 30, 2016 and December 31, 2015
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value, 240,000,000 shares authorized, 94,214,295 and 93,769,199 shares issued at June 30, 2016 and December 31, 2015, respectively
|
942
|
|
|
938
|
|
||
Additional paid-in capital
|
325,805
|
|
|
322,793
|
|
||
Retained earnings
|
171,607
|
|
|
101,047
|
|
||
Accumulated other comprehensive loss
|
(10,356
|
)
|
|
(11,813
|
)
|
||
Less: Common stock held in treasury, at cost, 183,401 and 2,075 shares at June 30, 2016 and December 31, 2015, respectively
|
(1,691
|
)
|
|
(20
|
)
|
||
Total shareholders’ equity
|
486,307
|
|
|
412,945
|
|
||
Total liabilities and shareholders’ equity
|
$
|
672,525
|
|
|
$
|
631,224
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net sales
|
$
|
245,594
|
|
|
$
|
230,504
|
|
|
$
|
519,647
|
|
|
$
|
514,683
|
|
Cost of sales
|
134,961
|
|
|
128,807
|
|
|
276,622
|
|
|
285,720
|
|
||||
Gross profit
|
110,633
|
|
|
101,697
|
|
|
243,025
|
|
|
228,963
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Selling expense
|
64,388
|
|
|
59,966
|
|
|
127,674
|
|
|
126,285
|
|
||||
General and administrative expense
|
17,089
|
|
|
15,536
|
|
|
32,633
|
|
|
31,635
|
|
||||
Research and development expense
|
8,288
|
|
|
7,603
|
|
|
16,522
|
|
|
15,519
|
|
||||
Total operating expenses
|
89,765
|
|
|
83,105
|
|
|
176,829
|
|
|
173,439
|
|
||||
Income from operations
|
20,868
|
|
|
18,592
|
|
|
66,196
|
|
|
55,524
|
|
||||
Interest income
|
332
|
|
|
276
|
|
|
494
|
|
|
347
|
|
||||
Interest expense
|
(679
|
)
|
|
(2,212
|
)
|
|
(1,462
|
)
|
|
(4,304
|
)
|
||||
Gain on sale of golf-related ventures (Note 6)
|
17,662
|
|
|
—
|
|
|
17,662
|
|
|
—
|
|
||||
Other income (expense), net
|
(2,141
|
)
|
|
(2,021
|
)
|
|
(7,057
|
)
|
|
525
|
|
||||
Income before income taxes
|
36,042
|
|
|
14,635
|
|
|
75,833
|
|
|
52,092
|
|
||||
Income tax provision
|
1,937
|
|
|
1,817
|
|
|
3,338
|
|
|
3,455
|
|
||||
Net income
|
$
|
34,105
|
|
|
$
|
12,818
|
|
|
$
|
72,495
|
|
|
$
|
48,637
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.36
|
|
|
$
|
0.16
|
|
|
$
|
0.77
|
|
|
$
|
0.62
|
|
Diluted
|
$
|
0.36
|
|
|
$
|
0.15
|
|
|
$
|
0.76
|
|
|
$
|
0.54
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
94,029
|
|
|
78,395
|
|
|
93,990
|
|
|
78,076
|
|
||||
Diluted
|
95,893
|
|
|
94,913
|
|
|
95,658
|
|
|
94,406
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Dividends declared per common share
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net income
|
$
|
34,105
|
|
|
$
|
12,818
|
|
|
$
|
72,495
|
|
|
$
|
48,637
|
|
Other comprehensive income, before tax:
|
|
|
|
|
|
|
|
||||||||
Change in fair value of derivative instruments
|
64
|
|
|
187
|
|
|
(2,223
|
)
|
|
2,043
|
|
||||
Foreign currency translation adjustments
|
(1,143
|
)
|
|
2,693
|
|
|
3,618
|
|
|
(4,285
|
)
|
||||
Comprehensive income, before tax
|
33,026
|
|
|
15,698
|
|
|
73,890
|
|
|
46,395
|
|
||||
Income tax (expense) benefit related to items of other comprehensive income
|
(29
|
)
|
|
—
|
|
|
62
|
|
|
—
|
|
||||
Comprehensive income
|
$
|
32,997
|
|
|
$
|
15,698
|
|
|
$
|
73,952
|
|
|
$
|
46,395
|
|
|
Six Months Ended
June 30, |
||||||
|
2016
|
|
2015
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
72,495
|
|
|
$
|
48,637
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
||||
Depreciation and amortization
|
8,337
|
|
|
9,157
|
|
||
Deferred taxes
|
(347
|
)
|
|
145
|
|
||
Share-based compensation
|
4,329
|
|
|
3,561
|
|
||
Gain on disposal of long-lived assets and deferred gain amortization
|
(124
|
)
|
|
(510
|
)
|
||
Gain on sale of golf-related investments
|
(17,662
|
)
|
|
—
|
|
||
Discount amortization on convertible notes
|
—
|
|
|
395
|
|
||
Unrealized losses on foreign currency hedges
|
884
|
|
|
—
|
|
||
Change in assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
(86,452
|
)
|
|
(112,433
|
)
|
||
Inventories
|
61,843
|
|
|
35,166
|
|
||
Other assets
|
918
|
|
|
2,962
|
|
||
Accounts payable and accrued expenses
|
(18,475
|
)
|
|
(9,941
|
)
|
||
Accrued employee compensation and benefits
|
(8,119
|
)
|
|
(9,979
|
)
|
||
Accrued warranty expense
|
466
|
|
|
840
|
|
||
Income taxes receivable/payable
|
(161
|
)
|
|
(378
|
)
|
||
Other liabilities
|
(171
|
)
|
|
(289
|
)
|
||
Net cash provided by (used in) operating activities
|
17,761
|
|
|
(32,667
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Proceeds from sale of investments in golf-related ventures
|
23,429
|
|
|
—
|
|
||
Collection of note receivable
|
3,104
|
|
|
—
|
|
||
Capital expenditures
|
(7,487
|
)
|
|
(5,912
|
)
|
||
Investment in golf-related ventures
|
(1,560
|
)
|
|
—
|
|
||
Proceeds from sales of property and equipment
|
20
|
|
|
2
|
|
||
Net cash provided by (used in) investing activities
|
17,506
|
|
|
(5,910
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
(Repayments of) proceeds from asset-based credit facilities, net
|
(9,638
|
)
|
|
27,364
|
|
||
Acquisition of treasury stock
|
(5,133
|
)
|
|
(1,915
|
)
|
||
Dividends paid
|
(1,882
|
)
|
|
(1,565
|
)
|
||
Exercise of stock options
|
2,096
|
|
|
5,330
|
|
||
Net cash (used in) provided by financing activities
|
(14,557
|
)
|
|
29,214
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(2,892
|
)
|
|
(1,558
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
17,818
|
|
|
(10,921
|
)
|
||
Cash and cash equivalents at beginning of period
|
49,801
|
|
|
37,635
|
|
||
Cash and cash equivalents at end of period
|
$
|
67,619
|
|
|
$
|
26,714
|
|
Supplemental disclosures:
|
|
|
|
||||
Cash paid for income taxes, net
|
$
|
3,920
|
|
|
$
|
3,596
|
|
Cash paid for interest and fees
|
$
|
1,109
|
|
|
$
|
3,494
|
|
Noncash investing and financing activities:
|
|
|
|
||||
Issuance of treasury stock for compensatory stock awards released from restriction
|
$
|
817
|
|
|
$
|
3,669
|
|
Accrued capital expenditures at period-end
|
$
|
640
|
|
|
$
|
553
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Treasury Stock
|
|
|
|
|||||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
Shares
|
|
Amount
|
|
Total
|
|||||||||||||||||||
Balance at December 31, 2015
|
93,769
|
|
|
$
|
938
|
|
|
$
|
322,793
|
|
|
$
|
101,047
|
|
|
|
$
|
(11,813
|
)
|
|
|
(2
|
)
|
|
$
|
(20
|
)
|
|
$
|
412,945
|
|
Acquisition of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
(571
|
)
|
|
(5,133
|
)
|
|
(5,133
|
)
|
||||||
Exercise of stock options
|
—
|
|
|
—
|
|
|
(541
|
)
|
|
—
|
|
|
|
—
|
|
|
|
299
|
|
|
2,637
|
|
|
2,096
|
|
||||||
Compensatory awards released from restriction
|
440
|
|
|
4
|
|
|
(821
|
)
|
|
—
|
|
|
|
—
|
|
|
|
91
|
|
|
817
|
|
|
—
|
|
||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
4,329
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
4,329
|
|
||||||
Stock dividends
|
5
|
|
|
—
|
|
|
45
|
|
|
(53
|
)
|
|
|
—
|
|
|
|
—
|
|
|
8
|
|
|
—
|
|
||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,882
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(1,882
|
)
|
||||||
Equity adjustment from foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
3,618
|
|
|
|
—
|
|
|
—
|
|
|
3,618
|
|
||||||
Change in fair value of derivative instruments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(2,161
|
)
|
|
|
—
|
|
|
—
|
|
|
(2,161
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
72,495
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
72,495
|
|
||||||
Balance at June 30, 2016
|
94,214
|
|
|
$
|
942
|
|
|
$
|
325,805
|
|
|
$
|
171,607
|
|
|
|
$
|
(10,356
|
)
|
|
|
(183
|
)
|
|
$
|
(1,691
|
)
|
|
$
|
486,307
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Earnings per common share—basic
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
34,105
|
|
|
$
|
12,818
|
|
|
$
|
72,495
|
|
|
$
|
48,637
|
|
Weighted-average common shares outstanding—basic
|
94,029
|
|
|
78,395
|
|
|
93,990
|
|
|
78,076
|
|
||||
Basic earnings per common share
|
$
|
0.36
|
|
|
$
|
0.16
|
|
|
$
|
0.77
|
|
|
$
|
0.62
|
|
Earnings per common share—diluted
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
34,105
|
|
|
$
|
12,818
|
|
|
$
|
72,495
|
|
|
$
|
48,637
|
|
Interest on convertible debt
|
—
|
|
|
1,260
|
|
|
—
|
|
|
2,506
|
|
||||
Net income including assumed conversions
|
$
|
34,105
|
|
|
$
|
14,078
|
|
|
$
|
72,495
|
|
|
$
|
51,143
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding—basic
|
94,029
|
|
|
78,395
|
|
|
93,990
|
|
|
78,076
|
|
||||
Convertible notes weighted-average shares outstanding
|
—
|
|
|
15,000
|
|
|
—
|
|
|
15,000
|
|
||||
Options and restricted stock
|
1,864
|
|
|
1,518
|
|
|
1,668
|
|
|
1,330
|
|
||||
Weighted-average common shares outstanding—diluted
|
95,893
|
|
|
94,913
|
|
|
95,658
|
|
|
94,406
|
|
||||
Dilutive earnings per common share
|
$
|
0.36
|
|
|
$
|
0.15
|
|
|
$
|
0.76
|
|
|
$
|
0.54
|
|
|
June 30,
2016 |
|
December 31,
2015
|
||||
Inventories:
|
|
|
|
||||
Raw materials
|
$
|
45,940
|
|
|
$
|
53,876
|
|
Work-in-process
|
525
|
|
|
703
|
|
||
Finished goods
|
104,981
|
|
|
154,304
|
|
||
|
$
|
151,446
|
|
|
$
|
208,883
|
|
|
Useful
Life
(Years)
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||||||
|
Gross
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
||||||||||||||||||
Non-Amortizing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trade name, trademark and trade dress and other
|
NA
|
|
$
|
88,590
|
|
|
|
$
|
—
|
|
|
|
$
|
88,590
|
|
|
$
|
88,590
|
|
|
|
$
|
—
|
|
|
|
$
|
88,590
|
|
Amortizing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Patents
|
2-16
|
|
31,581
|
|
|
|
31,414
|
|
|
|
167
|
|
|
31,581
|
|
|
|
31,389
|
|
|
|
192
|
|
||||||
Developed technology and other
|
1-9
|
|
7,961
|
|
|
|
7,961
|
|
|
|
—
|
|
|
7,961
|
|
|
|
7,961
|
|
|
|
—
|
|
||||||
Total intangible assets
|
|
|
$
|
128,132
|
|
|
|
$
|
39,375
|
|
|
|
$
|
88,757
|
|
|
$
|
128,132
|
|
|
|
$
|
39,350
|
|
|
|
$
|
88,782
|
|
Remainder of 2016
|
$
|
26
|
|
2017
|
51
|
|
|
2018
|
51
|
|
|
2019
|
39
|
|
|
|
$
|
167
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Beginning balance
|
$
|
6,350
|
|
|
$
|
6,408
|
|
|
$
|
5,706
|
|
|
$
|
5,607
|
|
Provision
|
1,503
|
|
|
1,466
|
|
|
3,240
|
|
|
3,269
|
|
||||
Claims paid/costs incurred
|
(1,681
|
)
|
|
(1,427
|
)
|
|
(2,774
|
)
|
|
(2,429
|
)
|
||||
Ending balance
|
$
|
6,172
|
|
|
$
|
6,447
|
|
|
$
|
6,172
|
|
|
$
|
6,447
|
|
Tax Jurisdiction
|
|
Years No Longer Subject to Audit
|
U.S. federal
|
|
2010 and prior
|
California (United States)
|
|
2008 and prior
|
Canada
|
|
2009 and prior
|
Japan
|
|
2009 and prior
|
South Korea
|
|
2011 and prior
|
United Kingdom
|
|
2011 and prior
|
Remainder of 2016
|
$
|
44,625
|
|
2017
|
18,259
|
|
|
2018
|
4,909
|
|
|
2019
|
1,491
|
|
|
2020
|
118
|
|
|
Thereafter
|
21
|
|
|
|
$
|
69,423
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In thousands)
|
||||||||||||||
Cost of sales
|
$
|
180
|
|
|
$
|
106
|
|
|
$
|
322
|
|
|
$
|
443
|
|
Operating expenses
|
2,303
|
|
|
1,191
|
|
|
4,213
|
|
|
6,224
|
|
||||
Total cost of share-based compensation included in income, before income tax
|
$
|
2,483
|
|
|
$
|
1,297
|
|
|
$
|
4,535
|
|
|
$
|
6,667
|
|
|
Fair
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
June 30, 2016
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts—asset position
|
$
|
2,547
|
|
|
$
|
—
|
|
|
$
|
2,547
|
|
|
$
|
—
|
|
Foreign currency forward contracts—liability position
|
(9,857
|
)
|
|
—
|
|
|
(9,857
|
)
|
|
—
|
|
||||
|
$
|
(7,310
|
)
|
|
$
|
—
|
|
|
$
|
(7,310
|
)
|
|
$
|
—
|
|
December 31, 2015
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts—asset position
|
$
|
680
|
|
|
$
|
—
|
|
|
$
|
680
|
|
|
$
|
—
|
|
Foreign currency forward contracts—liability position
|
(342
|
)
|
|
—
|
|
|
(342
|
)
|
|
—
|
|
||||
|
$
|
338
|
|
|
$
|
—
|
|
|
$
|
338
|
|
|
$
|
—
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||||||||
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
||||||||
Japan ABL Facility
(1)
|
$
|
5,331
|
|
|
$
|
5,331
|
|
|
$
|
14,969
|
|
|
$
|
14,969
|
|
Standby letters of credit
(2)
|
$
|
951
|
|
|
$
|
951
|
|
|
$
|
1,030
|
|
|
$
|
1,030
|
|
|
(1)
|
The carrying value of the amount outstanding under the Japan ABL Facility approximates the fair value due to the short-term nature of this obligation. The fair value of this debt is categorized within Level 2 of the fair value hierarchy. See Note 2 for information on the Company's credit facilities, including certain risks and uncertainties related thereto.
|
(2)
|
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. There were no amounts outstanding under these letters of credit as of
June 30, 2016
and December 31,
2015
. The fair value of this contingent obligation is categorized within Level 2 of the fair value hierarchy.
|
|
Asset Derivatives
|
||||||||||
June 30, 2016
|
|
December 31, 2015
|
|||||||||
Balance Sheet Location
|
|
Fair Value
|
|
Balance Sheet Location
|
|
Fair Value
|
|||||
Derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
Other current assets
|
|
$
|
171
|
|
|
Other current assets
|
|
$
|
520
|
|
|
|
|
|
|
|
|
|
||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
Other current assets
|
|
$
|
2,376
|
|
|
Other current assets
|
|
$
|
160
|
|
|
Liability Derivatives
|
||||||||||
June 30, 2016
|
|
December 31, 2015
|
|||||||||
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
|
|
$
|
2,616
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
296
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
Accounts payable and
accrued expenses
|
|
$
|
7,241
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
46
|
|
Accumulated other comprehensive loss, December 31, 2015
|
|
$
|
(11,813
|
)
|
Change in fair value of derivative instruments
|
|
(3,066
|
)
|
|
Amounts reclassified from accumulated other comprehensive income to cost of goods sold
|
|
272
|
|
|
Amounts reclassified from accumulated other comprehensive income to net sales
|
|
571
|
|
|
Foreign currency translation adjustments
|
|
3,618
|
|
|
Accumulated other comprehensive loss, June 30, 2016, before tax
|
|
$
|
(10,418
|
)
|
Accumulated other comprehensive loss, June 30, 2016, after tax
|
|
$
|
(10,356
|
)
|
|
|
Location of Net Gain (Loss) Recognized in Income on
Derivative Instruments
|
|
Amount of Net Gain (Loss) Recognized in Income on
Derivative Instruments
|
||||||||||||||
Derivatives not designated as hedging instruments
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||||
Foreign currency forward contracts
|
|
Other income (expense), net
|
|
$
|
(3,546
|
)
|
|
$
|
(2,251
|
)
|
|
$
|
(9,858
|
)
|
|
$
|
341
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net sales:
|
|
|
|
|
|
|
|
||||||||
Golf Clubs
|
$
|
198,598
|
|
|
$
|
189,616
|
|
|
$
|
431,235
|
|
|
$
|
430,772
|
|
Golf Balls
|
46,996
|
|
|
40,888
|
|
|
88,412
|
|
|
83,911
|
|
||||
|
$
|
245,594
|
|
|
$
|
230,504
|
|
|
$
|
519,647
|
|
|
$
|
514,683
|
|
Income before income taxes:
|
|
|
|
|
|
|
|
||||||||
Golf Clubs
|
$
|
23,402
|
|
|
$
|
22,051
|
|
|
$
|
68,348
|
|
|
$
|
62,990
|
|
Golf Balls
|
8,801
|
|
|
6,639
|
|
|
19,364
|
|
|
14,047
|
|
||||
Reconciling items
(1)
|
3,839
|
|
|
(14,055
|
)
|
|
(11,879
|
)
|
|
(24,945
|
)
|
||||
|
$
|
36,042
|
|
|
$
|
14,635
|
|
|
$
|
75,833
|
|
|
$
|
52,092
|
|
Additions to long-lived assets:
|
|
|
|
|
|
|
|
||||||||
Golf Clubs
|
$
|
1,193
|
|
|
$
|
2,736
|
|
|
$
|
3,912
|
|
|
$
|
4,819
|
|
Golf Balls
|
1,012
|
|
|
745
|
|
|
2,126
|
|
|
1,311
|
|
||||
|
$
|
2,205
|
|
|
$
|
3,481
|
|
|
$
|
6,038
|
|
|
$
|
6,130
|
|
|
(1)
|
Reconciling items represent corporate general and administrative expenses and other income (expense) not included by management in determining segment profitability. The reconciling items for the three and six months ended
June 30, 2016
include a
$17,662,000
gain that was 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 6). In addition, the decrease in the six months ended
June 30, 2016
compared to six months ended June 30, 2015 was due to an increase in corporate stock compensation expense, partially offset by a decrease in interest expense.
|
|
Three Months Ended
June 30, |
|
Growth
|
|||||||||||
|
2016
|
|
2015
|
|
Dollars
|
|
Percent
|
|
||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Woods
|
$
|
50.5
|
|
|
$
|
49.4
|
|
|
$
|
1.1
|
|
|
2.2
|
%
|
Irons
|
63.4
|
|
|
59.3
|
|
|
4.1
|
|
|
6.9
|
%
|
|||
Putters
|
25.0
|
|
|
24.4
|
|
|
0.6
|
|
|
2.5
|
%
|
|||
Accessories and other
|
59.7
|
|
|
56.5
|
|
|
3.2
|
|
|
5.7
|
%
|
|||
|
$
|
198.6
|
|
|
$
|
189.6
|
|
|
$
|
9.0
|
|
|
4.7
|
%
|
|
Three Months Ended
June 30, |
|
Growth
|
|||||||||||
|
2016
|
|
2015
|
|
Dollars
|
|
Percent
|
|||||||
Income before income taxes:
|
|
|
|
|
|
|
|
|||||||
Golf clubs
|
$
|
23.4
|
|
|
$
|
22.1
|
|
|
$
|
1.3
|
|
|
5.9
|
%
|
Golf balls
|
8.8
|
|
|
6.6
|
|
|
2.2
|
|
|
33.3
|
%
|
|||
Reconciling items
(1)
|
3.8
|
|
|
(14.1
|
)
|
|
17.9
|
|
|
127.0
|
%
|
|||
|
$
|
36.0
|
|
|
$
|
14.6
|
|
|
$
|
21.4
|
|
|
146.6
|
%
|
|
(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 the
second
quarter of
2016
compared to the
second
quarter of
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. See
Note 6
“Investments” to the Notes to Consolidated Condensed Financial Statements included in Part I, Item 1, of this Form 10-Q.
|
|
Six Months Ended
June 30, |
|
Growth/(Decline)
|
|||||||||||
|
2016
|
|
2015
|
|
Dollars
|
|
Percent
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Woods
|
$
|
136.5
|
|
|
$
|
138.9
|
|
|
$
|
(2.4
|
)
|
|
(1.7
|
)%
|
Irons
|
122.6
|
|
|
120.8
|
|
|
1.8
|
|
|
1.5
|
%
|
|||
Putters
|
54.8
|
|
|
55.4
|
|
|
(0.6
|
)
|
|
(1.1
|
)%
|
|||
Accessories and other
|
117.3
|
|
|
115.7
|
|
|
1.6
|
|
|
1.4
|
%
|
|||
|
$
|
431.2
|
|
|
$
|
430.8
|
|
|
$
|
0.4
|
|
|
0.1
|
%
|
|
Six Months Ended
June 30, |
|
Growth
|
|||||||||||
|
2016
|
|
2015
|
|
Dollars
|
|
Percent
|
|||||||
Income before income taxes:
|
|
|
|
|
|
|
|
|||||||
Golf clubs
|
$
|
68.3
|
|
|
$
|
63.0
|
|
|
$
|
5.3
|
|
|
8.4
|
%
|
Golf balls
|
19.4
|
|
|
14.0
|
|
|
5.4
|
|
|
38.6
|
%
|
|||
Reconciling items
(1)
|
(11.9
|
)
|
|
(24.9
|
)
|
|
13.0
|
|
|
52.2
|
%
|
|||
|
$
|
75.8
|
|
|
$
|
52.1
|
|
|
$
|
23.7
|
|
|
45.5
|
%
|
|
(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 the first six of
2016
compared to the same period in the prior year 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 an increase in corporate stock compensation expense, partially offset by a decrease in interest expense.
|
|
Payments Due By Period
|
||||||||||||||||||
|
Total
|
|
Less than
1 Year
|
|
1-3 Years
|
|
4-5 Years
|
|
More than
5 Years
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Japan ABL Facility
|
5.3
|
|
|
5.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Capital leases
(1)
|
0.5
|
|
|
0.2
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|||||
Operating leases
(2)
|
17.9
|
|
|
6.6
|
|
|
7.0
|
|
|
3.0
|
|
|
1.3
|
|
|||||
Unconditional purchase obligations
(3)
|
69.4
|
|
|
44.6
|
|
|
23.2
|
|
|
1.6
|
|
|
—
|
|
|||||
Uncertain tax contingencies
(4)
|
3.3
|
|
|
0.3
|
|
|
0.7
|
|
|
0.2
|
|
|
2.1
|
|
|||||
Total
|
$
|
96.4
|
|
|
$
|
57.0
|
|
|
$
|
31.2
|
|
|
$
|
4.8
|
|
|
$
|
3.4
|
|
|
(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 condensed 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 condensed balance sheet as of
June 30, 2016
. Amounts exclude uncertain income tax positions that the Company would be able to offset against deferred taxes. For further discussion see
Note 8
“Income Taxes” to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q.
|
|
Three Months Ended June 30, 2016
|
|||||||||||||||||||
|
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
|
|||||||||||||
April 1, 2016-April 30, 2016
|
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
—
|
|
|
|
|
$
|
44,149,074
|
|
May 1, 2016-May 31, 2016
|
|
243,759
|
|
|
|
|
$
|
9.25
|
|
|
|
|
243,759
|
|
|
|
|
$
|
41,894,256
|
|
June 1, 2016-June 30, 2016
|
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
—
|
|
|
|
|
$
|
41,894,256
|
|
Total
|
|
243,759
|
|
|
|
|
$
|
9.25
|
|
|
|
|
243,759
|
|
|
|
|
$
|
41,894,256
|
|
|
CALLAWAY GOLF COMPANY
|
|
|
|
By:
|
/s/ Jennifer Thomas
|
|
Jennifer Thomas
|
|
Vice President and
Chief Accounting Officer
|
Exhibit
|
|
Description
|
|
31.1
|
|
|
Certification of Oliver G. Brewer III pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
||
31.2
|
|
|
Certification of Robert K. Julian pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
||
32.1
|
|
|
Certification of Oliver G. Brewer III and Robert K. Julian pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
||
101.1
|
|
|
XBRL Instance Document
|
|
|
||
101.2
|
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
||
101.3
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
||
101.4
|
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
||
101.5
|
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
||
101.6
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
1 Year Callaway Golf Chart |
1 Month Callaway Golf Chart |
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