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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2022
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period                      to                     
Commission file number 001-10962  
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.)
2180 Rutherford Road, Carlsbad, CA 92008
(760) 931-1771
(Address, including zip code, and telephone number, including area code, of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on which Registered
Common Stock, $0.01 par value per shareELYThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ý
As of May 2, 2022, the number of shares outstanding of the Registrant’s common stock was 184,695,550.



Important Notice to Investors Regarding Forward-Looking Statements: This report contains “forward-looking statements” as defined under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “may,” “should,” “will,” “could,” “would,” “anticipate,” “plan,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” and similar references to future periods. Forward-looking statements include, among others, statements that relate to future plans, events, liquidity, financial results, performance, prospects or growth and scale opportunities including, but not limited to, statements relating to future industry and market conditions, the impact of the COVID-19 pandemic on the Company’s business, results of operations and financial condition and the impact of any measures taken to mitigate the effect of the COVID-19 pandemic, strength and demand of the Company’s products and services, continued brand momentum, demand for golf and outdoor activities and apparel, continued investments in the business, increases in shareholder value, post pandemic consumer trends and behavior, future industry and market conditions, the benefits of the merger with Topgolf International, Inc. (“Topgolf”), including the anticipated operations, venue/bay expansion plans, financial position, liquidity, performance, prospects or growth and scale opportunities of the Company following the merger, the strength of the Company’s brands, product lines and e-commerce business, geographic diversity, market recovery, availability of capital under the Company’s credit facilities, the capital markets or other sources, the Company’s conservation and cost reduction efforts, cash flows and liquidity, compliance with debt covenants, estimated unrecognized stock compensation expense, projected capital expenditures and depreciation and amortization expense, future contractual obligations, the realization of deferred tax assets, including loss and credit carryforwards, future income tax expense, the future impact of new accounting standards, the Topgolf merger and the related financial impact of the future business and prospects of the Company, including TravisMathew, LLC (“TravisMathew”), OGIO International, Inc. (“OGIO”), JW Stargazer Holding GmbH (“Jack Wolfskin”) and Topgolf. These statements are based upon current information and the Company’s current beliefs, expectations and assumptions regarding the future of the Company’s business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company’s control. As a result of these uncertainties and because the information on which these forward-looking statements is based may ultimately prove to be incorrect, actual results may differ materially from those anticipated. Important factors that could cause actual results to differ include, among others, the following:
certain risks and uncertainties, including changes in capital markets or economic conditions, particularly the uncertainty related to the inflation and related decreases in consumer demand and spending;
the impact of the COVID-19 pandemic and its related variants and other potential future outbreaks of infectious diseases or other health concerns, and measures taken to limit their impact, which could adversely affect the Company’s business, employees, suppliers, consumer demand and supply chain, and the global economy;
costs, expenses or difficulties related to the merger with Topgolf, including the integration of the Topgolf business, or the failure to realize the expected benefits and synergies of the transaction in the expected timeframes or at all;
the potential impact of the Topgolf merger on relationships with the Company’s and/or Topgolf’s employees, customers, suppliers and other business partners;
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 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 and scale opportunities across its supply chain and global business platform;
significant developments stemming from the U.K.’s withdrawal 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;

2


the Company’s ability to successfully integrate, operate and expand the retail stores of the acquired TravisMathew and Jack Wolfskin businesses, and venue locations of the Topgolf business;
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 United States Golf Association 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, including any escalation of hostility arising out of the conflict between Russia and Ukraine or natural disasters 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.
Investors should not place undue reliance on these forward-looking statements, which are based on current information and speak only as of the date hereof. The Company undertakes no obligation to update any forward-looking statements to reflect new information or events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Additionally, the risks, uncertainties and other factors set forth above or otherwise referred to in the reports that the Company has filed with the Securities and Exchange Commission may be further amplified by the global impact of the COVID-19 pandemic. Investors should also be aware that while the Company from time to time does communicate with securities analysts, it is against the Company’s policy to disclose to them any material non-public information or other confidential commercial information. Furthermore, the Company has a policy against distributing or confirming financial forecasts or projections issued by analysts and any reports issued by such analysts are not the responsibility of the Company. Investors should not assume that the Company agrees with any report issued by any analyst or with any statements, projections, forecasts or opinions contained in any such report. For details concerning these and other risks and uncertainties, see the Company’s most recent Annual Report on Form 10-K, as well as the Company’s quarterly reports on Form 10-Q and current reports on Form 8-K subsequently filed with the Securities and Exchange Commission from time to time.



3


Callaway Golf Company Trademarks: The following marks and phrases, among others, are trademarks of the Company: Alpha Convoy, Apex, Apex DCB, Apex TCB, Apex Tour, Apex UW, APW, Arm Lock, Backstryke, Big Bertha, Big Bertha B21, Big Bertha REVA, Big T, Bird of Prey, Black Series, Bounty Hunter, C Grind, Callaway, Callaway Capital, Callaway Golf, Callaway Media Productions, Callaway Super Hybrid, Callaway X, Capital, Chev, Chev 18, Chevron Device, Chrome Soft, Chrome Soft X, Cirrus, Comfort Tech, CUATER, Cuater C logo, Cup 360, CXR, 360 Face Cup, Dawn Patrol, Demonstrably Superior And Pleasingly Different, Divine, Double Wide, Eagle, Engage, Epic, Epic Flash, Epic Max, Epic Max LS, Epic Speed, ERC, ERC Soft, Everyone’s Game, Exo, Cage, Fast Tech Mantle, Flash Face Technology, Flash Face SS21, FT Optiforce, FT Performance, FT Tour, Fusion, Fusion Zero, GBB, GBB Epic, Gems, Golf Fusion, Gravity Core, Great Big Bertha, Great Big Bertha Epic, Grom, Groove- In- Groove Technology, Heavenwood, Hersatility,Hex Aerodynamics, Hex Chrome, HX, Hyper Dry, Hyper-Lite, Hyper Speed Face, I.D. Ball, Jack Wolfskin, Jailbird, Jailbreak, Jailbreak AI Speed Frame, Jailbreak AI Velocity Blades, JAWS MD5, Jewel Jam, Kings of Distance, Legacy, Life On Tour, Longer From Everywhere, Luxe, Mack Daddy, Magna, Majestic, MarXman, Mavrik, MD3 Milled, MD4 Tactical, MD5, MD 5 Jaws, Metal-X, Microhinge Face Insert, Microhinge Star, Mission:Ambition, Nanuk, NipIt, Number One Putter in Golf, O OGIO, O Works, Odyssey, Odyssey Works, Offset Groove in Groove, Ogio, OGIO AERO, OGIO ALPHA, OGIO ARORA, OGIO CLUB, OGIO FORGE, OGIO ME, OGIO RENEGADE, OGIO SAVAGE, OGIO SHADOW, OGIO XIX, Opti Flex, Opti Grip, Opti Shield, OptiFit, Opti Vent, ORG 7, ORG 14, ORG 15, Paw Print, PRESTIGE 7, ProType, ⋅R⋅, Red Ball, R-Moto, Renegade, Rig 9800, Rossie, RSX, S2H2, Sabertooth, Shredder, Silencer, SLED, Slice Stopper, SoftFast, Solaire, Speed Regime, Speed Step, Steelhead XR, Steelhead, Strata, Stroke Lab, Stronomic, Sub Zero, Superhot, Supersoft, SureOut, Swing Suite, Tee Time Adventures,TM, Tank, Tank Cruiser, Tech Series, Teron, Texapore, TMCA, Toe Up, TopChallenge, TopChip , TopContender, TopDrive, TopGolf, TopGolf Crush, Topgolf Entertainment Group, TopGolf Media, Topgolf Shield Logo, TopLife, TopPressure, TopScore, TopScramble, TopShot, TopTracer, TopTracer Range, Toulon, Toulon Garage, Tour Authentic, Tour Tested, Trade In! Trade Up!, TRAVISMATHEW, TravisMathew TM logo, Trionomer Cover, Truvis, Truvis Pattern, Tyro, udesign, Uptown, Versa, VFT, W Grind, Warbird, Weather Series, Wedgeducation, WGT, White Hot, White Hot OG, White Hot Tour, White Ice, World's Friendliest, X-12, X-14, X-16, X-18, X-20, X-22, X-24, XACT, X Face VFT, X Hot, X Hot Pro, X² Hot, X Series,X Tech, XR, XR 16, XSPANN, Xtra Traction Technology, Xtra Width Technology, XTT, 2-Ball.

4


CALLAWAY GOLF COMPANY
INDEX

Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


5


PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements (Unaudited)
CALLAWAY GOLF COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions, except par values)
(Unaudited)
March 31, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents$245.0 $352.2 
Restricted cash1.0 1.2 
Accounts receivable, less allowances of $11.3 million and $6.2 million, respectively
413.1 105.3 
Inventories552.4 533.5 
Prepaid expenses57.3 54.2 
Other current assets134.7 119.3
Total current assets1,403.5 1,165.7 
Property, plant and equipment, net1,534.5 1,451.4 
Operating lease right-of-use assets, net1,359.3 1,384.5 
Intangible assets, net1,518.1 1,528.6 
Goodwill1,974.4 1,960.1 
Other assets289.6 257.5 
Total assets$8,079.4 $7,747.8 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses$536.8 $491.2 
Accrued employee compensation and benefits107.9 128.9 
Asset-based credit facilities219.3 9.1 
Operating lease liabilities, short-term77.8 72.3 
Construction advances72.3 22.9 
Deferred revenue99.3 93.9 
Other current liabilities43.1 47.7 
Total current liabilities1,156.5 866.0 
Long-term liabilities:
Long-term debt, net (Note 6)
1,070.5 1,025.3 
Operating lease liabilities, long-term1,356.2 1,385.4 
Deemed landlord financing, long-term463.5 460.6 
Deferred taxes, net144.0 163.6 
Other long-term liabilities188.2 164.0 
Commitments and contingencies (Note 12)
Shareholders’ equity:
Preferred stock, $0.01 par value, 3.0 million shares authorized, none issued and outstanding as of March 31, 2022 and December 31, 2021
  
Common stock, $0.01 par value, 360.0 million shares authorized, 186.2 million shares issued as of March 31, 2022 and December 31, 2021
1.9 1.9 
Additional paid-in capital2,984.3 3,051.6 
Retained earnings781.3 682.2 
Accumulated other comprehensive loss(31.3)(27.3)
Less: Common stock held in treasury, at cost, 1.5 million and 1.0 million shares as of March 31, 2022 and December 31, 2021, respectively
(35.7)(25.5)
Total shareholders’ equity3,700.5 3,682.9 
Total liabilities and shareholders’ equity$8,079.4 $7,747.8 
The accompanying notes are an integral part of these financial statements.

6


CALLAWAY GOLF COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)

 Three Months Ended
March 31,
 20222021
Net revenues:
Products$722.4 $559.9 
Services317.8 91.7 
Total net revenues1,040.2 651.6 
Costs and expenses:
Cost of products411.8 310.6 
Cost of services, excluding depreciation and amortization39.0 11.0 
Other venue expenses230.4 65.4 
Selling, general and administrative expenses243.1 173.9 
Research and development expense17.5 12.7 
Venue pre-opening costs4.1 1.9 
Total costs and expenses945.9 575.5 
Income from operations94.3 76.1 
Interest expense, net(31.4)(17.4)
Gain on Topgolf investment 252.5 
Other income, net8.1 9.0 
Income before income taxes71.0 320.2 
Income tax (benefit)/provision(15.7)47.7 
Net income$86.7 $272.5 
Earnings per common share:
Basic$0.47 $2.32 
Diluted$0.44 $2.19 
Weighted-average common shares outstanding:
Basic185.1 117.5 
Diluted200.8 124.6 
















The accompanying notes are an integral part of these financial statements.

7


CALLAWAY GOLF COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
(Unaudited)


 Three Months Ended
March 31,
 20222021
Net income$86.7 $272.5 
Other comprehensive income/(loss):
Change in derivative instruments8.9 6.3 
Foreign currency translation adjustments(13.4)(16.2)
Comprehensive income, before income tax on other comprehensive income items82.2 262.6 
Income tax (benefit)/provision on derivative instruments(0.5)1.0 
Comprehensive income$82.7 $261.6 



































The accompanying notes are an integral part of these financial statements.

8


CALLAWAY GOLF COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three months ended March 31,
 20222021
Cash flows from operating activities:
Net income$86.7 $272.5 
Adjustments to reconcile net income to net cash used in operating activities:
   Depreciation and amortization42.6 20.3 
   Lease amortization expense20.9 10.8 
Amortization of debt discount and issuance costs2.5 4.1 
   Deferred taxes, net(12.6)46.4 
   Non-cash share-based compensation13.8 4.6 
   Gain on Topgolf investment (252.5)
   Acquisition costs (15.8)
Other(0.2)(6.1)
Change in assets and liabilities, net of effect from acquisitions:
   Accounts receivable, net(311.4)(183.9)
   Inventories(24.0)25.4 
   Leasing receivables(3.5)(2.9)
   Other assets(0.8)(19.0)
   Accounts payable and accrued expenses50.7 6.1 
   Deferred revenue4.8 3.9 
   Accrued employee compensation and benefits(20.5)17.6 
   Payments on operating leases(21.1)(9.2)
   Income taxes receivable/payable, net(9.1)(2.7)
   Other liabilities(4.1)1.8 
Net cash used in operating activities(185.3)(78.6)
Cash flows from investing activities:
Cash acquired in merger 171.3 
Capital expenditures(124.3)(28.8)
Net cash (used in) provided by investing activities
(124.3)142.5 
Cash flows from financing activities:
Repayments of long-term debt(77.6)(5.3)
Proceeds from borrowings on long-term debt60.0  
Proceeds from (repayments of) credit facilities, net212.2 (6.9)
Debt issuance cost (5.4)
Payment on contingent earn-out obligation(5.6)(3.6)
Repayments of financing leases(0.1)(0.1)
Proceeds from lease financing50.5 3.1 
Exercise of stock options 0.3 
Acquisition of treasury stock(34.3)(12.5)
Net cash provided by (used in) financing activities205.1 (30.4)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(3.0)(2.3)
Net (decrease) increase in cash, cash equivalents and restricted cash(107.5)31.2 
Cash, cash equivalents and restricted cash at beginning of period357.7 366.1 
Cash, cash equivalents and restricted cash at end of period250.2 397.3 
Restricted cash (1)
5.2  
Cash and Cash Equivalents at end of period$245.0 $397.3 
Supplemental disclosures:
Cash paid for income taxes, net$8.9 $3.1 
Cash paid for interest and fees$21.5 $15.4 
Non-cash investing and financing activities:
Issuance of treasury stock and common stock for compensatory stock awards released from restriction$24.0 $16.6 
Accrued capital expenditures at period-end$50.4 $14.4 
Financed additions of capital expenditures$1.1 $9.8 
Issuance of common stock in Topgolf merger$ $2,650.2 
(1) Includes $1.0 million of short-term restricted cash and $4.2 million of long-term restricted cash included in other assets in the consolidated condensed balance sheet as of March 31, 2022.





The accompanying notes are an integral part of these financial statements.
9


CALLAWAY GOLF COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In millions)
(Unaudited)
 Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Treasury Stock
Total Shareholders’ Equity
 SharesAmountSharesAmount
Balance at December 31, 2021
186.2 $1.9 $3,051.6 $682.2 $(27.3)(1.0)$(25.5)$3,682.9 
Cumulative impact of Accounting Standards Update 2020-06 adoption (Note 2)
— — (57.1)12.4 — — — (44.7)
Acquisition of treasury stock— — — — — (1.5)(34.2)(34.2)
Compensatory awards released from restriction— — (24.0)— — 1.0 24.0  
Share-based compensation— — 13.8 — — — — 13.8 
Equity adjustment from foreign currency translation— — — — (13.4)— — (13.4)
Change in fair value of derivative instruments, net of tax— — — — 9.4 — — 9.4 
Net income— — — 86.7 — — — 86.7 
Balance at March 31, 2022
186.2 $1.9 $2,984.3 $781.3 $(31.3)(1.5)$(35.7)$3,700.5 


 Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Treasury Stock
Total Shareholders’ Equity
 SharesAmountSharesAmount
Balance at December 31, 202095.6 $1.0 $346.9 $360.2 $(6.5)(1.4)$(26.0)$675.6 
Common stock issued in Topgolf merger89.8 0.9 2,649.3 — — — — 2,650.2 
Fair value of replacement awards converted in Topgolf merger (Note 5)— — 33.1 — — — — 33.1 
Common stock issued for replacement restricted stock awards0.2 — — — — — —  
Acquisition of treasury stock— — — — — (0.4)(12.5)(12.5)
Exercise of stock options— — (0.5)— — — 0.7 0.2 
Compensatory awards released from restriction— — (16.6)— — 0.9 16.6  
Share-based compensation— — 4.6 — — — — 4.6 
Equity adjustment from foreign currency translation— — — — (16.2)— — (16.2)
Change in fair value of derivative instruments, net of tax— — — — 5.3 — — 5.3 
Net income— — — 272.5 — — — 272.5 
Balance at March 31, 2021185.6 $1.9 $3,016.8 $632.7 $(17.4)(0.9)$(21.2)$3,612.8 





















The accompanying notes are an integral part of these financial statements.
10


CALLAWAY GOLF COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. The Company and Basis of Presentation
The Company
Callaway Golf Company, a Delaware corporation, together with its wholly-owned subsidiaries (collectively, the “Company,” “Callaway” or “Callaway Golf”), is a modern golf and active lifestyle leader that provides world-class golf entertainment experiences, designs and manufactures premium golf equipment, and sells golf and active lifestyle apparel and other accessories through its family of brand names which include Topgolf, Callaway Golf, Odyssey, OGIO, TravisMathew and Jack Wolfskin.
The Company’s products and brands are reported under three operating segments: Topgolf, which includes the operations of the Company’s Topgolf business; Golf Equipment, which includes the operations of the Company’s golf club and golf ball business; and Apparel, Gear and Other, which includes the operations of the Company’s soft goods business marketed under the Callaway, TravisMathew, Jack Wolfskin and OGIO brand names.
Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, the Company has condensed or omitted certain information and disclosures that are normally included in its annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, these consolidated condensed financial statements include all of the normal and recurring adjustments necessary for the fair presentation of the financial position, results of operations and cash flows for the periods and dates presented. These unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 1, 2022. Interim operating results are not necessarily indicative of operating results that may be expected for the year ending December 31, 2022, or any other future periods.
The Company translates the financial statements of its foreign subsidiaries using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. All intercompany balances and transactions have been eliminated during consolidation.
The Company’s Topgolf subsidiary operates on a 52- or 53-week fiscal year ending on the Sunday closest to December 31. Therefore, Topgolf financial information included in the Company’s consolidated condensed financial statements for the three months ended March 31, 2022 is for the period beginning January 3, 2022 and ending April 3, 2022. Topgolf financial information included in the Company’s consolidated condensed financial statements for the three months ended March 31, 2021 is for the period beginning March 8, 2021, the date which the Company completed its merger with Topgolf, and ending April 4, 2021.
Note 2. Summary of Significant Accounting Policies
The Company’s significant accounting policies are described in Note 2 to its audited consolidated financial statements for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K which was filed with the SEC on March 1, 2022.

11


Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may materially differ from these estimates. The Company reviews its estimates on an ongoing basis or as new information becomes available to ensure that these estimates appropriately reflect changes in its business.
Adoption of New Accounting Standards
In August 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). This ASU simplifies the accounting for convertible instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, a convertible debt instrument is accounted for as a single liability measured at its amortized cost. These changes reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that was bifurcated according to previously existing rules. Also, this ASU requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The amendments in this update are effective for public entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, and may be adopted through either a fully retrospective or modified retrospective method of transition only at the beginning of an entity’s fiscal year. The Company has Convertible Senior Notes (the “Convertible Notes”) with a cash conversion feature that was recognized in equity at the time of issuance (Note 6) and has adopted this standard as of January 1, 2022 under the modified retrospective method of transition. As such, prior period amounts have not been retrospectively adjusted. Adoption of the standard resulted in a reduction in additional paid-in capital of $57.1 million, an increase to long-term debt, net of $57.9 million, a decrease in the deferred taxes, net of $13.2 million and an increase in retained earnings of $12.4 million. Additionally, in periods when net income is reported, the Company will use the if-converted method for calculating diluted earnings per common share. Under the if-converted method, the 14.7 million common shares underlying the Convertible Notes are assumed to have been outstanding as of the beginning of the current reporting period and any interest expense related to the Convertible Notes for the period is excluded from the calculation of diluted earnings per common share, resulting in an increase to net income. As a result, during the three months ended March 31, 2022, after-tax interest expense in the amount of $1.6 million was excluded from the calculation of diluted earnings per share (Note 7). Prior to the adoption of ASU 2020-06, the Company used the treasury stock method to compute dilutive shares of common stock related to the Convertible Notes for periods when the Company reported net income. The treasury stock method assumes that proceeds received upon exercises are used to purchase common shares at the average market price during the period. Additionally, under the treasury stock method, interest expense related to the Convertible Notes for the period was included in the calculation of earnings per common share-diluted.

12


Note 3. Leases
Sales-Type Leases
The Company enters into non-cancellable license agreements that provide software and hardware to driving ranges and hospitality and entertainment venues, which are classified as sales-type leases.
Leasing revenue attributed to sales-type leases is included in services revenues within the consolidated condensed statement of operations. Leasing revenue attributed to sales-type leases consists of the selling price and interest income as follows (in millions):
Three Months Ended March 31,
20222021
Sales-type lease selling price(1)
$7.1 $3.5 
Cost of underlying assets(3.3)(2.4)
Operating profit$3.8 $1.1 
Interest income$0.9 $0.4 
Leasing revenue attributable to sales-type leases$8.0 $3.9 
(1) Selling price is equal to the present value of lease payments over the non-cancellable term.
Leasing receivables related to the Company’s net investment in sales-type leases are as follows (in millions):
Balance Sheet LocationMarch 31, 2022December 31, 2021
Leasing receivables, net - short-termOther current assets$13.4 $12.8 
Leasing receivables, net - long-termOther assets45.9 44.1 
$59.3 $56.9 
Operating and Finance Leases
As a lessee, the Company leases office space, manufacturing plants, warehouses, distribution centers, Company-operated Topgolf venues, vehicles, and equipment, as well as retail and/or outlet locations related to the TravisMathew and Jack Wolfskin businesses and the apparel businesses in Japan and Korea.
In response to the COVID-19 pandemic, the Company received rent concessions in the form of deferments and abatements on certain of its operating leases. Rent deferments are recorded as payables and are paid at a later negotiated date. Rent abatements are recognized as reductions in rent expense over the periods covered by the abatement period. As of December 31, 2021, the Company had rent deferments of $3.8 million, of which $3.2 million was recorded in accrued expenses, and $0.6 million was recorded in other long-term liabilities in the consolidated balance sheets. As of March 31, 2022, rent deferments of $0.2 million and $0.3 million were recorded in accrued expenses and other long-term liabilities, respectively, in the consolidated condensed balance sheets. There were no material rent abatements recorded during the three months ended March 31, 2022 and March 31, 2021.
Supplemental balance sheet information related to leases is as follows (in millions):
Balance Sheet LocationMarch 31, 2022December 31, 2021
Operating Leases
ROU assets, netOperating lease right-of-use assets, net$1,359.3 $1,384.5 
Lease liabilities, short-termOperating lease liabilities, short-term$77.8 $72.3 
Lease liabilities, long-termOperating lease liabilities, long-term$1,356.2 $1,385.4 
Finance Leases
ROU assets, netOther assets$158.7 $129.5 
Lease liabilities, short-termAccounts payable and accrued expenses$1.8 $1.8 
Lease liabilities, long-termLong-term other$162.4 $132.5 

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The components of lease expense are as follows (in millions):
Three Months Ended March 31,
20222021
Operating lease costs$37.4 $20.5 
Financing lease costs:
Amortization of right-of-use assets0.6 0.3 
Interest on lease liabilities2.1  
Total financing lease costs2.7 0.3 
Variable lease costs1.9 0.6 
Total lease costs$42.0 $21.4 

Other information related to leases was as follows (in millions):
Three Months Ended March 31,
Supplemental Cash Flows Information20222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$39.8 $18.9 
Operating cash flows from finance leases$2.1 $ 
Financing cash outflows from finance leases$0.1 $0.1 
Lease liabilities arising from new ROU assets:
Operating leases$ $28.4 
Finance leases$30.0 $ 
March 31, 2022December 31, 2021
Weighted average remaining lease term (years):
Operating leases15.714.1
Finance leases35.336.2
Weighted average discount rate:
Operating leases5.4 %5.3 %
Finance leases5.3 %5.3 %
Future minimum lease obligations as of March 31, 2022 were as follows (in millions):
Operating LeasesFinance Leases
Remainder of 2022$104.2 $5.4 
2023143.5 9.7 
2024141.2 9.3 
2025138.8 9.0 
2026133.9 9.0 
Thereafter1,569.7 364.2 
Total future lease payments2,231.3 406.6 
Less: imputed interest797.3 242.4 
Total$1,434.0 $164.2 



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Financing Obligations (Deemed Landlord Financing Obligations)
During the three months ended March 31, 2022, the Company had 29 Deemed Landlord Financing (“DLF”) obligations that did not meet the sale-leaseback criteria upon the completion of construction in accordance with ASC Topic 842, “Leases”. As of March 31, 2022, the Company was the accounting owner of the 13 land and 16 building assets under the DLF obligations, for a total amount of $127.0 million and $500.6 million, respectively. Land assets and the net book value of the buildings under the DLF obligations are included in property, plant and equipment on the Company’s consolidated condensed balance sheets. Buildings capitalized in conjunction with the DLF obligations are depreciated, less residual value, over 40 years or over their estimated useful life, whichever is shorter.
Supplemental balance sheet information related to DLF obligations is as follows (in millions):
Balance Sheet LocationMarch 31, 2022December 31, 2021
DLF obligation liabilities, short-termAccrued expenses$1.1 $0.9 
DLF obligation liabilities, long-termDeemed landlord financing, long-term$463.5 $460.6 
The components of DLF obligation expenses are as follows (in millions):
Three Months Ended March 31,
20222021
Amortization of DLF obligations$3.2 $0.4 
Interest on DLF obligations10.1 1.5 
Total DLF contracts expenses$13.3 $1.9 
Payments on DLF obligations represent payments related to interest accretion for the three months ended March 31, 2022 and March 31, 2021.
Three Months Ended March 31,
Supplemental Cash Flows Information (in millions)20222021
Operating cash outflows from DLF obligations$9.6 $1.5 
Financing cash outflows from DLF obligations$ $0.2 

March 31, 2022December 31, 2021
Weighted average remaining lease term (years)38.839.0
Weighted average discount rate8.8 %9.2 %
Future minimum financing obligations related to DLF obligations as of March 31, 2022 were as follows (in millions):
Remainder of 2022$23.4 
202336.5 
202437.7 
202538.1 
202639.0 
Thereafter1,810.2 
Total future lease payments1,984.9 
Less: imputed interest1,520.3 
Total$464.6 

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Leases Under Construction
Lease payments exclude $1,421.2 million related to 14 venues subject to non-cancellable leases that have been signed as of March 31, 2022 but have not yet commenced. The Company’s minimum capital commitment related to leases, net of amounts reimbursed by third-party real estate financing partners, was approximately $43.0 million as of March 31, 2022. As the Company is actively involved in the construction of these properties, the Company recorded $172.9 million in building-related construction costs within property, plant and equipment as of March 31, 2022. Additionally, as of March 31, 2022, the Company recorded $72.3 million in construction advances from the landlords in connection with these properties. The Company will determine the lease classification for properties currently under construction at the end of the construction period. The initial base term upon the commencement of these leases is generally 20 years.
Note 4. Revenue Recognition
The Company primarily recognizes revenue from the sale of its products and operation of its venues. Revenue from product sales include golf clubs, golf balls, lifestyle and outdoor apparel, gear and accessories, and golf apparel and accessories. The Company sells its products to customers, which include on- and off-course golf shops and national retail stores, as well as to consumers through its e-commerce business and at its apparel retail and venue locations. The Company’s product revenue also includes royalty income from third parties from the licensing of certain soft goods products. Revenue from services primarily includes venue sales of food and beverage, fees charged for gameplay, the sale of game credits to guests, franchise fees, the sale of gift cards, sponsorship contracts, leasing revenue and non-refundable deposits received for venue reservations. In addition, the Company recognizes service revenue through its online multiplayer World Golf Tour (“WGT”) digital golf game.
The Company’s contracts with customers for its products are generally in the form of a purchase order. In certain cases, the Company enters into sales agreements containing specific terms, discounts and allowances. The Company enters into licensing agreements with certain distributors and, with respect to the Company’s Toptracer operations, driving ranges and hospitality and entertainment venues.
The following table presents the Company’s revenue disaggregated by operating and reportable segment, and by major category (in millions):
Operating and Reportable Segments
Three Months Ended March 31, 2022Three Months Ended March 31, 2021
Topgolf (1)
Golf EquipmentApparel, Gear
& Other
Total
Topgolf (1)
Golf EquipmentApparel, Gear
& Other
Total
Venues$306.5 $— $— $306.5 $86.1 $— $— $86.1 
Other Topgolf business lines15.5 — — 15.5 6.5 — — 6.5 
Golf club — 370.4 — 370.4 — 316.4 — 316.4 
Golf ball — 97.6 — 97.6 — 60.5 — 60.5 
Apparel — — 138.4 138.4 — — 95.3 95.3 
Gear, accessories & other— — 111.8 111.8 — — 86.8 86.8 
$322.0 $468.0 $250.2 $1,040.2 $92.6 $376.9 $182.1 $651.6 
(1) As of January 1, 2022, the Company began reporting revenues associated with corporate advertising sponsorship contracts within the venues service line to align with the Company’s current management reporting structure. These revenues were previously included within other Topgolf business lines. Accordingly, revenue of $1.0 million for the three months ended March 31, 2021 was reclassified from other Topgolf business lines to venues in order to conform with the current year presentation.
The Company sells its Golf Equipment products and Apparel, Gear and Other products in the United States and internationally, with its principal international regions being in Europe and Asia. Golf equipment product sales are generally higher than Apparel, Gear, and Other product sales in most regions other than in Europe, which has a higher concentration of Apparel, Gear and Other product sales due to the Jack Wolfskin business. Venues revenue is higher in the United States due to Topgolf having significantly more domestic venues than international venues. Revenue related to other Topgolf business lines is predominantly in the United States and in regions within Europe.
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The following table summarizes revenue by geographical areas in which the Company operates (in millions):
Three Months Ended
March 31,
20222021
Revenue by Major Geographic Region(1):
United States$709.4 $388.2 
Europe134.9 108.3 
Asia158.6 123.9 
Rest of world37.3 31.2 
$1,040.2 $651.6