Company Quick10K Filing
Callaway Golf
Price19.01 EPS1
Shares96 P/E23
MCap1,830 P/FCF29
Net Debt380 EBIT138
TEV2,211 TEV/EBIT16
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-02
10-Q 2019-09-30 Filed 2019-11-06
10-Q 2019-06-30 Filed 2019-08-09
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-03-01
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-07
10-Q 2018-03-31 Filed 2018-05-09
10-K 2017-12-31 Filed 2018-02-27
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-07
10-Q 2017-03-31 Filed 2017-05-09
10-K 2016-12-31 Filed 2017-02-27
10-Q 2016-09-30 Filed 2016-11-07
10-Q 2016-06-30 Filed 2016-08-01
10-Q 2016-03-31 Filed 2016-05-02
10-K 2015-12-31 Filed 2016-03-04
10-Q 2015-09-30 Filed 2015-11-05
10-Q 2015-06-30 Filed 2015-08-06
10-Q 2015-03-31 Filed 2015-04-29
10-K 2014-12-31 Filed 2015-03-03
10-Q 2014-09-30 Filed 2014-11-05
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-04-25
10-K 2013-12-31 Filed 2014-02-27
10-Q 2013-09-30 Filed 2013-10-28
10-Q 2013-06-30 Filed 2013-07-29
10-Q 2013-03-31 Filed 2013-04-29
10-K 2012-12-31 Filed 2013-03-08
10-Q 2012-09-30 Filed 2012-10-30
10-Q 2012-06-30 Filed 2012-08-02
10-Q 2012-03-31 Filed 2012-04-27
10-K 2011-12-31 Filed 2012-03-02
10-Q 2011-09-30 Filed 2011-11-02
10-Q 2011-06-30 Filed 2011-08-01
10-Q 2011-03-31 Filed 2011-05-02
10-K 2010-12-31 Filed 2011-03-01
10-Q 2010-09-30 Filed 2010-10-29
10-Q 2010-06-30 Filed 2010-07-30
10-Q 2010-03-31 Filed 2010-04-30
10-K 2009-12-31 Filed 2010-02-26
8-K 2020-05-19 Regulation FD
8-K 2020-05-12 Amend Bylaw, Shareholder Vote, Exhibits
8-K 2020-05-07 Earnings, Exhibits
8-K 2020-04-30 Other Events, Exhibits
8-K 2020-04-29 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2020-04-28 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2020-04-27 Earnings, Exhibits
8-K 2020-04-02 Officers
8-K 2020-03-25 Regulation FD
8-K 2020-03-20 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2020-03-05 Officers
8-K 2020-02-10 Earnings, Exhibits
8-K 2019-11-21 Officers, Other Events, Exhibits
8-K 2019-10-30 Earnings, Exhibits
8-K 2019-09-24 Regulation FD
8-K 2019-08-30 Officers, Exhibits
8-K 2019-08-27 Regulation FD
8-K 2019-08-08 Earnings, Exhibits
8-K 2019-07-15 Officers
8-K 2019-06-11 Regulation FD, Exhibits
8-K 2019-06-03 Regulation FD
8-K 2019-05-28 Regulation FD
8-K 2019-05-21 Regulation FD, Exhibits
8-K 2019-05-17 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-05-13 Regulation FD, Exhibits
8-K 2019-05-09 Earnings, Exhibits
8-K 2019-05-09 Shareholder Vote
8-K 2019-03-04 Regulation FD, Exhibits
8-K 2019-02-11 Regulation FD, Exhibits
8-K 2019-02-06 Earnings, Exhibits
8-K 2019-02-01 Enter Agreement, Exhibits
8-K 2019-01-03 Enter Agreement, M&A, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2018-11-29 Enter Agreement, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2018-11-07 Officers, Other Events
8-K 2018-10-24 Earnings, Exhibits
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-05-09 Officers, Shareholder Vote, Other Events
8-K 2018-04-26 Earnings, Exhibits
8-K 2018-02-07 Earnings, Exhibits
8-K 2018-01-17 Regulation FD

ELY 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Note 1. Basis of Presentation
Note 2. Leases
Note 3. Revenue Recognition
Note 4. Estimated Credit Losses
Note 5. Business Combinations
Note 6. Financing Arrangements
Note 7. Earnings per Common Share
Note 8. Inventories
Note 9. Goodwill and Intangible Assets
Note 10. Joint Venture
Note 11. Investments
Note 12. Product Warranty
Note 13. Income Taxes
Note 14. Commitments & Contingencies
Note 15. Share - Based Employee Compensation
Note 16. Fair Value of Financial Instruments
Note 17. Derivatives and Hedging
Note 18. Accumulated Other Comprehensive Loss
Note 19. Segment Information
Note 20. Subsequent Event
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.2 ely-exx102q120.htm
EX-31.1 ely-exx311q120.htm
EX-31.2 ely-exx312q120.htm
EX-32.1 ely-exx321q120.htm

Callaway Golf Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
2.01.61.20.80.40.02012201420172020
Assets, Equity
0.60.50.30.20.0-0.12012201420172020
Rev, G Profit, Net Income
0.70.50.2-0.0-0.3-0.52012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2020
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 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
  
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 filer
Accelerated filer
Non-accelerated filer
Smaller 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 March 31, 2020, the number of shares outstanding of the Registrant’s common stock was 94,107,978.
 




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 pandemic, 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, future stock repurchases, 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 integration of the JW Stargazer Holding GmbH ("Jack Wolfskin") acquisition, the related financial impact of the future business and prospects of the Company, TravisMathew, LLC ("TravisMathew"), OGIO International, Inc. ("OGIO") and Jack Wolfskin, and the impact of the 2017 Tax Cuts and Jobs Act (the "Tax Act"), which includes a broad range of provisions that could have a material impact on the Company's tax provision in future periods. 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 market or economic conditions, particularly the uncertainty related to the duration and impact of the COVID-19 pandemic, and related decreases in consumer demand and spending;
the impact of the COVID-19 pandemic 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, consumer demand and supply chain, and the global economy;
disruptions to business operations whether from COVID-19-related travel restrictions, mandated quarantines or voluntary “social distancing” that affects employees, customers and suppliers, production delays, closures of manufacturing facilities, retail locations, warehouses and supply and distribution chains, and staffing shortages as a result of remote working requirements or otherwise;
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 and scale opportunities across its supply chain and global business platform;
the costs and disruption associated with activist investors;
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;


2



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, including without limitation the COVID-19 pandemic, 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. 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 Part I, Item IA, “Risk Factors” contained in 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.

Callaway Golf Company Trademarks: The following marks and phrases, among others, are trademarks of the Company: Alpha Convoy, Apex, Apex Tour, APW, Aqua Dry, Arm Lock, Backstryke, Big Bertha, 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, Cirrus, Comfort Tech, CUATER, Cuater C logo, Cup 360, CXR, 360 Face Cup, D.A.R.T., Dawn Patrol, Demonstrably Superior And Pleasingly Different, Divine, Double Wide, Eagle, Engage, Epic, Epic Flash, ERC, ERC Soft, Exo, Cage, Fast Tech Mantle, Flash Face Technology, FT Optiforce, FT Performance, FT Tour, Fusion, Fusion Zero, GBB, GBB Epic, Gems, 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, Innovate or Die, Ion-X, Jack Wolfskin, Jailbird, Jailbreak, 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, Nanuk, NipIt, Number One Putter in Golf, O OGIO, O Works, Odyssey, Odyssey Works, Ogio, OGIO ALPHA, OGIO ARORA, OGIO CLUB, OGIO FORGE, OGIO ME, OGIO MY EXPRESSION, OGIO RENEGADE, OGIO SAVAGE, OGIO SHADOW, Opti Flex, Opti Grip, Opti Shield, Opti Therm, OptiFit, Opti Vent, ORG 14, ORG 15, Paw Print, PRESTIGE 7, ProType, ∙R∙, Red Ball, R-Moto, Renegade, Rig 9800, Rossie, RSX, S2H2, Sabertooth, Shredder, Silencer, SLED, SoftFast, Solaire, Speed Regime, Speed Step, Steelhead XR, Steelhead, Strata, Stroke Lab, Stronomic, Sub Zero, Superhot, Supersoft, SureOut, TM, Tank, Tank Cruiser, Tech Series, Teron, Texapore, TMCA, Toe Up, 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, White Hot, White Hot Tour, White Ice, World's Friendliest, X-12, X-14, X-16, X-18, X-20, X-22, X-24, X-ACT, X Face VFT, X Hot, X Hot Pro, X² Hot, X Series, XR, XR 16, XSPANN, Xtra Traction Technology, Xtra Width Technology, XTT, 2-Ball.



3



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.


4



PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements (Unaudited)
CALLAWAY GOLF COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
 
March 31,
2020
 
December 31,
2019
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
166,635

 
$
106,666

Accounts receivable, net
259,530

 
140,455

Inventories
412,690

 
456,639

Income taxes receivable
21,048

 
9,919

Other current assets
74,219

 
75,671

Total current assets
934,122

 
789,350

Property, plant and equipment, net
150,969

 
132,760

Operating lease right-of-use assets, net
193,829

 
160,098

Intangible assets, net
487,864

 
493,423

Goodwill
200,787

 
203,743

Deferred taxes, net
61,517

 
73,948

Investment in golf-related venture
90,134

 
90,134

Other assets
15,854

 
17,092

Total assets
$
2,135,076

 
$
1,960,548

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
224,282

 
$
276,300

Accrued employee compensation and benefits
29,438

 
46,891

Asset-based credit facilities
335,593

 
144,580

Accrued warranty expense
9,791

 
9,636

Operating lease liabilities, short-term
28,544

 
26,418

Current portion of long-term debt
8,734

 
7,317

Income taxes payable
12,526

 
12,104

Total current liabilities
648,908

 
523,246

Long-term liabilities:
 
 
 
Operating lease liabilities, long-term
175,954

 
137,696

Long-term debt (Note 6)
453,774

 
443,259

Income tax liability
7,156

 
7,264

Deferred taxes, net
72,289

 
73,483

Other long-term liabilities
17,028

 
8,247

Commitments and contingencies (Note 14)

 

Shareholders’ equity:
 
 
 
Preferred stock, $0.01 par value, 3,000,000 shares authorized, none issued and outstanding at March 31, 2020 and December 31, 2019

 

Common stock, $0.01 par value, 240,000,000 shares authorized, 95,648,648 shares issued at both March 31, 2020 and December 31, 2019, respectively
956

 
956

Additional paid-in capital
307,133

 
323,600

Retained earnings
517,004

 
489,382

Accumulated other comprehensive loss
(37,517
)
 
(22,422
)
Less: Common stock held in treasury, at cost, 1,540,670 and 1,450,875 shares at March 31, 2020 and December 31, 2019, respectively
(27,609
)
 
(24,163
)
Total Callaway Golf Company shareholders’ equity
759,967

 
767,353

Total shareholders’ equity
759,967

 
767,353

Total liabilities and shareholders’ equity
$
2,135,076

 
$
1,960,548


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


5



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

 
Three Months Ended
March 31,
 
2020
 
2019
Net sales
$
442,276

 
$
516,197

Cost of sales
246,602

 
277,764

Gross profit
195,674

 
238,433

Operating expenses:
 
 
 
Selling expense
111,061

 
119,321

General and administrative expense
30,693

 
36,938

Research and development expense
13,240

 
12,538

Total operating expenses
154,994

 
168,797

Income from operations
40,680

 
69,636

Interest income
99

 
189

Interest expense
(9,214
)
 
(9,828
)
Other income (expense), net
6,480

 
(1,940
)
Income before income taxes
38,045

 
58,057

Income tax provision
9,151

 
9,556

Net income
28,894

 
48,501

Less: Net loss attributable to non-controlling interest

 
(146
)
Net income attributable to Callaway Golf Company
$
28,894

 
$
48,647

 
 
 
 
Earnings per common share:
 
 
 
Basic
$
0.31

 
$
0.51

Diluted
$
0.30

 
$
0.50

Weighted-average common shares outstanding:
 
 
 
Basic
94,309

 
94,684

Diluted
95,676

 
96,419


















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


6



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

 
Three Months Ended
March 31,
 
2020
 
2019
Net income
$
28,894

 
$
48,501

Other comprehensive income:
 
 
 
Change in derivative instruments
(589
)
 
(3,174
)
Foreign currency translation adjustments
(14,936
)
 
(2,978
)
Comprehensive income, before income tax on other comprehensive income items
13,369

 
42,349

Income tax benefit (provision) on derivative instruments
430

 
(428
)
Comprehensive income
13,799

 
41,921

Less: Comprehensive loss attributable to non-controlling interests

 
(108
)
Comprehensive income attributable to Callaway Golf Company
$
13,799

 
$
42,029




 





























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


7



CALLAWAY GOLF COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
Three Months Ended
March 31,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net income
$
28,894

 
$
48,501

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
   Depreciation and amortization
8,997

 
7,977

   Lease amortization expense
8,517

 
9,154

   Amortization of debt issuance costs
835

 
647

   Inventory step-up from acquisition

 
5,367

   Deferred taxes, net
12,409

 
4,005

   Non-cash share-based compensation
1,861

 
3,435

   Loss on disposal of long-lived assets
51

 
75

   Unrealized net (gains) losses on hedging instruments
767

 
(478
)
Change in assets and liabilities, net of effect from acquisitions:
 
 
 
   Accounts receivable, net
(120,075
)
 
(187,577
)
   Inventories
36,982

 
42,173

   Other assets
19,349

 
(2,962
)
   Accounts payable and accrued expenses
(58,137
)
 
(22,730
)
   Accrued employee compensation and benefits
(16,680
)
 
(14,983
)
   Accrued warranty expense
155

 
966

Change in operating leases, net
(7,041
)
 
(8,714
)
   Income taxes receivable/payable, net
(11,356
)
 
(4,468
)
Other liabilities
790

 
(992
)
Net cash used in operating activities
(93,682
)
 
(120,604
)
Cash flows from investing activities:
 
 
 
Capital expenditures
(16,953
)
 
(11,304
)
Acquisition, net of cash acquired

 
(463,105
)
Proceeds from sales of property and equipment

 
15

Net cash used in investing activities
(16,953
)
 
(474,394
)
Cash flows from financing activities:
 
 
 
Proceeds from credit facilities, net
191,013

 
174,182

Proceeds from issuance of long-term debt
9,766

 
480,000

Repayments of long-term debt
(3,143
)
 
(1,760
)
Debt issuance cost

 
(18,129
)
Principal payments on finance leases
(109
)
 
(114
)
Acquisition of treasury stock
(21,938
)
 
(27,377
)
Dividends paid, net
(949
)
 
(953
)
Exercise of stock options
130

 

Net cash provided by financing activities
174,770

 
605,849

Effect of exchange rate changes on cash and cash equivalents
(4,166
)
 
4,107

Net increase in cash and cash equivalents
59,969

 
14,958

Cash and cash equivalents at beginning of period
106,666

 
63,981

Cash and cash equivalents at end of period
$
166,635

 
$
78,939

Supplemental disclosures:
 
 
 
Cash paid for income taxes, net
$
3,983

 
$
3,259

Cash paid for interest and fees
$
7,165

 
$
5,042

Non-cash investing and financing activities:
 
 
 
Issuance of treasury stock and common stock for compensatory stock awards released from restriction
$
18,129

 
$
18,467

Accrued capital expenditures at period-end
$
4,055

 
$
1,178






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


8



CALLAWAY GOLF COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(In thousands)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
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, 2018
95,649

 
$
956

 
$
341,241

 
$
413,799

 
 
$
(13,700
)
 
 
(1,138
)
 
$
(17,722
)
 
 
$
724,574

 
 
$
9,734

 
$
734,308

Acquisition of treasury stock

 

 

 

 
 

 
 
(1,654
)
 
(27,377
)
 
 
(27,377
)
 
 

 
(27,377
)
Compensatory awards released from restriction

 

 
(18,467
)
 

 
 

 
 
803

 
18,467

 
 

 
 

 

Share-based compensation

 

 
3,435

 

 
 

 
 

 

 
 
3,435

 
 

 
3,435

Stock dividends
 
 

 

 
(37
)
 
 

 
 
385

 
37

 
 

 
 

 

Cash dividends ($0.01 per share)

 

 

 
(953
)
 
 

 
 

 

 
 
(953
)
 
 

 
(953
)
Equity adjustment from foreign currency translation

 

 

 

 
 
(2,870
)
 
 


 

 
 
(2,870
)
 
 
(108
)
 
(2,978
)
Change in fair value of derivative instruments

 

 

 

 
 
(3,602
)
 
 

 

 
 
(3,602
)
 
 

 
(3,602
)
Net Income

 

 

 
48,647

 
 

 
 


 

 
 
48,647

 
 
(146
)
 
48,501

Balance, March 31, 2019
95,649

 
$
956

 
$
326,209

 
$
461,456

 
 
$
(20,172
)
 
 
(1,604
)
 
$
(26,595
)
 
 
$
741,854

 
 
$
9,480

 
$
751,334


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
Balance at December 31, 2019
95,649

 
$
956

 
$
323,600

 
$
489,382

 
 
$
(22,422
)
 
 
(1,451
)
 
$
(24,163
)
 
 
$
767,353

 
Adoption of accounting standard

 

 

 
(289
)
 
 

 
 

 

 
 
(289
)
 
Acquisition of treasury stock

 

 

 

 
 

 
 
(1,167
)
 
(21,938
)
 
 
(21,938
)
 
Exercise of stock options

 

 
(203
)
 

 
 

 
 
20

 
333

 
 
130

 
Compensatory awards released from restriction

 

 
(18,129
)
 

 
 

 
 
1,055

 
18,129

 
 

 
Share-based compensation

 

 
1,861

 

 
 

 
 

 

 
 
1,861

 
Stock dividends

 

 
4

 
(34
)
 
 

 
 
2

 
30

 
 

 
Cash dividends ($0.01 per share)

 

 

 
(949
)
 
 

 
 

 

 
 
(949
)
 
Equity adjustment from foreign currency translation

 

 

 

 
 
(14,936
)
 
 

 

 
 
(14,936
)
 
Change in fair value of derivative instruments, net of tax

 

 

 

 
 
(159
)
 
 

 

 
 
(159
)
 
Net income

 

 

 
28,894

 
 

 
 

 

 
 
28,894

 
Balance at March 31, 2020
95,649

 
$
956

 
$
307,133

 
$
517,004

 
 
$
(37,517
)
 
 
(1,541
)
 
$
(27,609
)
 
 
$
759,967

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 









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


9



CALLAWAY GOLF COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been prepared by Callaway Golf Company (the “Company” or “Callaway Golf”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “Commission”). Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. These 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, 2019 filed with the Commission. These consolidated condensed financial statements, in the opinion of management, include all 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. Interim operating results are not necessarily indicative of operating results for the full year.
The preparation of financial statements in conformity with U.S. 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. Examples of such estimates include provisions for warranty, uncollectible accounts receivable, inventory obsolescence, sales returns, and tax contingencies and estimates related to the Tax Act enacted in December 2017, and estimates on the valuation of share-based awards and recoverability of long-lived assets and investments. Actual results may materially differ from these estimates. On an ongoing basis, the Company reviews its estimates to ensure that these estimates appropriately reflect changes in its business or as new information becomes available.
Recent Accounting Standards
In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." This ASU removes specific exceptions to the general principles in Accounting Standards Codification ("ASC") Topic 740, "Accounting for Income Taxes" ("Topic 740") and simplifies certain U.S. GAAP requirements. ASU 2019-12 is effective for public filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact this ASU will have on its consolidated condensed financial statements and disclosures.
Adoption of New Accounting Standards
On January 1, 2020, the Company adopted ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("Topic 326") utilizing the modified retrospective approach. This new standard is intended to improve financial reporting by requiring timelier recording of credit losses on the Company's trade account receivable and requires the measurement of all expected credit losses based on historical experience, current conditions, and reasonable and supportable forecasts. Upon the completion of the Company's assessment of Topic 326, the Company concluded that its prior methodology of estimating credit losses on its trade accounts receivable closely aligns with the requirements of the new standard, and therefore, the adoption of this ASU did not have a material impact on the Company consolidated condensed financial statements. For further information, see Note 4 . Upon adoption of Topic 326, the Company recorded a cumulative adjustment to beginning retained earnings of $289,000, which reflected an increase to the allowance for doubtful accounts. As the impact to the Company's consolidated condensed financial statements in the first quarter of 2020 was not material, prior period information that is presented for comparative purposes has not been restated and continues to be reported under the accounting standards that were in effect during those periods.
On January 1, 2020, the Company adopted ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement." The amendments in this ASU removed, modified or added to the disclosure requirements for fair value measurements in ASC Topic 820, "Fair Value Measurement" ("Topic 820"). The adoption of this ASU did not have a material impact on the Company's consolidated condensed financial statements and disclosures.


10



 
 
 
 
 
 

Note 2. Leases
The Company leases office space, manufacturing plants, warehouses, distribution centers and vehicles and equipment, as well as retail and/or outlet locations related to the TravisMathew and Jack Wolfskin businesses and the apparel business in Japan. Certain real estate leases include one or more options to extend the lease term or options to purchase the leased property at the Company's sole discretion. When deemed reasonably certain of exercise, the renewal and purchase options are included in the determination of the lease term and lease payment obligation, respectively. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Right-of-use ("ROU") assets represent the right to use an underlying asset during the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. When readily determinable, the Company uses the rate implicit in the lease agreement in determining the present value of minimum lease payments. If the implicit rate is not provided, the Company uses its incremental borrowing rate based on information available at the lease commencement date, including the lease term. At the commencement of a lease, the ROU asset for operating leases is measured by taking the sum of the present value of the lease liability, initial direct costs (if any) and prepaid lease payments (if any), and deducting lease incentives (if any). After the lease commencement date and over the lease term, lease expense is recognized as a single lease cost on a straight-line basis. Lease agreements related to properties are generally comprised of lease components and non-lease components. Non-lease components, such as common area maintenance charges, are expensed as incurred and recognized separately from the straight-line lease expense. Variable lease payments that do not depend on an index or rate, such as rental payments based on a percentage of retail sales over contractual levels, are expensed separately as incurred, and are not included in the measurement of the ROU asset and lease liability. Variable lease payments that depend on an index or rate, such as payments that are adjusted periodically for inflation, are included in the measurement of the ROU asset and lease liability and are recognized on a straight-line basis over the lease term.
Supplemental balance sheet information related to leases is as follows (in thousands):
 
Balance Sheet Location
 
March 31, 2020
 
December 31, 2019
Operating leases
 
 

 
 
ROU assets, net
Operating lease ROU assets, net
 
$
193,829

 
$
160,098

Lease liabilities, short-term
Operating lease liabilities, short-term
 
$
28,544

 
$
26,418

Lease liabilities, long-term
Operating lease liabilities, long-term
 
$
175,954

 
$
137,696

 
 
 
 
 
 
Finance Leases
 
 

 
 
ROU assets, net,
Other assets
 
$
1,108

 
$
1,263

Lease liabilities, short-term
Accounts payable and accrued expenses
 
$
542

 
$
589

Lease liabilities, long-term
Long-term other
 
$
509

 
$
558



The components of lease expense are as follows (in thousands):
 
Three Months Ended
March 31,
 
2020
 
2019
Operating lease costs
$
11,022

 
$
8,897

Financing lease costs:
 
 
 
Amortization of right-of-use assets
167

 
257

Interest on lease liabilities
11

 
25

Total financing lease costs
178

 
282

Variable lease costs
1,296

 
1,340

Total lease costs
$
12,496

 
$
10,519



11




Other information related to leases was as follows (in thousands):
 
 
Three Months Ended
March 31,
Supplemental Cash Flows Information
 
2020
 
2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
 
Operating cash flows - operating leases
 
$
9,331

 
$
8,714

Operating cash flows from finance leases
 
$
11

 
$
25

Financing cash flows from finance leases
 
$
109

 
$
114

 
 
 
 
 
Lease liabilities arising from new ROU assets:
 
 
 
 
Operating leases
 
$
51,851

 
$
3,059

Finance leases
 
$
22

 
$


 
 
March 31,
2020
 
December 31,
2019
Weighted average remaining lease term (years):
 
 
 
 
Operating leases
 
10.1

 
6.6

Finance leases
 
2.7

 
2.7

 
 
 
 
 
Weighted average discount rate:
 
 
 
 
Operating leases
 
5.4
%
 
5.5
%
Finance leases
 
4.1
%
 
4.5
%


Future minimum lease obligations as of March 31, 2020 were as follows (in thousands):
 
Operating Leases
 
Finance Leases
Remainder of 2020
$
29,289

 
$
510

2021
34,284

 
245

2022
29,864

 
204

2023
26,016

 
94

2024
22,586

 
23

Thereafter
126,550

 
23

Total future lease payments
268,589

 
1,099

Less: imputed interest
64,091

 
48

Total
$
204,498

 
$
1,051


Note 3. Revenue Recognition
The Company recognizes revenue from the sale of its products, which include golf clubs, golf balls, lifestyle and outdoor apparel, gear and accessories, in addition to 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 locations. In addition, the Company recognizes royalty income from third parties from the licensing of certain soft goods products, as well as revenue from gift cards.
The Company's contracts with customers are generally in the form of a purchase order. In certain cases, the Company enters into sales agreements containing specific terms, discounts and allowances. In addition, the Company enters into licensing agreements with certain distributors.


12



The Company has two operating and reportable segments, namely the Golf Equipment operating segment and the Apparel, Gear and Other operating segment. The following table presents the Company's revenue disaggregated by major product category and operating and reportable segment (in thousands):
 
 
 
 
 
 
 
 
 
Operating and Reportable Segments
 
Three Months Ended March 31, 2020
 
Three Months Ended March 31, 2019
 
Golf Equipment
 
Apparel, Gear
& Other
 
Total
 
Golf Equipment
 
Apparel, Gear
& Other
 
Total
Major product category:
 
 
 
 
 
 
 
Golf Clubs
$
251,224

 
$

 
$