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 | ý | Accelerated filer | o | |||
Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | o | |||
Emerging growth company | o |
• | certain risks and uncertainties, including changes in capital market or economic conditions; |
• | delays or difficulties in the integration of the TravisMathew and/or OGIO acquisitions; |
• | 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; |
• | significant fluctuations in foreign currency exchange rates; |
• | 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. | ||
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Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. |
September 30, 2017 | December 31, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 82,021 | $ | 125,975 | |||
Accounts receivable, net | 152,420 | 127,863 | |||||
Inventories | 186,585 | 189,400 | |||||
Income taxes receivable | 5,109 | 637 | |||||
Other current assets | 20,466 | 16,550 | |||||
Total current assets | 446,601 | 460,425 | |||||
Property, plant and equipment, net | 65,906 | 54,475 | |||||
Intangible assets, net (Note 6) | 224,351 | 88,731 | |||||
Goodwill (Note 6) | 56,091 | 25,593 | |||||
Deferred taxes, net | 83,149 | 114,707 | |||||
Investment in golf-related venture (Note 8) | 50,495 | 48,997 | |||||
Other assets | 9,390 | 8,354 | |||||
Total assets | $ | 935,983 | $ | 801,282 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 140,572 | $ | 132,521 | |||
Accrued employee compensation and benefits | 34,830 | 32,568 | |||||
Asset-based credit facilities | 70,618 | 11,966 | |||||
Accrued warranty expense | 7,550 | 5,395 | |||||
Income tax liability | 3,552 | 4,404 | |||||
Total current liabilities | 257,122 | 186,854 | |||||
Long-term liabilities: | |||||||
Income tax payable | 4,152 | 3,608 | |||||
Deferred taxes, net | 1,793 | 1,596 | |||||
Long-term incentive compensation and other | 764 | 624 | |||||
Commitments and contingencies (Note 11) | |||||||
Shareholders’ equity: | |||||||
Preferred stock, $0.01 par value, 3,000,000 shares authorized, none issued and outstanding at September 30, 2017 and December 31, 2016 | — | — | |||||
Common stock, $0.01 par value, 240,000,000 shares authorized, 95,042,557 and 94,214,295 shares issued at September 30, 2017 and December 31, 2016, respectively | 950 | 942 | |||||
Additional paid-in capital | 332,133 | 330,206 | |||||
Retained earnings | 344,413 | 287,129 | |||||
Accumulated other comprehensive loss | (9,041 | ) | (18,466 | ) | |||
Less: Common stock held in treasury, at cost, 506,188 and 97,837 shares at September 30, 2017 and December 31, 2016, respectively | (5,450 | ) | (905 | ) | |||
Total Callaway Golf Company shareholders’ equity | 663,005 | 598,906 | |||||
Non-controlling interest in consolidated entity (Note 7) | 9,147 | 9,694 | |||||
Total shareholders’ equity | 672,152 | 608,600 | |||||
Total liabilities and shareholders’ equity | $ | 935,983 | $ | 801,282 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 243,604 | $ | 187,850 | $ | 857,079 | $ | 707,497 | |||||||
Cost of sales | 138,702 | 108,975 | 456,297 | 385,597 | |||||||||||
Gross profit | 104,902 | 78,875 | 400,782 | 321,900 | |||||||||||
Operating expenses: | |||||||||||||||
Selling expense | 65,754 | 55,869 | 205,618 | 183,543 | |||||||||||
General and administrative expense | 23,957 | 19,851 | 68,976 | 52,484 | |||||||||||
Research and development expense | 9,154 | 8,420 | 26,899 | 24,942 | |||||||||||
Total operating expenses | 98,865 | 84,140 | 301,493 | 260,969 | |||||||||||
Income (loss) from operations | 6,037 | (5,265 | ) | 99,289 | 60,931 | ||||||||||
Interest income | 63 | 56 | 399 | 550 | |||||||||||
Interest expense | (705 | ) | (487 | ) | (2,306 | ) | (1,949 | ) | |||||||
Gain on sale of investment in golf-related venture (Note 8) | — | — | — | 17,662 | |||||||||||
Other income (expense), net | (820 | ) | 1,251 | (6,197 | ) | (5,806 | ) | ||||||||
Income (loss) before income taxes | 4,575 | (4,445 | ) | 91,185 | 71,388 | ||||||||||
Income tax provision | 1,486 | 1,294 | 30,742 | 4,632 | |||||||||||
Net income (loss) | 3,089 | (5,739 | ) | 60,443 | 66,756 | ||||||||||
Less: Net income attributable to non-controlling interest | 29 | 127 | 251 | 127 | |||||||||||
Net income (loss) attributable to Callaway Golf Company | $ | 3,060 | $ | (5,866 | ) | $ | 60,192 | $ | 66,629 | ||||||
Earnings (loss) per common share: | |||||||||||||||
Basic | $ | 0.03 | $ | (0.06 | ) | $ | 0.64 | $ | 0.71 | ||||||
Diluted | $ | 0.03 | $ | (0.06 | ) | $ | 0.62 | $ | 0.70 | ||||||
Weighted-average common shares outstanding: | |||||||||||||||
Basic | 94,450 | 94,081 | 94,246 | 94,021 | |||||||||||
Diluted | 96,879 | 94,081 | 96,343 | 95,687 | |||||||||||
Dividends declared per common share | $ | 0.01 | $ | 0.01 | $ | 0.03 | $ | 0.03 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income (loss) | $ | 3,089 | $ | (5,739 | ) | $ | 60,443 | $ | 66,756 | ||||||
Other comprehensive income (loss) | |||||||||||||||
Change in derivative instruments | 626 | 515 | (2,992 | ) | (1,708 | ) | |||||||||
Foreign currency translation adjustments | 3,431 | 577 | 12,002 | 4,195 | |||||||||||
Comprehensive income (loss), before income tax on other comprehensive income items | 7,146 | (4,647 | ) | 69,453 | 69,243 | ||||||||||
Income tax benefit (expense) on derivative instruments | (277 | ) | (31 | ) | 521 | 31 | |||||||||
Comprehensive income (loss) | 6,869 | (4,678 | ) | 69,974 | 69,274 | ||||||||||
Less: Comprehensive income (loss) attributable to non-controlling interest | (14 | ) | (76 | ) | 176 | (76 | ) | ||||||||
Comprehensive income (loss) attributable to Callaway Golf Company | $ | 6,883 | $ | (4,602 | ) | $ | 69,798 | $ | 69,350 |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 60,443 | $ | 66,756 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 12,806 | 12,541 | |||||
Inventory step-up amortization from acquisitions | 1,701 | — | |||||
Deferred taxes | 32,586 | (370 | ) | ||||
Share-based compensation | 9,583 | 6,465 | |||||
Loss (gain) on disposal of long-lived assets and deferred gain amortization | 1,035 | (117 | ) | ||||
Gain on sale of investment in golf-related venture | — | (17,662 | ) | ||||
Unrealized losses on foreign currency forward contracts | 1,373 | 2,880 | |||||
Change in assets and liabilities, net of effect from acquisitions: | |||||||
Accounts receivable, net | (6,540 | ) | (38,740 | ) | |||
Inventories | 24,038 | 64,842 | |||||
Other assets | (4,835 | ) | 3,859 | ||||
Accounts payable and accrued expenses | (20,563 | ) | (10,490 | ) | |||
Accrued employee compensation and benefits | 1,762 | (3,342 | ) | ||||
Accrued warranty expense | 2,155 | (191 | ) | ||||
Income taxes receivable/payable, net | (4,835 | ) | (639 | ) | |||
Other liabilities | 76 | (171 | ) | ||||
Net cash provided by operating activities | 110,785 | 85,621 | |||||
Cash flows from investing activities: | |||||||
Acquisitions, net of cash acquired | (181,824 | ) | — | ||||
Capital expenditures | (16,846 | ) | (12,163 | ) | |||
Proceeds from sales of property and equipment | 560 | 20 | |||||
Proceeds from sale of investment in golf-related venture | — | 23,429 | |||||
Collection of note receivable | — | 3,104 | |||||
Investments in golf-related venture | (1,499 | ) | (1,560 | ) | |||
Net cash (used in) provided by investing activities | (199,609 | ) | 12,830 | ||||
Cash flows from financing activities: | |||||||
Proceeds from (repayments of) asset-based credit facilities, net | 58,652 | (14,969 | ) | ||||
Acquisition of treasury stock | (16,479 | ) | (5,133 | ) | |||
Dividends paid | (2,827 | ) | (2,822 | ) | |||
Distribution to non-controlling interest | (974 | ) | — | ||||
Exercise of stock options | 4,205 | 2,625 | |||||
Net cash provided by (used in) financing activities | 42,577 | (20,299 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 2,293 | (3,325 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (43,954 | ) | 74,827 | ||||
Cash and cash equivalents at beginning of period | 125,975 | 49,801 | |||||
Cash and cash equivalents at end of period | $ | 82,021 | $ | 124,628 | |||
Supplemental disclosures: | |||||||
Cash paid for income taxes, net | $ | 9,787 | $ | 5,750 | |||
Cash paid for interest and fees | $ | 1,865 | $ | 1,399 | |||
Non-cash investing and financing activities: | |||||||
Issuance of treasury stock for compensatory stock awards released from restriction | $ | 5,556 | $ | 893 | |||
Accrued capital expenditures at period-end | $ | 1,865 | $ | 1,272 |
Shareholders' Equity Callaway Golf Company | |||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total Callaway Golf Company Shareholders' Equity | Non- Controlling Interest | |||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Total | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2016 | 94,214 | $ | 942 | $ | 330,206 | $ | 287,129 | $ | (18,466 | ) | (98 | ) | $ | (905 | ) | $ | 598,906 | $ | 9,694 | $ | 608,600 | ||||||||||||||||||||
Acquisition of treasury stock | — | — | — | — | — | (1,527 | ) | (16,479 | ) | (16,479 | ) | — | (16,479 | ) | |||||||||||||||||||||||||||
Exercise of stock options | — | — | (2,173 | ) | — | — | 600 | 6,378 | 4,205 | — | 4,205 | ||||||||||||||||||||||||||||||
Compensatory awards released from restriction | 825 | 8 | (5,564 | ) | — | — | 519 | 5,556 | — | — | — | ||||||||||||||||||||||||||||||
Share-based compensation | — | — | 9,583 | — | — | — | — | 9,583 | — | 9,583 | |||||||||||||||||||||||||||||||
Stock dividends | 4 | — | 81 | (81 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Cash dividends | — | — | — | (2,827 | ) | — | — | — | (2,827 | ) | — | (2,827 | ) | ||||||||||||||||||||||||||||
Equity adjustment from foreign currency translation | — | — | — | — | 11,826 | — | — | 11,826 | 176 | 12,002 | |||||||||||||||||||||||||||||||
Change in fair value of derivative instruments, net of tax | — | — | — | — | (2,401 | ) | — | — | (2,401 | ) | — | (2,401 | ) | ||||||||||||||||||||||||||||
Distribution to non-controlling interest | — | — | — | — | — | — | — | — | (974 | ) | (974 | ) | |||||||||||||||||||||||||||||
Net income | — | — | — | 60,192 | — | — | — | 60,192 | 251 | 60,443 | |||||||||||||||||||||||||||||||
Balance at September 30, 2017 | 95,043 | $ | 950 | $ | 332,133 | $ | 344,413 | $ | (9,041 | ) | (506 | ) | $ | (5,450 | ) | $ | 663,005 | $ | 9,147 | $ | 672,152 |
At January 11, 2017 | ||||
Assets Acquired | ||||
Cash | $ | 8,061 | ||
Accounts receivable | 7,696 | |||
Inventory | 7,092 | |||
Other current assets | 328 | |||
Property and equipment | 2,369 | |||
Intangibles - trade name | 49,700 | |||
Intangibles - customer & distributor relationships | 1,500 | |||
Intangibles - non-compete agreements | 150 | |||
Goodwill | 5,885 | |||
Total assets acquired | 82,781 | |||
Liabilities Assumed | ||||
Accounts Payable and accrued liabilities | 16,830 | |||
Net assets acquired | $ | 65,951 |
At August 17, 2017 | ||||
Assets Acquired | ||||
Cash | $ | 663 | ||
Accounts receivable | 9,715 | |||
Inventory | 11,909 | |||
Other current assets | 549 | |||
Property and equipment | 4,327 | |||
Other assets | 117 | |||
Intangibles - trade name | 78,400 | |||
Intangibles - licensing agreement | 1,100 | |||
Intangibles - customer & distributor relationships | 4,450 | |||
Intangibles - non-compete agreements | 600 | |||
Goodwill | 23,436 | |||
Total assets acquired | 135,266 | |||
Liabilities Assumed | ||||
Accounts Payable and accrued liabilities | 10,669 | |||
Net assets acquired | $ | 124,597 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in thousands) | |||||||||||||||
Net sales | $ | 249,952 | $ | 211,849 | $ | 894,936 | $ | 780,408 | |||||||
Net income (loss) attributable to Callaway Golf Company | $ | 5,597 | $ | (3,459 | ) | $ | 70,796 | $ | 64,643 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Earnings (loss) per common share—basic | |||||||||||||||
Net income (loss) attributable to Callaway Golf Company | $ | 3,060 | $ | (5,866 | ) | $ | 60,192 | $ | 66,629 | ||||||
Weighted-average common shares outstanding—basic | 94,450 | 94,081 | 94,246 | 94,021 | |||||||||||
Basic earnings (loss) per common share | $ | 0.03 | $ | (0.06 | ) | $ | 0.64 | $ | 0.71 | ||||||
Earnings (loss) per common share—diluted | |||||||||||||||
Net income (loss) attributable to Callaway Golf Company | $ | 3,060 | $ | (5,866 | ) | $ | 60,192 | $ | 66,629 | ||||||
Weighted-average common shares outstanding—basic | 94,450 | 94,081 | 94,246 | 94,021 | |||||||||||
Options and restricted stock | 2,429 | — | 2,097 | 1,666 | |||||||||||
Weighted-average common shares outstanding—diluted | 96,879 | 94,081 | 96,343 | 95,687 | |||||||||||
Dilutive earnings (loss) per common share | $ | 0.03 | $ | (0.06 | ) | $ | 0.62 | $ | 0.70 |
September 30, 2017 | December 31, 2016 | ||||||
Inventories: | |||||||
Raw materials | $ | 49,457 | $ | 46,451 | |||
Work-in-process | 740 | 739 | |||||
Finished goods | 136,388 | 142,210 | |||||
$ | 186,585 | $ | 189,400 |
Useful Life (Years) | September 30, 2017 | December 31, 2016 | |||||||||||||||||||||||||||
Gross | Accumulated Amortization | Net Book Value | Gross | Accumulated Amortization | Net Book Value | ||||||||||||||||||||||||
Non-Amortizing: | |||||||||||||||||||||||||||||
Trade name, trademark and trade dress and other | NA | $ | 216,690 | $ | — | $ | 216,690 | $ | 88,590 | $ | — | $ | 88,590 | ||||||||||||||||
Amortizing: | |||||||||||||||||||||||||||||
Patents | 2-16 | 31,581 | 31,478 | 103 | 31,581 | 31,440 | 141 | ||||||||||||||||||||||
Other | 1-10 | 15,780 | 8,222 | 7,558 | 7,981 | 7,981 | — | ||||||||||||||||||||||
Total intangible assets | $ | 264,051 | $ | 39,700 | $ | 224,351 | $ | 128,152 | $ | 39,421 | $ | 88,731 |
Remainder of 2017 | $ | 267 | |
2018 | 1,066 | ||
2019 | 1,053 | ||
2020 | 966 | ||
2021 | 910 | ||
2022 | 734 | ||
Thereafter | 2,665 | ||
$ | 7,661 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Beginning balance | $ | 5,969 | $ | 6,172 | $ | 5,395 | $ | 5,706 | |||||||
Provision | 4,371 | 1,163 | 8,495 | 4,403 | |||||||||||
Claims paid/costs incurred | (2,790 | ) | (1,820 | ) | (6,340 | ) | (4,594 | ) | |||||||
Ending balance | $ | 7,550 | $ | 5,515 | $ | 7,550 | $ | 5,515 |
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 | 2010 and prior | |
South Korea | 2011 and prior | |
United Kingdom | 2012 and prior |
Remainder of 2017 | $ | 38,286 | |
2018 | 19,702 | ||
2019 | 7,903 | ||
2020 | 5,488 | ||
2021 | 1,333 | ||
2022 | 2 | ||
$ | 72,714 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(In thousands) | |||||||||||||||
Cost of sales | $ | 287 | $ | 198 | $ | 650 | $ | 520 | |||||||
Operating expenses | 3,894 | 2,067 | 8,901 | 6,280 | |||||||||||
Total cost of share-based compensation included in income, before income tax | $ | 4,181 | $ | 2,265 | $ | 9,551 | $ | 6,800 |
Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
September 30, 2017 | |||||||||||||||
Foreign currency forward contracts—asset position | $ | 460 | $ | — | $ | 460 | $ | — | |||||||
Foreign currency forward contracts—liability position | (1,403 | ) | — | (1,403 | ) | — | |||||||||
$ | (943 | ) | $ | — | $ | (943 | ) | $ | — | ||||||
December 31, 2016 | |||||||||||||||
Foreign currency forward contracts—asset position | $ | 3,524 | $ | — | $ | 3,524 | $ | — | |||||||
Foreign currency forward contracts—liability position | (85 | ) | — | (85 | ) | — | |||||||||
$ | 3,439 | $ | — | $ | 3,439 | $ | — |
September 30, 2017 | December 31, 2016 | ||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||
Primary asset-based revolving credit facility(1) | $ | 52,400 | $ | 52,400 | $ | — | $ | — | |||||||
Japan ABL Facilities(1) | $ | 18,218 | $ | 18,218 | $ | 11,966 | $ | 11,966 | |||||||
Standby letters of credit(2) | $ | 857 | $ | 857 | $ | 823 | $ | 823 | |||||||
Money market funds(3) | $ | — | $ | — | $ | 69,081 | $ | 69,081 |
(1) | The carrying value of the amounts outstanding under the Company's primary asset-based revolving credit facility and Japan ABL Facilities approximates the fair value due to the short-term nature of these obligations. The fair value of this debt is categorized within Level 2 of the fair value hierarchy. See Note 3 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. The fair value of this contingent obligation is categorized within Level 2 of the fair value hierarchy. |
(3) | The carrying value of the money market funds approximates fair value as the funds are highly liquid and short-term in nature. The funds seek to maintain a stable net asset value of $1.00 per share, and the market value per share of these funds are available in active markets. As such, they are categorized within Level 1 of the fair value hierarchy. The money market funds accrued dividends, which were reinvested and reflected in the carrying value as of December 31, 2016. There were no money market funds outstanding as of September 30, 2017. |
Asset Derivatives | |||||||||||
September 30, 2017 | December 31, 2016 | ||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Derivatives designated as cash flow hedging instruments: | |||||||||||
Foreign currency forward contracts | Other current assets | $ | 39 | Other current assets | $ | 2,660 | |||||
Derivatives not designated as hedging instruments: | |||||||||||
Foreign currency forward contracts | Other current assets | $ | 421 | Other current assets | $ | 864 |
Liability Derivatives | |||||||||||
September 30, 2017 | December 31, 2016 | ||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Derivatives designated as cash flow hedging instruments: | |||||||||||
Foreign currency forward contracts | Accounts payable and accrued expenses | $ | 195 | Accounts payable and accrued expenses | $ | 28 | |||||
Derivatives not designated as hedging instruments: | |||||||||||
Foreign currency forward contracts | Accounts payable and accrued expenses | $ | 1,208 | Accounts payable and accrued expenses | $ | 57 |
Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Derivatives designated as cash flow hedging instruments | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Foreign currency forward contracts | $ | (371 | ) | $ | 331 | $ | (2,673 | ) | $ | (3,345 | ) |
Gain (Loss) Reclassified from Other Comprehensive Income into Earnings (Effective Portion) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Derivatives designated as cash flow hedging instruments | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Foreign currency forward contracts | $ | (1,067 | ) | $ | (809 | ) | $ | 249 | $ | (1,637 | ) |
Location of Net Loss Recognized in Income on Derivative Instruments | Amount of Net Loss Recognized in Income on Derivative Instruments | |||||||||||||||||
Derivatives not designated as hedging instruments | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||
Foreign currency forward contracts | Other income (expense), net | $ | (1,233 | ) | $ | (50 | ) | $ | (6,469 | ) | $ | (9,908 | ) |
Derivative Instruments | Foreign Currency Translation | Total | ||||||||||
Accumulated other comprehensive income (loss), December 31, 2016 | $ | 1,570 | $ | (20,036 | ) | $ | (18,466 | ) | ||||
Change in derivative instruments | (2,673 | ) | — | (2,673 | ) | |||||||
Net gains reclassified to cost of goods sold | (249 | ) | — | (249 | ) | |||||||
Foreign currency translation adjustments | — | 11,826 | 11,826 | |||||||||
Income tax expense | 521 | — | 521 | |||||||||
Accumulated other comprehensive loss, September 30, 2017, after tax | $ | (831 | ) | $ | (8,210 | ) | $ | (9,041 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016(1) | 2017 | 2016(1) | ||||||||||||
Net sales: | |||||||||||||||
Golf Clubs | $ | 146,113 | $ | 121,228 | $ | 535,995 | $ | 480,740 | |||||||
Golf Balls | 39,071 | 32,640 | 136,062 | 121,052 | |||||||||||
Gear, Accessories and Other | 58,420 | 33,982 | 185,022 | 105,705 | |||||||||||
$ | 243,604 | $ | 187,850 | $ | 857,079 | $ | 707,497 | ||||||||
Income before income taxes: | |||||||||||||||
Golf Clubs | $ | 10,420 | $ | 2,224 | $ | 83,818 | $ | 55,638 | |||||||
Golf Balls | 5,040 | 3,845 | 27,500 | 21,985 | |||||||||||
Gear, Accessories and Other | 6,420 | 595 | 27,916 | 16,753 | |||||||||||
Reconciling items(2) | (17,305 | ) | (11,109 | ) | (48,049 | ) | (22,988 | ) | |||||||
$ | 4,575 | $ | (4,445 | ) | $ | 91,185 | $ | 71,388 | |||||||
Additions to long-lived assets: | |||||||||||||||
Golf Clubs | $ | 1,316 | $ | 4,339 | $ | 7,928 | $ | 8,308 | |||||||
Golf Balls | 2,784 | 1,135 | 7,872 | 2,707 | |||||||||||
Gear, Accessories and Other | 767 | 1,244 | 2,293 | 1,741 | |||||||||||
$ | 4,867 | $ | 6,718 | $ | 18,093 | $ | 12,756 |
(1) | Prior period amounts have been reclassified to conform to the current year presentation as a result of the change in operating segments as of January 1, 2017. |
(2) | Reconciling items represent corporate general and administrative expenses and other income (expense) not included by management in determining segment profitability. The increase in reconciling items for the three and nine months ended September 30, 2017 compared to the same periods in 2016 was primarily due to a $17,662,000 gain recognized in the second quarter of 2016 in connection with the sale of approximately 10.0% of the Company's investment in Topgolf, as well as increases in marketing expense and employee costs. For further information on the Company's investment in Topgolf, see Note 8 "Investments." |
September 30, 2017 | December 31, 2016(1) | ||||||
Total Assets:(2) | |||||||
Golf Clubs | $ | 256,318 | $ | 277,469 | |||
Golf Balls | 47,198 | 42,460 | |||||
Gear, Accessories and Other | 229,416 | 38,270 | |||||
Reconciling items | 403,051 | 443,083 | |||||
$ | 935,983 | $ | 801,282 | ||||
Goodwill: | |||||||
Golf Clubs | $ | 26,770 | $ | 25,593 | |||
Golf Balls | — | — | |||||
Gear, Accessories and Other | 29,321 | — | |||||
$ | 56,091 | $ | 25,593 |
(1) | Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017. |
(2) | Total assets by reportable segment are comprised of net inventory, certain property, plant and equipment, intangible assets and goodwill. The increase in total assets for Gear, Accessories and Other was primarily due to the acquisitions of OGIO in January 2017 and TravisMathew in August 2017. Reconciling items represent unallocated corporate assets not segregated between the three segments including cash and cash equivalents, net accounts receivable, and deferred tax assets. |
• | The Company’s results for the third quarter and first nine months of 2017 include transaction and transition expenses of $2.6 million and $8.8 million, respectively, related to the OGIO and TravisMathew acquisitions completed in January 2017 and August 2017, respectively. |
• | The Company’s results for the first nine months of 2016 include a pre-tax gain of $17.7 million from the sale of approximately 10% of the Company's investment in Topgolf. There was no such sale or gain in 2017. |
• | The Company’s results of operations for the third quarter and first nine months of 2017 include the operating results from the OGIO and TravisMathew businesses, which are incremental to the results in the comparative periods of 2016. In addition, the Company’s results of operations for the first nine months of 2017 include the incremental operating results from the apparel joint venture in Japan, which was established in July 2016. The Company’s results of operations for the first nine months of 2016 only include the joint venture’s operating results beginning in the third quarter. |
• | During the third quarter and first nine months of 2016, the Company did not recognize U.S. income tax expense on its U.S. operations due to the prior valuation allowance on its U.S. deferred tax assets. Most of the valuation allowance was reversed in the fourth quarter of 2016 and therefore in January 2017 the Company once again began recognizing U.S. income tax expense on its U.S. operations. When evaluating the Company’s performance on a non-GAAP basis, the Company applied an estimated tax rate of 38.5% to its 2016 interim period results to make them more comparable to 2017. |
• | Beginning in January 2017, the Company began reporting three operating segments (namely, Golf Clubs, Golf Balls and Gear, Accessories and Other) as opposed to the two operating segments reported in 2016 (namely, Golf Clubs and Golf Balls). For comparison purposes, the 2016 results have been reclassified to reflect the current year operating segment presentation. |
Three Months Ended September 30, | Growth | |||||||||||||
2017 | 2016(1) | Dollars | Percent | |||||||||||
Net sales: | ||||||||||||||
Golf clubs | $ | 146.1 | $ | 121.2 | $ | 24.9 | 20.5 | % | ||||||
Golf balls | 39.1 | 32.7 | 6.4 | 19.6 | % | |||||||||
Gear, accessories and other | 58.4 | 34.0 | 24.4 | 71.8 | % | |||||||||
$ | 243.6 | $ | 187.9 | $ | 55.7 | 29.6 | % |
(1) | Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017. For further discussion, see Note 16 “Segment Information” to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q. |
Three Months Ended September 30, | Growth | |||||||||||||
2017 | 2016 | Dollars | Percent | |||||||||||
Net sales: | ||||||||||||||
United States | $ | 123.8 | $ | 92.9 | $ | 30.9 | 33.3 | % | ||||||
Europe | 32.5 | 26.4 | 6.1 | 23.1 | % | |||||||||
Japan | 53.0 | 41.4 | 11.6 | 28.0 | % | |||||||||
Rest of Asia | 20.4 | 15.9 | 4.5 | 28.3 | % | |||||||||
Other countries | 13.9 | 11.3 | 2.6 | 23.0 | % | |||||||||
$ | 243.6 | $ | 187.9 | $ | 55.7 | 29.6 | % |
Three months ended September 30, 2017 | Three months ended September 30, 2016 | ||||||||||||||||||||||
As Reported | Acquisition Costs(1) | Non-GAAP | As Reported | Non-Cash Tax Adjustment(2) | Non-GAAP | ||||||||||||||||||
Net income (loss) attributable to Callaway Golf Company | $ | 3.1 | $ | (2.2 | ) | $ | 5.3 | $ | (5.9 | ) | $ | (3.0 | ) | $ | (2.9 | ) | |||||||
Diluted earnings (loss) per share | $ | 0.03 | $ | (0.02 | ) | $ | 0.05 | $ | (0.06 | ) | $ | (0.03 | ) | $ | (0.03 | ) | |||||||
Weighted-average shares outstanding | 96.9 | 96.9 | 96.9 | 94.1 | 94.1 | 94.1 |
(1) | Represents transaction and transition costs associated with the acquisition of OGIO in January 2017 and transaction costs associated with the acquisition of TravisMathew in August 2017. The income tax benefit of $1.1 million associated with these costs were based on the Company's effective tax rate for the three months ended September 30, 2017. |
(2) | The Company had a valuation allowance on its U.S. deferred tax assets in the third quarter of 2016, which resulted in no federal U.S. tax expense for the quarter. In the fourth quarter of 2016, the Company reversed a significant portion of the valuation allowance and recognized income taxes on its U.S. operations that were retroactive for all of 2016. For comparability to the third quarter of 2017, the Company applied an estimated statutory tax rate of 38.5% to calculate non-GAAP results for the third quarter of 2016. |
Three Months Ended September 30, | Growth/(Decline) | |||||||||||||
2017 | 2016(1) | Dollars | Percent | |||||||||||
Net sales: | ||||||||||||||
Woods | $ | 65.8 | $ | 39.3 | $ | 26.5 | 67.4 | % | ||||||
Irons | 60.8 | 64.3 | (3.5 | ) | (5.4 | )% | ||||||||
Putters | 19.5 | 17.6 | 1.9 | 10.8 | % | |||||||||
$ | 146.1 | $ | 121.2 | $ | 24.9 | 20.5 | % |
(1) | Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017. For further discussion, see Note 16 “Segment Information” to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q. |
Three Months Ended September 30, | Growth | |||||||||||||
2017 | 2016 | Dollars | Percent | |||||||||||
Net sales: | ||||||||||||||
Golf balls | $ | 39.1 | $ | 32.7 | $ | 6.4 | 19.6 | % |
Three Months Ended September 30, | Growth | |||||||||||||
2017 | 2016(1) | Dollars | Percent | |||||||||||
Net sales: | ||||||||||||||
Gear, accessories and other | $ | 58.4 | $ | 34.0 | $ | 24.4 | 71.8 | % |
(1) | Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017. For further discussion, see Note 16 “Segment Information” to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q. |
Three Months Ended September 30, | Growth/(Decline) | |||||||||||||
2017 | 2016(1) | Dollars | Percent | |||||||||||
Income before income taxes: | ||||||||||||||
Golf clubs | $ | 10.4 | $ | 2.2 | $ | 8.2 | 372.7 | % | ||||||
Golf balls | 5.0 | 3.8 | 1.2 | 31.6 | % | |||||||||
Gear, accessories and other | 6.4 | 0.6 | 5.8 | 966.7 | % | |||||||||
Reconciling items(2) | (17.2 | ) | (11.0 | ) | (6.2 | ) | (56.4 | )% | ||||||
$ | 4.6 | $ | (4.4 | ) | $ | 9.0 | 204.5 | % |
(1) | Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017. For further discussion, see Note 16 “Segment Information” to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q. |
(2) | Reconciling items represent corporate general and administrative expenses and other income (expense) not included by management in determining segment profitability. The increase in reconciling items was primarily due to increases in employee costs, professional fees and legal expenses. |
Nine Months Ended September 30, | Growth | |||||||||||||
2017 | 2016(1) | Dollars | Percent | |||||||||||
Net sales: | ||||||||||||||
Golf clubs | $ | 536.0 | $ | 480.7 | $ | 55.3 | 11.5 | % | ||||||
Golf balls | 136.1 | 121.1 | 15.0 | 12.4 | % | |||||||||
Gear, accessories and other | 185.0 | 105.7 | 79.3 | 75.0 | % | |||||||||
$ | 857.1 | $ | 707.5 | $ | 149.6 | 21.1 | % |
(1) | Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017. For further discussion, see Note 16 “Segment Information” to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q. |
Nine Months Ended September 30, | Growth | |||||||||||||
2017 | 2016 | Dollars | Percent | |||||||||||
Net sales: | ||||||||||||||
United States | $ | 472.1 | $ | 380.2 | $ | 91.9 | 24.2 | % | ||||||
Europe | 118.6 | 101.2 | 17.4 | 17.2 | % | |||||||||
Japan | 147.4 | 121.2 | 26.2 | 21.6 | % | |||||||||
Rest of Asia | 62.9 | 51.8 | 11.1 | 21.4 | % | |||||||||
Other countries | 56.1 | 53.1 | 3.0 | 5.6 | % | |||||||||
$ | 857.1 | $ | 707.5 | $ | 149.6 | 21.1 | % |
Nine months ended September 30, 2017 | Nine months ended September 30, 2016 | ||||||||||||||||||||||||||
As Reported | Acquisition Costs(1) | Non-GAAP | As Reported | Non-Cash Tax Adjustment(2) | Topgolf Gain(3) | Non-GAAP | |||||||||||||||||||||
Net income (loss) attributable to Callaway Golf Company | $ | 60.2 | $ | (6.3 | ) | $ | 66.5 | $ | 66.6 | $ | 16.0 | $ | 17.7 | $ | 32.9 | ||||||||||||
Diluted earnings (loss) per share | $ | 0.62 | $ | (0.07 | ) | $ | 0.69 | $ | 0.70 | $ | 0.18 | $ | 0.18 | $ | 0.34 | ||||||||||||
Weighted-average shares outstanding | 96.3 | 96.3 | 96.3 | 95.7 | 95.7 | 95.7 | 95.7 |
(1) | Represents transaction and transition costs associated with the acquisition of OGIO in January 2017 and transaction costs associated with the acquisition of TravisMathew in August 2017. The income tax benefit of $3.2 million associated with these costs was based on the Company's effective tax rate for the first nine months of 2017. |
(2) | The Company had a valuation allowance on its U.S. deferred tax assets in the first nine months of 2016, which resulted in no federal U.S. tax expense for the nine months ended September 30, 2016. In the fourth quarter of 2016, the Company reversed a significant portion of the valuation allowance and recognized income taxes on its U.S. operations that were retroactive for all of 2016. For comparability to 2017, the Company applied an estimated statutory tax rate of 38.5% to calculate pro-forma results for the nine months ended September 30, 2016. |
(3) | Gain recognized on the sale of approximately 10.0% of the Company's investment in Topgolf in the second quarter of 2016. |
Nine Months Ended September 30, | Growth/(Decline) | |||||||||||||
2017 | 2016(1) | Dollars | Percent | |||||||||||
Net sales: | ||||||||||||||
Woods | $ | 262.7 | $ | 183.1 | $ | 79.6 | 43.5 | % | ||||||
Irons | 202.1 | 224.4 | (22.3 | ) | (9.9 | )% | ||||||||
Putters | 71.2 | 73.2 | (2.0 | ) | (2.7 | )% | ||||||||
$ | 536.0 | $ | 480.7 | $ | 55.3 | 11.5 | % |
(1) | Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017. For further discussion, see Note 16 “Segment Information” to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q. |
Nine Months Ended September 30, | Growth | |||||||||||||
2017 | 2016 | Dollars | Percent | |||||||||||
Net sales: | ||||||||||||||
Golf balls | $ | 136.1 | $ | 121.1 | $ | 15.0 | 12.4 | % |
Nine Months Ended September 30, | Growth | |||||||||||||
2017 | 2016 | Dollars | Percent | |||||||||||
Net sales: | ||||||||||||||
Gear, accessories and other | $ | 185.0 | $ | 105.7 | $ | 79.3 | 75.0 | % |
(1) | Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017. For further discussion, see Note 16 “Segment Information” to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q. |
Nine Months Ended September 30, | Growth/(Decline) | |||||||||||||
2017 | 2016(1) | Dollars | Percent | |||||||||||
Income before income taxes: | ||||||||||||||
Golf clubs | $ | 83.8 | $ | 55.6 | $ | 28.2 | 50.7 | % | ||||||
Golf balls | 27.5 | 22.0 | 5.5 | 25.0 | % | |||||||||
Gear, accessories and other | 27.9 | 16.8 | 11.1 | 66.1 | % | |||||||||
Reconciling items(2) | (48.0 | ) | (23.0 | ) | (25.0 | ) | (108.7 | )% | ||||||
$ | 91.2 | $ | 71.4 | $ | 19.8 | 27.7 | % |
(1) | Prior period amounts have been reclassified to conform to the current year presentation as the result of the change in operating segments as of January 1, 2017. For further discussion, see Note 16 “Segment Information” to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q. |
(2) | Reconciling items represent corporate general and administrative expenses and other income (expense) not included by management in determining segment profitability. The increase in reconciling items 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, in addition to increases in employee costs, professional fees and legal expenses. For further discussion of the Topgolf gain see Note 8 "Investments" to the Notes to Consolidated Condensed Financial Statements included in Part I, Item 1, of this Form 10-Q. |
Payments Due By Period | |||||||||||||||||||
Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | |||||||||||||||
(in millions) | |||||||||||||||||||
Primary Asset-Based Revolving Credit Facility | $ | 52.4 | $ | 52.4 | $ | — | $ | — | $ | — | |||||||||
Japan ABL facilities | 18.2 | 18.2 | — | — | — | ||||||||||||||
Capital leases (1) | 0.3 | 0.2 | 0.1 | — | — | ||||||||||||||
Operating leases(2) | 47.3 | 8.0 | 13.6 | 10.8 | 14.9 | ||||||||||||||
Unconditional purchase obligations(3) | 72.7 | 38.3 | 27.6 | 6.8 | — | ||||||||||||||
Uncertain tax contingencies(4) | 4.5 | 0.6 | 1.3 | 0.5 | 2.1 | ||||||||||||||
Total | $ | 195.4 | $ | 117.7 | $ | 42.6 | $ | 18.1 | $ | 17.0 |
(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. |
(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 September 30, 2017. Amounts exclude uncertain income tax positions that the Company would be able to offset against deferred taxes. For further discussion, see Note 10 “Income Taxes” to the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q. |
Three Months Ended September 30, 2017 | ||||||||||||||||||||
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 | |||||||||||||||||
July 1, 2017-July 31, 2017 | — | $ | — | — | $ | 25,473,193 | ||||||||||||||
August 1, 2017-August 31, 2017 | — | $ | — | — | $ | 25,473,193 | ||||||||||||||
September 1, 2017-September 30, 2017 | 4,995 | $ | 13.76 | 4,995 | $ | 25,404,461 | ||||||||||||||
Total | 4,995 | $ | 13.76 | 4,995 | $ | 25,404,461 |
2.1 | |||
3.1 | Certificate of Incorporation, incorporated herein by this reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, as filed with the Commission on July 1, 1999 (file no. 1-10962). | ||
3.2 | |||
10.1 | |||
10.2 | |||
31.1 | |||
31.2 | |||
32.1 | |||
101.1 | XBRL Instance Document † | ||
101.2 | XBRL Taxonomy Extension Schema Document † | ||
101.3 | XBRL Taxonomy Extension Calculation Linkbase Document † | ||
101.4 | XBRL Taxonomy Extension Definition Linkbase Document † | ||
101.5 | XBRL Taxonomy Extension Label Linkbase Document † | ||
101.6 | XBRL Taxonomy Extension Presentation Linkbase Document † |
CALLAWAY GOLF COMPANY | |
By: | /s/ Jennifer Thomas |
Jennifer Thomas | |
Vice President and Chief Accounting Officer |
2. | Compensation. Sections 4(a) and (b) of the Agreement are amended to read: |
EMPLOYEE | COMPANY | |
Callaway Golf Company, a Delaware corporation | ||
/s/ Brian P. Lynch | By: /s/ Chris Carroll | |
Brian P. Lynch | Chris Carroll | |
Senior Vice President, Global Human Resources | ||
/S/ OLIVER G. BREWER III |
Oliver G. Brewer III President and Chief Executive Officer |
/S/ BRIAN P. LYNCH |
Brian P. Lynch Senior Vice President, Chief Financial Officer, General Counsel and Corporate Secretary |
/S/ OLIVER G. BREWER III |
Oliver G. Brewer III President and Chief Executive Officer |
/S/ BRIAN P. LYNCH |
Brian P. Lynch Senior Vice President, Chief Financial Officer, General Counsel and Corporate Secretary |
Document and Entity Information |
9 Months Ended |
---|---|
Sep. 30, 2017
shares
| |
Document and Entity Information [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Sep. 30, 2017 |
Document Fiscal Year Focus | 2017 |
Document Fiscal Period Focus | Q3 |
Trading Symbol | ELY |
Entity Registrant Name | CALLAWAY GOLF CO |
Entity Central Index Key | 0000837465 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 94,536,369 |
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 3,000,000 | 3,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 240,000,000 | 240,000,000 |
Common stock, shares issued (in shares) | 95,042,557 | 94,214,295 |
Common Stock held in treasury, shares (in shares) | 506,188 | 97,837 |
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Income Statement [Abstract] | ||||
Net sales | $ 243,604 | $ 187,850 | $ 857,079 | $ 707,497 |
Cost of sales | 138,702 | 108,975 | 456,297 | 385,597 |
Gross profit | 104,902 | 78,875 | 400,782 | 321,900 |
Operating expenses: | ||||
Selling expense | 65,754 | 55,869 | 205,618 | 183,543 |
General and administrative expense | 23,957 | 19,851 | 68,976 | 52,484 |
Research and development expense | 9,154 | 8,420 | 26,899 | 24,942 |
Total operating expenses | 98,865 | 84,140 | 301,493 | 260,969 |
Income (loss) from operations | 6,037 | (5,265) | 99,289 | 60,931 |
Interest income | 63 | 56 | 399 | 550 |
Interest expense | (705) | (487) | (2,306) | (1,949) |
Gain on sale of preferred shares in Topgolf | 0 | 0 | 0 | 17,662 |
Other income (expense), net | (820) | 1,251 | (6,197) | (5,806) |
Income (loss) before income taxes | 4,575 | (4,445) | 91,185 | 71,388 |
Income tax provision | 1,486 | 1,294 | 30,742 | 4,632 |
Net income (loss) | 3,089 | (5,739) | 60,443 | 66,756 |
Less: Net income attributable to non-controlling interest | 29 | 127 | 251 | |
Net income (loss) attributable to Callaway Golf Company | $ 3,060 | $ (5,866) | $ 60,192 | $ 66,629 |
Earnings (loss) per common share: | ||||
Basic (usd per share) | $ 0.03 | $ (0.06) | $ 0.64 | $ 0.71 |
Diluted (usd per share) | $ 0.03 | $ (0.06) | $ 0.62 | $ 0.70 |
Weighted-average common shares outstanding: | ||||
Basic (in shares) | 94,450 | 94,081 | 94,246 | 94,021 |
Diluted (in shares) | 96,879 | 94,081 | 96,343 | 95,687 |
Dividends declared per common share (usd per share) | $ 0.01 | $ 0.01 | $ 0.03 | $ 0.03 |
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 3,089 | $ (5,739) | $ 60,443 | $ 66,756 |
Other comprehensive income (loss) | ||||
Change in derivative instruments | 626 | 515 | (2,992) | (1,708) |
Foreign currency translation adjustments | 3,431 | 577 | 12,002 | 4,195 |
Comprehensive income (loss), before income tax on other comprehensive income items | 7,146 | (4,647) | 69,453 | 69,243 |
Income tax benefit (expense) on derivative instruments | (277) | (31) | 521 | 31 |
Comprehensive income (loss) | 6,869 | (4,678) | 69,974 | 69,274 |
Less: Comprehensive income (loss) attributable to non-controlling interest | (14) | (76) | 176 | (76) |
Comprehensive income (loss) attributable to Callaway Golf Company | $ 6,883 | $ (4,602) | $ 69,798 | $ 69,350 |
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) - 9 months ended Sep. 30, 2017 - USD ($) shares in Thousands, $ in Thousands |
Total |
Common Stock |
Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Treasury Stock |
Callaway Golf Company |
Non-Controlling Interests |
---|---|---|---|---|---|---|---|---|
Beginning Balance (in shares) at Dec. 31, 2016 | 94,214 | (98) | ||||||
Beginning Balance at Dec. 31, 2016 | $ 608,600 | $ 942 | $ 330,206 | $ 287,129 | $ (18,466) | $ (905) | $ 598,906 | $ 9,694 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Acquisition of treasury stock (in shares) | (1,527) | |||||||
Acquisition of treasury stock | (16,479) | $ (16,479) | (16,479) | |||||
Exercise of stock options (in shares) | 600 | |||||||
Exercise of stock options | 4,205 | (2,173) | $ 6,378 | 4,205 | ||||
Compensatory awards released from restriction (in shares) | 825 | 519 | ||||||
Compensatory awards released from restriction | 0 | $ 8 | (5,564) | $ 5,556 | ||||
Share-based compensation | 9,583 | 9,583 | 9,583 | |||||
Stock dividends (in shares) | 4 | |||||||
Stock dividends | 0 | 81 | (81) | |||||
Cash dividends | (2,827) | (2,827) | (2,827) | |||||
Equity adjustment from foreign currency translation | 12,002 | 11,826 | 11,826 | 176 | ||||
Change in fair value of derivative instruments | (2,401) | (2,401) | (2,401) | |||||
Distributions to non-controlling interests | (974) | (974) | ||||||
Net income | 60,443 | 60,192 | 60,192 | 251 | ||||
Ending Balance (in shares) at Sep. 30, 2017 | 95,043 | (506) | ||||||
Ending Balance at Sep. 30, 2017 | $ 672,152 | $ 950 | $ 332,133 | $ 344,413 | $ (9,041) | $ (5,450) | $ 663,005 | $ 9,147 |
Basis of Presentation |
9 Months Ended |
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Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | 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, 2016 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 assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates and assumptions. Recent Accounting Standards In August 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." The new standard is designed to refine and expand hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes certain targeted improvements to simplify the application of hedge accounting guidance. The new standard is effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption, including adoption in an interim period, is permitted. If early adoption is elected in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period (i.e., the initial application date). The Company is currently evaluating the impact this ASU will have on its consolidated condensed financial statements and disclosures. In March 2016, the FASB issued ASU No. 2016-09, "Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." This amendment is intended to simplify several aspects of the accounting for share-based payment transactions, including (i) the recognition of excess tax benefits or deficiencies in the operating statement when compensatory stock awards are vested and settled, and the presentation of these tax benefits or deficiencies as an operating cash outflow on the statement of cash flows, (ii) the option to withhold the maximum statutory tax rate on the settlement of compensatory stock without triggering liability accounting, as well as presenting the shares withheld for the settlement of these taxes as a financing outflow on the statement of cash flows, and (iii) the option to elect a change in the accounting policy to account for forfeitures as they occur. This amendment became effective for the Company as of January 1, 2017. The Company adopted this ASU using the modified retrospective transition method with respect to the recognition of excess tax benefits in the consolidated condensed statement of operations. The adoption did not result in a cumulative-effect adjustment to equity as of January 1, 2017. The amendment related to the cash flow presentation of shares acquired to satisfy the Company's minimum tax withholding requirements in connection with the settlement of compensatory stock was applied retrospectively as a financing outflow. The adoption had no impact to any periods presented on the consolidated condensed statement of cash flows as these cash outflows have historically been presented as a financing activity. The Company elected not to change its accounting policy on the recognition of estimated forfeitures. In March 2016, the FASB issued ASU No. 2016-04, "Liabilities—Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products." The amendment clarifies when it is acceptable to recognize the unredeemed portion of prepaid gift cards into income, and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. As of September 30, 2017, the Company had $1,050,000 of deferred revenue related to unredeemed gift cards. The Company does not expect the adoption of this ASU will have a material impact on its consolidated condensed financial statements and disclosures. In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (i) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating the impact this ASU will have on its consolidated condensed financial statements and disclosures. In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments─Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." The amendment requires (i) equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, (ii) public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes and (iii) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables). This amendment eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost. This amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. As of September 30, 2017, the Company had an investment in Topgolf International, Inc. of $50,495,000 that was accounted for at cost in accordance with ASC Topic 325, “Investments—Other” (see Note 8). Based on prior observable market transactions, the Company believes that the fair value of its investment in Topgolf significantly exceeds its cost. However, the Company is currently unable to estimate the fair value of this investment as of September 30, 2017, as it was not practical to do so, and there were no recent identifiable events or changes in circumstances that had a significant effect on fair value. If there are any observable price changes related to this investment or a similar investment of the same issuer in fiscal years beginning after December 15, 2017, the Company would be required to write this investment up or down to its estimated fair value, which could have a significant effect on the Company's financial position and results of operations. In July 2015, the FASB issued ASU No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory." This amendment requires an entity to measure in-scope inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of this amendment did not have a material impact on the Company's consolidated condensed financial statements. In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers: (Topic 606)." This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosures regarding revenue and contracts with customers. The Company is finalizing its analysis of this ASU, and is expecting to reach a conclusion in the fourth quarter of 2017 on the financial impact it will have on its consolidated financial statements and footnote disclosures. In its ongoing analysis of this ASU, the Company determined that the new standard will primarily apply to certain sales promotions and price concessions that the Company offers to its retailers. The Company expects that this ASU will accelerate the timing of when these sales promotions and price concessions are recognized to earlier in the product life cycle which could impact quarter-over-quarter net sales trends. The Company plans to adopt this ASU as of January 1, 2018 using the modified retrospective approach, which will result in a cumulative adjustment to retained earnings at the adoption date, in addition to increased footnote disclosures. |
Business Combinations |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination Disclosure [Text Block] | Note 2. Business Combinations During the first nine months of 2017, the Company completed the acquisitions of OGIO International, Inc. ("OGIO") and TravisMathew, LLC (TravisMathew). The purchase price of each acquisition was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values as of the date of acquisition in accordance with ASC Topic 820, "Fair Value Measurement." The excess between the purchase price and the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed was allocated to goodwill. The Company determined the estimated fair values after review and consideration of relevant information, including discounted cash flows, quoted market prices and estimates made by management. The Company may adjust the preliminary purchase price allocation, as necessary, during the measurement period of up to one year after the relevant acquisition closing date as it obtains more information as to facts and circumstances existing as of the relevant acquisition date. Valuations of acquired intangible assets and inventory are subject to fair value measurements that were based primarily on significant inputs not observable in the market and thus represent Level 3 measurements (see Note 13). Both acquisitions were treated as asset purchases for income tax purposes and, as such, the Company expects to deduct all of the intangible assets, including goodwill. Acquisition of OGIO International, Inc. On January 11, 2017, the Company acquired all of the outstanding shares of capital stock of OGIO, a leading manufacturer of high quality bags, accessories and apparel in the golf and lifestyle categories, in a cash transaction pursuant to the terms of a Share Purchase Agreement, by and among the Company, OGIO, and each of the shareholders and option holders of OGIO. The acquired furniture, fixtures, office equipment, leasehold improvements, computer equipment and warehouse equipment were all valued at their estimated replacement cost, which the Company determined approximated the net book value of the assets on the date of the acquisition. Inventory was valued using the net realizable value approach, which was based on the estimated selling price in the ordinary course of business less reasonable disposal costs. The customer and distributor relationships were valued under the income approach based on the present value of future earnings. The trade name was valued under the royalty savings income approach method, which is equal to the present value of the after-tax royalty savings attributable to owning the trade name as opposed to paying a third party for its use. For this valuation, the Company used a royalty rate of 7.5%, which is reflective of royalty rates paid in market transactions, and a discount rate of 14.0% on the future cash flows generated by the net after-tax savings. Goodwill arising from the acquisition consists largely of the synergies expected from combining the operations of the Company and OGIO. For segment reporting purposes, goodwill is reported in the gear, accessories and other operating segment. At the acquisition date, the total purchase price was valued at approximately $66,032,000. Due to the subsequent measurement of liabilities assumed in the acquisition, the purchase price was reduced to $65,951,000 as of September 30, 2017. In addition, as a result of measurement adjustments, during the three months ended September 30, 2017, goodwill was increased by $342,000. The Company incurred transaction costs of approximately $3,052,000, of which $1,805,000 was recognized in general and administrative expenses during the nine months ended September 30, 2017. The remainder was recognized in 2016. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date based on the purchase price allocation (in thousands):
Acquisition of TravisMathew, LLC On August 17, 2017, the Company acquired TravisMathew, a golf and lifestyle apparel company in an all-cash transaction pursuant to the terms of an Agreement and Plan of Merger, by and among the Company, TravisMathew, OTP LLC, a California limited liability company and wholly-owned subsidiary of the Company (“Merger Sub”), and a representative of the equity holders of TravisMathew. The Company acquired TravisMathew by way of a merger of Merger Sub with and into TravisMathew, with TravisMathew surviving as a wholly-owned subsidiary of the Company. The purchase price remains subject to a working capital adjustment. The acquisition is expected to enhance the Company's strategy of developing growth in areas tangential to the golf equipment business. The acquired furniture, fixtures, office equipment, leasehold improvements, computer equipment and warehouse equipment were all valued at their estimated replacement cost, which the Company determined approximated the net book value of the assets on the date of the acquisition. Inventory was valued using the net realizable value approach, which was based on the estimated selling price in the ordinary course of business less reasonable disposal costs. The licensing agreement was valued under the income approach based on the projected royalty income from the distributors. The customer and distributor relationships were valued under the income approach based on the present value of future earnings. The trade name was valued under the royalty savings income approach method, which is equal to the present value of the after-tax royalty savings attributable to owning the trade name as opposed to paying a third party for its use. For this valuation, the Company used a royalty rate of 8.0%, which is reflective of royalty rates paid in market transactions, and a discount rate of 11.0% on the future cash flows generated by the net after-tax savings. Goodwill arising from the acquisition consists largely of the synergies expected from combining the operations of the Company and TravisMathew. For segment reporting purposes, goodwill is reported in the gear, accessories and other operating segment. At the acquisition date, the total purchase price was valued at approximately $124,597,000. In connection with the acquisition, during the three and nine months ended September 30, 2017, the Company recognized transaction costs of approximately $2,423,000 in general and administrative expenses. The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date based on the purchase price allocation (in thousands):
Supplemental Pro-Forma Information The following table presents supplemental pro-forma information for the three and nine months ended September 30, 2017 and 2016 as if both the OGIO and TravisMathew acquisitions had occurred on January 1, 2016. These amounts have been calculated after applying the Company's accounting policies and are based upon currently available information. For this analysis, the Company assumed that costs associated with the acquisition, including the amortization of intangible assets and the step-up of inventory, as well as the tax effect on those costs, were recognized as of January 1, 2016. Pre-acquisition net sales and net income amounts for both OGIO and TravisMathew were derived from the books and records of OGIO and TravisMathew prepared prior to the respective acquisition and are presented for informational purposes only and do not purport to be indicative of the results of future operations or of the results that would have occurred had the acquisition taken place as of the dates noted below.
For the three and nine months ended September 30, 2017, the Company's consolidated net sales included $19,450,000 and $44,367,000, respectively, attributable to both OGIO and TravisMathew. Due to the integration of OGIO into the Company's operations since the day of acquisition, the net income for OGIO could not be determined and is therefore not presented. The net loss for TravisMathew that was included in the Company's consolidated results of operations for the three and nine months ended September 30, 2017 was nominal. |
Financing Arrangements |
9 Months Ended |
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Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Financing Arrangements | Note 3. Financing Arrangements In addition to cash on hand, as well as cash generated from operations, the Company relies on its primary asset-based revolving credit facility and its Japan asset-based revolving credit facilities to manage seasonal fluctuations in liquidity and to provide additional liquidity when the Company’s operating cash flows are not sufficient to fund the Company’s requirements. As of September 30, 2017, the Company had $70,618,000 in borrowings outstanding under all facilities, $857,000 in outstanding letters of credit, and $82,021,000 in cash and cash equivalents. As of September 30, 2017, the Company's available liquidity, which is comprised of cash on hand and amounts available under both facilities, after letters of credit was $195,105,000. At September 30, 2016, the Company had no borrowings outstanding under either facility, $933,000 in outstanding letters of credit, and $124,628,000 in cash and cash equivalents. As of September 30, 2016, the Company's available liquidity was $212,241,000. Primary Asset-Based Revolving Credit Facility The Company's primary credit facility is a Loan and Security Agreement with Bank of America N.A. and other lenders (as amended, the “ABL Facility”), which provides a senior secured asset-based revolving credit facility of up to $230,000,000, comprised of a $160,000,000 U.S. facility, a $25,000,000 Canadian facility and a $45,000,000 United Kingdom facility, in each case subject to borrowing base availability under the applicable facility. The amounts outstanding under the ABL Facility are secured by certain assets, including cash (to the extent pledged by the Company), inventory and accounts receivable of the Company’s subsidiaries in the United States, Canada and the United Kingdom. As of September 30, 2017, the Company had $52,400,000 borrowings outstanding under the ABL Facility and $857,000 in outstanding letters of credit. Amounts available under the ABL Facility fluctuate with the general seasonality of the business and increase and decrease with changes in the Company’s inventory and accounts receivable balances. Amounts available are highest during the first half of the year when the Company’s inventory and accounts receivable balances are higher and lower during the second half of the year when the Company's inventory levels decrease and its accounts receivable decrease as a result of cash collections and lower sales. Average outstanding borrowings during the nine months ended September 30, 2017 were $35,890,000, and the average amount available under the ABL Facility during the nine months ended September 30, 2017, after outstanding borrowings and letters of credit, was approximately $116,760,000. Amounts borrowed under the ABL Facility may be repaid and borrowed as needed. The entire outstanding principal amount (if any) is due and payable on June 23, 2019. The ABL Facility includes certain restrictions including, among other things, restrictions on the incurrence of additional debt, liens, stock repurchases and other restricted payments, asset sales, investments, mergers, acquisitions and affiliate transactions. In addition, the ABL Facility imposes restrictions on the amount the Company could pay in annual cash dividends, including meeting certain restrictions on the amount of additional indebtedness and requirements to maintain a certain fixed charge coverage ratio under certain circumstances. The "fixed charge coverage ratio" is the ratio of (i) the 12-month trailing EBITDA (as defined in the ABL Facility) adjusted for capital expenditures and taxes paid, to (ii) interest expense and certain distributions paid in the trailing 12-month period adjusted for debt amortization, if any. These restrictions do not materially limit the Company's ability to pay future dividends at the current dividend rate. As of September 30, 2017, the Company was in compliance with all financial covenants of the ABL Facility. Additionally, the Company is subject to compliance with a fixed charge coverage ratio covenant during, and continuing 30 days after, any period in which the Company’s borrowing base availability, as amended, falls below $23,000,000. The Company’s borrowing base availability was above $23,000,000 during the nine months ended September 30, 2017, and the Company was in compliance with the fixed charge coverage ratio as of September 30, 2017. Had the Company not been in compliance with the fixed charge coverage ratio as of September 30, 2017, the Company's maximum amount of additional indebtedness that could have been outstanding on September 30, 2017 would have been reduced by $23,000,000. The interest rate applicable to outstanding loans under the ABL Facility fluctuates depending on the Company’s “availability ratio," which is expressed as a percentage of (i) the average daily availability under the ABL Facility to (ii) the sum of the Canadian, the U.K. and the U.S. borrowing bases, as adjusted. The applicable margin for any month could be reduced by 0.25% if the Company’s availability ratio is greater than or equal to 67% and the Company’s “leverage ratio” (as defined below) is less than 4.0 to 1.0 as of the last day of the month for which financial statements have been delivered, so long as no default or event of default exists. The Company’s “leverage ratio” is the ratio of the amount of debt for borrowed money to the 12-month trailing EBITDA (as defined in the ABL Facility), each determined on a consolidated basis. At September 30, 2017, the Company’s trailing 12 month average interest rate applicable to its outstanding loans under the ABL Facility, not including the fees described below, was 3.18%. The ABL Facility provides for monthly fees of 0.25% of the unused portion of the ABL Facility. The fees incurred in connection with the origination and amendment of the ABL Facility totaled $5,283,000, which are amortized into interest expense over the term of the ABL Facility agreement. Unamortized fees at September 30, 2017 and December 31, 2016 totaled $1,170,000 and $1,297,000, respectively, of which $669,000 and $519,000 were included in other current assets, respectively, and $501,000 and $778,000 were included in other assets, respectively, in the accompanying consolidated condensed balance sheets. In August 2017, the Company amended the ABL Facility to include an additional term loan facility ("Term Loan Facility") for $60,000,000 that is in addition to the other amounts available under the ABL Facility. Loans under the Term Loan Facility ("Term Loans") bear interest at the current rates under the ABL Facility, plus 250 basis points. The Term Loan Facility matures on the earlier of (i) four years from the commencement date of the facility and (ii) the maturity of the ABL Facility, and amortizes over a three year period, beginning in the second year of the facility. The Company must maintain a fixed charge coverage ratio of at least 1.0 to 1.0 and a leverage ratio of 4.0 to 1.0 or less at any time when there is $20,000,000 or more outstanding in Term Loans. The Term Loan Facility is collateralized by the same assets as those under the ABL Facility, and is subject to certain restrictions, including placing liens on certain assets, in addition to limits on certain distributions. As of September 30, 2017, there were no amounts outstanding under this facility. Origination fees associated with this facility were recorded in other current assets and other assets on the accompanying balance sheet as of September 30, 2017. Japan ABL Facilities The Company has a separate asset-based loan and guarantee agreement, as amended, between its subsidiary in Japan and The Bank of Tokyo-Mitsubishi UFG, Ltd and The Development Bank of Japan, which provides a credit facility of up to 2,000,000,000 Yen (or U.S. $17,774,000, using the exchange rate in effect as of September 30, 2017) over a two-year term, subject to borrowing base availability under the facility. The amounts outstanding are secured by certain assets, including eligible inventory. The Company had 1,650,000,000 Yen (or U.S. $14,663,000) in borrowings outstanding under this facility as of September 30, 2017. The facility also includes certain restrictions including covenants related to certain pledged assets and financial performance metrics. As of September 30, 2017, the Company was in compliance with these covenants. This facility is subject to an effective interest rate equal to TIBOR plus 0.25%. At September 30, 2017, the trailing 12-month average interest rate applicable to the Company's outstanding loans under this facility together with fees was 0.28%. During the first quarter of 2017, the Company entered into a second asset-based loan between its subsidiary in Japan and The Bank of Tokyo-Mitsubishi UFG, Ltd, which provides a credit facility of up to 1,000,000,000 Yen (or U.S. $8,887,000) over a 10-month term, subject to borrowing base availability under the facility. The amounts outstanding are secured by certain assets, including eligible accounts receivable. The Company had 400,000,000 Yen (or U.S. $3,555,000) in borrowings outstanding under this facility as of September 30, 2017. The facility also includes certain restrictions including covenants related to certain pledged assets and financial performance metrics. As of September 30, 2017, the Company was in compliance with these covenants. This facility is subject to an effective interest rate equal to TIBOR plus 0.75%. At September 30, 2017, the trailing 12-month average interest rate applicable to the Company's outstanding loans under this facility was 0.78%. Both facilities (the "Japan ABL Facilities") expire in January 2018. The Company anticipates that both facilities will be refinanced at that time. |
Earnings (Loss) per Common Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings (Loss) per Common Share | Note 4. Earnings (Loss) per Common Share Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share takes into account the potential dilution that could occur if securities, or other contracts to issue common stock, were exercised. Dilutive securities are included in the calculation of diluted earnings per common share using the treasury stock method in accordance with Accounting Standards Codification ("ASC") Topic 260, “Earnings per Share.” Dilutive securities include options granted pursuant to the Company’s stock option plans and outstanding restricted stock units and performance share units granted to employees and non-employee directors (see Note 12). Weighted-average common shares outstanding—diluted is the same as weighted-average common shares outstanding—basic in periods when a net loss is reported or in periods when anti-dilution occurs. The following table summarizes the computation of basic and diluted earnings per share (in thousands, except per share data):
For the three months ended September 30, 2017 and 2016, securities outstanding totaling approximately 131,000 shares and 269,000 shares, respectively, comprised of stock options, have been excluded from the calculation of earnings per common share—diluted as their effect would be antidilutive. For the nine months ended September 30, 2017 and 2016, securities outstanding totaling approximately 138,000 shares and 330,000 shares, respectively, comprised of stock options and restricted stock units, have been excluded from the calculation of earnings per common share—diluted as their effect would be antidilutive. |
Inventories |
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Inventories | Note 5. Inventories Inventories are summarized below (in thousands):
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Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | Note 6. Goodwill and Intangible Assets Goodwill and intangible assets, consisting of trade names, trademarks, trade dress, patents and other intangible assets, were acquired in connection with the acquisitions of Odyssey Sports, Inc. in 1997, FrogTrader, Inc. in 2004 (which represents the Company's pre-owned business), OGIO in January 2017, TravisMathew in August 2017 (see Note 2) and certain foreign distributors. Internally developed intangible assets are expensed as incurred. The Company’s goodwill and acquired intangible assets with indefinite lives are not amortized, but are subject to an annual impairment test. The Company performs an impairment analysis on its goodwill and intangible assets at least annually and whenever events or changes in circumstances indicate that the carrying value of such assets may not be fully recoverable. Acquired intangible assets with definite lives are amortized over their estimated useful lives and are tested for impairment only when impairment indicators are present. Goodwill at September 30, 2017 and December 31, 2016 was $56,091,000 and $25,593,000, respectively. During the nine months ended September 30, 2017, the Company recorded additions to goodwill of $5,885,000 and $23,436,000 as a result of the acquisitions of OGIO completed in January 2017 and TravisMathew completed in August 2017, respectively. Goodwill also increased $1,178,000 during the nine months ended September 30, 2017, due to foreign currency fluctuations combined with measurement adjustments identified subsequent to the acquisition date. The following sets forth the intangible assets by major asset class (dollars in thousands):
The increase in intangible assets is related to the acquisition of non-amortizing trademarks, trade names and goodwill in addition to amortizing intangibles in connection with the OGIO and TravisMathew acquisitions. Aggregate amortization expense related to intangible assets was approximately $280,000 and $59,000 for the nine months ended September 30, 2017 and 2016, respectively. Amortization expense related to intangible assets at September 30, 2017 in each of the next five fiscal years and beyond is expected to be incurred as follows (in thousands):
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Joint Venture |
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Sep. 30, 2017 | |
Noncontrolling Interest [Abstract] | |
Joint Venture | Note 7. Joint Venture Effective July 1, 2016, the Company completed a joint venture, Callaway Apparel K.K. with its long-time apparel licensee, TSI Groove & Sports Co, Ltd., ("TSI"), a premier apparel manufacturer in Japan. The joint venture designs, manufactures and distributes Callaway-branded apparel, footwear and headwear in Japan. The Company contributed $10,556,000, primarily in cash, for a 52% ownership of the joint venture, and TSI contributed $9,744,000, primarily in inventory, for the remaining 48%. The Company has a majority voting percentage on matters pertaining to the business operations and significant management decisions of the joint venture, and as such, the Company consolidates the financial results of the joint venture with the financial results of the Company. The joint venture is consolidated one month in arrears. As a result of the consolidation, during the three and nine months ended September 30, 2017, the Company recorded net income attributable to the non-controlling interest of $29,000 and $251,000, respectively, in its consolidated condensed statement of operations, and $127,000 during both the three and nine months ended September 30, 2016. During the nine months ended September 30, 2017, the joint venture paid a dividend of $974,000 to TSI, which was recorded as a reduction in non-controlling interests in the consolidated condensed financial statements as of September 30, 2017. Total non-controlling interests on the Company's consolidated condensed financial statements was $9,147,000 and $9,694,000 at September 30, 2017 and December 31, 2016, respectively. |
Investments |
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Sep. 30, 2017 | |
Investments, All Other Investments [Abstract] | |
Investments | Note 8. Investments Investment in Topgolf International, Inc. The Company owns a minority interest in Topgolf International, Inc., doing business as the Topgolf Entertainment Group (“Topgolf”), the owner and operator of Topgolf entertainment centers, which ownership consists of common stock and various classes of preferred stock. In connection with this investment, the Company has a preferred partner agreement with Topgolf in which the Company has preferred signage rights, rights as the preferred supplier of golf products used or offered for use at Topgolf facilities at prices no less than those paid by the Company’s customers, preferred retail positioning in Topgolf retail stores, access to consumer information obtained by Topgolf, and other rights incidental to those listed above. The Company invested an additional $1,499,000 in preferred shares of Topgolf during the three and nine months ended September 30, 2017. During the nine months ended September 30, 2016, the Company invested an additional $1,260,000 in preferred shares of Topgolf. In addition, in December 2015, the Company and Topgolf entered into a shareholder loan agreement, which resulted in a note receivable from Topgolf for $3,200,000. The loan was subject to an annual interest rate of 10.0% and was due and payable on March 30, 2016. The loan was paid in full in February 2016. In February 2016, Topgolf announced that Providence Equity Partners L.L.C. (“Providence Equity”) made a significant minority preferred stock investment in Topgolf (the “Providence Equity Investment”). As required by the terms of the Providence Equity Investment, Topgolf used a portion of the proceeds it received to repurchase shares from its existing shareholders, other than Providence Equity (the “Topgolf Repurchase Program”). In April 2016, the Company sold approximately 10.0% or $5,767,000 (on a cost basis) of its preferred shares in Topgolf under the Topgolf Repurchase Program for $23,429,000, and recognized a gain of approximately $17,662,000 in other income (expense) during the second quarter of 2016. As of September 30, 2017 and December 31, 2016, the Company's total investment in Topgolf was $50,495,000 and $48,997,000, respectively. The Company's ownership percentage at September 30, 2017 was approximately in the range of 14.0% to 15.0%. As of September 30, 2017, there were no impairment indicators present with respect to this investment. Based on prior observable market transactions, the Company believes that the fair value of its investment in Topgolf significantly exceeds its cost. However, the Company is currently unable to estimate the fair value of this investment as of September 30, 2017, as it was not practicable to do so and there were no recent identified events or changes in circumstances that had a significant effect on the fair value. In fiscal years beginning after December 15, 2017, in accordance with Subtopic 825-10 issued in January 2016, the Company would be required to write this investment up or down to its estimated fair value if there are observable price changes, which could have a significant effect on the Company's financial position and results of operations. For further discussion, see “Recent Accounting Standards” in Note 1. The Company’s total ownership interest in Topgolf, including the Company's voting rights in the preferred shares of Topgolf, remains at less than 20.0% of the outstanding equity securities of Topgolf. As of September 30, 2017, the Company did not have the ability to significantly influence the operating and financing activities and policies of Topgolf, and accordingly, the Company’s investment in Topgolf is accounted for at cost in accordance with ASC Topic 325, “Investments—Other.” |
Product Warranty |
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Guarantees [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Product Warranty | Note 9. Product Warranty The Company has a stated two-year warranty policy for its golf clubs. The Company’s policy is to accrue the estimated cost of satisfying future warranty claims at the time the sale is recorded. In estimating its future warranty obligations, the Company considers various relevant factors, including the Company’s stated warranty policies and practices, the historical frequency of claims, and the cost to replace or repair its products under warranty. The increase in warranty expense for the three and nine months ended September 30, 2017, compared to the same periods in the prior year, was primarily due to additional claims related to certain 2015 putter models. The Company believes it has resolved the quality issues related to these putters. The following table provides a reconciliation of the activity related to the Company’s reserve for accrued warranty expense (in thousands):
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Income Taxes |
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Sep. 30, 2017 | ||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||
Income Taxes | Note 10. Income Taxes The Company calculates its interim income tax provision in accordance with ASC 270, “Interim Reporting,” and ASC 740 “Accounting for Income Taxes” (together, “ASC 740”). At the end of each interim period, the Company estimates its annual effective tax rate and applies that rate to its ordinary quarterly earnings to calculate the tax related to ordinary income. The tax effects for other items that are excluded from ordinary income are discretely calculated and recognized in the period in which they occur. The realization of deferred tax assets, including loss and credit carryforwards, is subject to the Company generating sufficient taxable income during the periods in which the deferred tax assets become realizable. Due to the Company’s improved profitability in 2015 and 2016, combined with future projections of profitability, the Company determined that the majority of its U.S. deferred tax assets were more likely than not to be realized and reversed a significant portion of its valuation allowance against those deferred tax assets as of December 31, 2016. The remaining valuation allowance on the Company’s U.S. deferred tax assets as of September 30, 2017 primarily relates to state net operating loss carryforwards and credits that the Company estimates it may not be able to utilize in future periods. With respect to non-U.S. entities, there continues to be sufficient positive evidence to conclude that realization of its deferred tax assets is more likely than not under applicable accounting rules, and therefore no significant valuation allowances have been established. The income tax provision for the three months ended September 30, 2017 and 2016 was $1,486,000 and $1,294,000, respectively. The increase was primarily due to income tax expense on the Company’s foreign operations during the third quarter of 2017. The income tax provision for the nine months ended September 30, 2017 and 2016 was $30,742,000 and $4,632,000, respectively. The increase was primarily due to the recognition of income tax expense on the Company’s U.S. operations during the third quarter and first nine months of 2017 as a result of the reversal of a significant portion of the valuation allowance on the Company's deferred tax assets in the United States in the fourth quarter of 2016. At September 30, 2017, the gross liability for income taxes associated with uncertain tax positions was $9,295,000. Of this amount, $1,624,000 would benefit the Company’s consolidated condensed financial statements and effective income tax rate if favorably settled. The unrecognized tax benefit liabilities are expected to decrease by approximately $426,000 during the next 12 months. The gross liability for uncertain tax positions increased by $550,000 and $1,039,000 for the three and nine months ended September 30, 2017, respectively. The increase was primarily due to increases for tax positions expected to be taken in the current tax year. The Company recognizes interest and penalties related to income tax matters in income tax expense. For the three months ended September 30, 2017 and 2016, the Company's provision for income taxes includes expense of $132,000 and $54,000, respectively, related to the recognition of interest and penalties. For the nine months ended September 30, 2017 and 2016, the Company's provision for income taxes includes expense of $241,000 and $83,000, respectively. As of September 30, 2017 and December 31, 2016, the gross amount of accrued interest and penalties included in income taxes payable in the accompanying consolidated condensed balance sheets was $1,558,000 and $1,317,000, respectively. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is generally no longer subject to income tax examinations by tax authorities in the following major jurisdictions:
Pursuant to Section 382 of the Internal Revenue Code, use of the Company's net operating losses and credit carry-forwards may be limited significantly if the Company were to experience a cumulative change in ownership of the Company's stock by “5-percent shareholders” that exceeds 50% over a rolling three-year period. The Company does not believe there has been a cumulative change in ownership in excess of 50% during any rolling three-year period, and the Company continues to monitor changes in its ownership. If such a cumulative change did occur in any three-year period and the Company were limited in the amount of losses it could use to offset taxable income, the Company's results of operations and cash flows could be adversely impacted. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Note 11. Commitments & Contingencies Legal Matters The Company is subject to routine legal claims, proceedings and investigations incident to its business activities, including claims, proceedings, and investigations relating to commercial disputes and employment matters. The Company also receives from time to time information claiming that products sold by the Company infringe or may infringe patent, trademark or other intellectual property rights of third parties. One or more such claims of potential infringement could lead to litigation, the need to obtain licenses, the need to alter a product to avoid infringement, a settlement or judgment or some other action or material loss by the Company, which also could adversely affect the Company’s overall ability to protect its product designs and ultimately limit its future success in the marketplace. In addition, the Company is occasionally subject to non-routine claims, proceedings or investigations. The Company regularly assesses such matters to determine the degree of probability that the Company will incur a material loss as a result of such matters as well as the range of possible loss. An estimated loss contingency is accrued in the Company’s financial statements if it is probable the Company will incur a loss and the amount of the loss can be reasonably estimated. The Company reviews all claims, proceedings and investigations at least quarterly and establishes or adjusts any accruals for such matters to reflect the impact of negotiations, settlements, advice of legal counsel and other information and events pertaining to a particular matter. All legal costs associated with such matters are expensed as incurred. Historically, the claims, proceedings and investigations brought against the Company, individually and in the aggregate, have not had a material adverse effect on the consolidated results of operations, cash flows or financial position of the Company. The Company believes that it has valid legal defenses to the matters currently pending against the Company. These matters are inherently unpredictable and the resolutions of these matters are subject to many uncertainties and the outcomes are not predictable with assurance. Consequently, management is unable to estimate the ultimate aggregate amount of monetary loss, amounts covered by insurance or the financial impact that will result from such matters. In addition, the Company cannot assure that it will be able to successfully defend itself in those matters or that any amounts accrued are sufficient. The Company does not believe that the matters currently pending against the Company will have a material adverse effect on the Company’s consolidated business, financial condition, cash flows or results of operations. Unconditional Purchase Obligations During the normal course of its business, the Company enters into agreements to purchase goods and services, including purchase commitments for production materials, as well as 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. As of September 30, 2017, the Company has entered into many of these contractual agreements with terms ranging from one to six years. The minimum obligation that the Company is required to pay under these agreements is $72,714,000 over the next six years. Future minimum commitments as of September 30, 2017, are as follows (in thousands):
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 total. Other Contingent Contractual Obligations During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These include (i) intellectual property indemnities to the Company’s customers and licensees in connection with the use, sale and/or license of Company product or trademarks, (ii) indemnities to various lessors in connection with facility leases for certain claims arising from such facilities or leases, (iii) indemnities to vendors and service providers pertaining to the goods and services provided to the Company or based on the negligence or willful misconduct of the Company and (iv) indemnities involving the accuracy of representations and warranties in certain contracts. In addition, the Company has consulting agreements that provide for payment of nominal fees upon the issuance of patents and/or the commercialization of research results. The Company has also issued guarantees in the form of standby letters of credit of $857,000 as of September 30, 2017. The duration of these indemnities, commitments and guarantees varies, and in certain cases, may be indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation on the maximum amount of future payments the Company could be obligated to make. Historically, costs incurred to settle claims related to indemnities have not been material to the Company’s financial position, results of operations or cash flows. In addition, the Company believes the likelihood is remote that payments under the commitments and guarantees described above will have a material effect on the Company’s consolidated condensed financial statements. The fair value of indemnities, commitments and guarantees that the Company issued during the nine months ended September 30, 2017 was not material to the Company’s financial position, results of operations or cash flows. Employment Contracts The Company has made contractual commitments to each of its officers and certain other employees providing for severance payments, including salary continuation, upon the termination of employment by the Company without substantial cause or by the officer for good reason or non-renewal. In addition, in order to assure that the officers would continue to provide independent leadership consistent with the Company’s best interest, the contracts also generally provide for certain protections in the event of a change in control of the Company. These protections include the payment of certain severance benefits, such as monetary payments and health benefits, upon the termination of employment following a change in control. |
Share-Based Employee Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Employee Compensation | Note 12. Share-Based Employee Compensation As of September 30, 2017, the Company had two shareholder approved stock plans under which shares were available for equity-based awards: the Callaway Golf Company Amended and Restated 2004 Incentive Plan (the "2004 Incentive Plan") and the 2013 Non-Employee Directors Stock Incentive Plan (the "2013 Directors Plan"). From time to time, the Company grants stock options, restricted stock units, performance share units, phantom stock units, stock appreciation rights and other awards under these plans. The table below summarizes the amounts recognized in the financial statements for the three and nine months ended September 30, 2017 and 2016 for share-based compensation, including expense for stock options, restricted stock units, performance share units and cash settled stock appreciation rights. The increase in stock compensation expense was primarily due performance share units, which were adjusted to reflect the Company's anticipated performance level for these awards.
Stock Options Stock options granted under the 2004 Incentive Plan are valued using the Black-Scholes option-pricing model on the date of grant. The model uses various assumptions, including a risk-free interest rate, the estimated term of the options and the estimated stock price volatility and dividend yield. Compensation expense for stock options is recognized over the vesting period and is reduced by an estimate for forfeitures, which is based on the Company’s historical forfeitures of unvested options and awards. There were no stock options granted during the first nine months of 2017 or 2016. Total compensation expense recognized for stock options during the three months ended September 30, 2017 and 2016 was $9,000 and $8,000, respectively. Total compensation expense recognized for stock options during the nine months ended September 30, 2017 and 2016 was $25,000 and $137,000, respectively. At September 30, 2017, the total amount of unamortized expense related to stock options was $23,000, which will be recognized over a weighted-average period of 0.7 years. Restricted Stock Units Restricted stock units awarded under the 2004 Incentive Plan and the 2013 Directors Plan are valued at the Company’s closing stock price on the date of grant. Restricted stock units generally vest over a one- to three-year period. Compensation expense for restricted stock units is recognized on a straight-line basis over the vesting period and is reduced by an estimate for forfeitures. During the three months ended September 30, 2017 and 2016, the Company granted 155,000 and 126,000 shares underlying restricted stock units, respectively, at a weighted average grant-date fair value of $12.93 and $11.49, respectively. During the nine months ended September 30, 2017 and 2016, the Company granted 680,000 and 665,000 shares underlying restricted stock units, respectively, at a weighted average grant-date fair value of $10.94 and $9.20, respectively. Total compensation expense, net of estimated forfeitures, recognized for restricted stock units during the three months ended September 30, 2017 and 2016 was $1,430,000 and $1,055,000, respectively, and $4,090,000 and $3,157,000, for the nine months ended September 30, 2017 and 2016, respectively. At September 30, 2017, the Company had $10,067,000 of total unamortized compensation expense related to non-vested restricted stock units. That cost is expected to be recognized over a weighted-average period of 2.6 years. Performance Share Units Performance share units granted under the 2004 Incentive Plan are stock-based awards in which the number of shares ultimately received depends on the Company's performance against specified metrics over a one- to three-year performance period from the date of grant. These performance metrics are established by the Company at the beginning of the performance period. At the end of the performance period, the number of shares of stock that could be issued is fixed based upon the degree of achievement of the performance goals. The number of shares that could be issued can range from 0% to 200% of the participant's target award. Performance share units are initially valued at the Company's closing stock price on the date of grant. Stock compensation expense, net of estimated forfeitures, is recognized on a straight-line basis over the vesting period. The expense recognized over the vesting period is adjusted up or down based on the anticipated performance level during the performance period. If the performance metrics are not probable of achievement during the performance period, compensation expense would be reversed. The awards are forfeited if the threshold performance metrics are not achieved as of the end of the performance period. The performance share units cliff-vest in full three years from the date of grant. The Company granted 462,000 and 420,000 shares underlying performance share units during the nine months ended September 30, 2017 and 2016, respectively, at a weighted average grant-date fair value of $10.68 and $8.61 per share, respectively. During the three months ended September 30, 2017, the Company granted 92,450 shares underlying performance share units at a weighted average grant-date fair value of $12.98. There were no shares underlying performance share units granted during the three months ended September 30, 2016. The awards granted in 2017 and 2016 are subject to a three-year performance period provided that (i) if certain first year performance goals are achieved, the participant could earn up to 50% of the three-year target award shares, subject to continued service through the vesting date, and (ii) if certain cumulative first- and second-year performance goals are achieved, the participant could earn up to an aggregate of 80% of the three-year target award shares (which includes any shares earned during the first year), subject to continued service through the vesting date. Based on the Company’s performance in 2016, participants earned a minimum of 50% of the target award shares granted in 2016, subject to continued service through the vesting date. During the three months ended September 30, 2017 and 2016, the Company recognized total compensation expense, net of estimated forfeitures, for performance share units of $2,742,000 and $1,073,000, respectively, and $5,468,000 and $3,170,000 for the nine months ended September 30, 2017 and 2016, respectively. At September 30, 2017, unamortized compensation expense related to these awards was $10,750,000, which is expected to be recognized over a weighted-average period of 1.4 years. Stock Appreciation Rights Cash settled stock appreciation rights ("SARs") granted under the 2004 Incentive Plan are valued using the Black-Scholes option-pricing model on the date of grant. SARs are subsequently remeasured at each interim reporting period based on a revised Black-Scholes value until they are exercised. SARs generally vest over a three-year period. There were no outstanding SARs as of September 30, 2017. There were no SARs granted during the first nine months of 2017 or 2016, and there were no outstanding SARs as of September 30, 2017. The Company recognized $129,000 of compensation expense related to previously granted SARs during the three months ended September 30, 2016. There were no outstanding SARs during the three months ended September 30, 2017. The Company reversed $32,000 and recognized $336,000 of compensation expense related to previously granted SARs during the nine months ended September 30, 2017 and 2016, respectively. Accrued compensation expense for these awards was $224,000 at December 31, 2016, which was recorded in accrued employee compensation and benefits in the accompanying consolidated condensed balance sheet. There were no outstanding amounts accrued as of September 30, 2017. |
Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Note 13. Fair Value of Financial Instruments Certain of the Company’s financial assets and liabilities are measured at fair value on a recurring and nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or the price paid to transfer a liability (the exit price) in the principal and most advantageous market for the asset or liability in an orderly transaction between market participants. Assets and liabilities carried at fair value are classified using the following three-tier hierarchy: Level 1: Quoted market prices in active markets for identical assets or liabilities; Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and Level 3: Fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. The following table summarizes the valuation of the Company’s foreign currency forward contracts (see Note 14) that are measured at fair value on a recurring basis by the above pricing levels at September 30, 2017 and December 31, 2016 (in thousands):
The fair value of the Company’s foreign currency forward contracts is based on observable inputs that are corroborated by market data. Observable inputs include broker quotes, daily market foreign currency rates and forward pricing curves. Remeasurement gains and losses on foreign currency forward contracts designated as cash flow hedges are recorded in other comprehensive income, and in other income (expense) for non-designated foreign currency forward contracts (see Note 14). Disclosures about the Fair Value of Financial Instruments The carrying values of cash and cash equivalents at September 30, 2017 and December 31, 2016 are categorized within Level 1 of the fair value hierarchy due to the short-term nature of these balances. The table below summarizes information about fair value relating to the Company’s financial assets and liabilities that are recognized in the accompanying consolidated balance sheets as of September 30, 2017 and December 31, 2016, as well as the fair value of contingent contracts that represent financial instruments (in thousands).
Nonrecurring Fair Value Measurements The Company measures certain assets at fair value on a nonrecurring basis at least annually or when certain indicators are present. These assets include long-lived assets, goodwill and non-amortizing intangible assets that are written down to fair value when they are held for sale or determined to be impaired. During each of the nine months ended September 30, 2017 and 2016, there were no impairment indicators related to the Company's assets that are measured at fair value on a nonrecurring basis. Assets purchased in connection with the acquisitions of OGIO and TravisMathew were valued at their net realizable value on the date of purchase (see Note 2). |
Derivatives and Hedging |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives and Hedging | Note 14. Derivatives and Hedging In the normal course of business, the Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to transactions of its international subsidiaries. As part of its strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates, the Company uses designated cash flow hedges and non-designated hedges in the form of foreign currency forward contracts to mitigate the impact of foreign currency translation on transactions that are denominated primarily in Japanese Yen, British Pounds, Euros, Canadian Dollars, Australian Dollars and Korean Won. The Company accounts for its foreign currency forward contracts in accordance with ASC Topic 815, "Derivatives and Hedging ("ASC Topic 815"). ASC Topic 815 requires the recognition of all derivative instruments as either assets or liabilities on the balance sheet, the measurement of those instruments at fair value and the recognition of changes in the fair value of derivatives in earnings in the period of change, unless the derivative qualifies as a designated cash flow hedge that offsets certain exposures. Certain criteria must be satisfied in order for derivative financial instruments to be classified and accounted for as a cash flow hedge. Gains and losses from the remeasurement of qualifying cash flow hedges are recorded as a component of other comprehensive income and released into earnings as a component of cost of goods sold or net sales during the period in which the hedged transaction takes place. Gains and losses on the ineffective portion of hedges (hedges that do not meet accounting requirements due to ineffectiveness) and derivatives that are not elected for hedge accounting treatment are immediately recorded in earnings as a component of other income (expense). Foreign currency forward contracts are used only to meet the Company’s objectives of minimizing variability in the Company’s operating results arising from foreign exchange rate movements. The Company does not enter into foreign currency forward contracts for speculative purposes. The Company utilizes counterparties for its derivative instruments that it believes are credit-worthy at the time the transactions are entered into and the Company closely monitors the credit ratings of these counterparties. The following table summarizes the fair value of the Company's foreign currency forward contracts as well as the location of the asset and/or liability on the consolidated condensed balance sheets at September 30, 2017 and December 31, 2016 (in thousands):
The Company's foreign currency forward contracts are subject to a master netting agreement with each respective counterparty bank and are therefore net settled at their maturity date. Although the Company has the legal right of offset under the master netting agreements, the Company has elected not to present these contracts on a net settlement amount basis, and therefore present these contracts on a gross basis on the accompanying consolidated condensed balance sheets at September 30, 2017 and December 31, 2016. Cash Flow Hedging Instruments The Company uses foreign currency forward contracts designated as qualifying cash flow hedging instruments to help mitigate the Company's foreign currency exposure on intercompany sales of inventory to its foreign subsidiaries. These contracts generally mature within 12 to 15 months from their inception. At September 30, 2017 and December 31, 2016, the notional amounts of the Company's foreign currency forward contracts designated as cash flow hedge instruments were approximately $4,647,000 and $27,325,000, respectively. The reporting of gains and losses on these cash flow hedging instruments depends on whether the gains or losses are effective at offsetting changes in the cash flows of the underlying hedged items. The Company uses the critical terms method to measure the effectiveness of the foreign currency forward contracts and evaluates the effectiveness on a quarterly basis. The effective portion of the gains and losses on the hedging instruments are recorded in other comprehensive income until recognized in earnings during the period that the hedged transactions take place. Any ineffective portion of the gains and losses from the hedging instruments is recognized in earnings immediately. The Company would discontinue hedge accounting prospectively (i) if it is determined that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item, (ii) when the derivative expires or is sold, terminated, or exercised, (iii) if it becomes probable that the forecasted transaction being hedged by the derivative will not occur, (iv) if a hedged firm commitment no longer meets the definition of a firm commitment, or (v) if it is determined that designation of the derivative as a hedge instrument is no longer appropriate. The Company estimates the fair value of its foreign currency forward contracts based on pricing models using current market rates. These contracts are classified under Level 2 of the fair value hierarchy (see Note 13). As of September 30, 2017, the Company recorded a net loss of $2,673,000 in other comprehensive income (loss) related to its hedging activities. Of this amount, net losses of $1,067,000 and net gains of $249,000 for the three and nine months ended September 30, 2017, respectively, were relieved from other comprehensive income and recognized in cost of goods sold for the underlying intercompany sales that were recognized. There were no ineffective hedge gains or losses recognized during the nine months ended September 30, 2017. Gains on forward points of $39,000 and $286,000 were expensed as incurred for the three and nine months ended September 30, 2017, respectively. Based on the current valuation, the Company expects to reclassify net losses of $450,000 from accumulated other comprehensive income (loss) into net earnings during the next 12 months. The Company recognized net losses of $879,000 and $758,000 in cost of goods sold and net sales, respectively, for the nine months ended September 30, 2016. The following tables summarize the net effect of all cash flow hedges on the consolidated condensed financial statements for the three and nine months ended September 30, 2017 and 2016 (in thousands):
Foreign Currency Forward Contracts Not Designated as Hedging Instruments The Company uses foreign currency forward contracts that are not designated as qualifying cash flow hedging instruments to mitigate certain balance sheet exposures (payables and receivables denominated in foreign currencies), as well as gains and losses resulting from the translation of the operating results of the Company’s international subsidiaries into U.S. dollars for financial reporting purposes. These contracts generally mature within 12 months from their inception. At September 30, 2017 and December 31, 2016, the notional amounts of the Company’s foreign currency forward contracts used to mitigate the exposures discussed above were approximately $43,428,000 and $14,821,000, respectively. The increase in foreign currency forward contracts reflects the general timing of when the Company enters into these contracts. The Company estimates the fair values of foreign currency forward contracts based on pricing models using current market rates, and records all derivatives on the balance sheet at fair value with changes in fair value recorded in the statement of operations. The foreign currency contracts are classified under Level 2 of the fair value hierarchy (see Note 13). The following table summarizes the location of net gains and losses in the consolidated condensed statements of operations that were recognized during the three and nine months ended September 30, 2017 and 2016, respectively (in thousands):
In addition, for the three months ended September 30, 2017 and 2016, the Company recognized net foreign currency gains related to transactions with its foreign subsidiaries of $423,000 and $1,244,000, respectively. In addition, for the nine months ended September 30, 2017 and 2016, the Company recognized net foreign currency gains related to transactions with its foreign subsidiaries of $1,122,000 and $3,909,000, respectively. |
Accumulated Other Comprehensive Income (Loss) Accumulated Other Comprehensive Income (Loss) |
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Accumulated Other Comprehensive Income (Loss) | Note 15. Accumulated Other Comprehensive Income (Loss) The following table details the amounts reclassified from accumulated other comprehensive loss to cost of goods sold, as well as changes in foreign currency translation for the nine months ended September 30, 2017. Amounts are in thousands.
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Segment Information |
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Segment Information | As a result of the Company's apparel joint venture in Japan established in July 2016, as well as the Company's acquisition of OGIO in January 2017, the Company reassessed its operating segments during the first quarter of 2017 consistent with the way management reviews its business operations on an ongoing basis. With the addition of the apparel joint venture and the OGIO acquisition, the Company anticipates generating significant growth within its accessories and other product category that was previously included within the Company's golf clubs segment. As a result, and based on the Company's assessment, as of January 1, 2017 the Company began including sales generated from golf apparel and footwear, golf bags, golf gloves, travel gear, headwear and other golf-related accessories, OGIO branded gear and accessories, TravisMathew branded apparel, retail apparel sales from the Company's joint venture in Japan, in addition to royalties from licensing of the Company’s trademarks and service marks for various soft goods in the gear, accessories and other operating segment. The golf clubs segment now consists of Callaway Golf woods, hybrids, irons and wedges, Odyssey putters, including Toulon Design putters by Odyssey, packaged sets and sales of pre-owned golf clubs. Prior period amounts have been reclassified to reflect these changes. The golf balls segment continues to consist of Callaway Golf and Strata golf balls that are designed, manufactured and sold by the Company. The Company's operating segments are organized on the basis of products. There are no significant intersegment transactions. The table below contains information utilized by management to evaluate its operating segments for the interim periods presented (in thousands).
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Accounting Policies [Abstract] | |
Recent Accounting Standards | Recent Accounting Standards In August 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." The new standard is designed to refine and expand hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes certain targeted improvements to simplify the application of hedge accounting guidance. The new standard is effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption, including adoption in an interim period, is permitted. If early adoption is elected in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period (i.e., the initial application date). The Company is currently evaluating the impact this ASU will have on its consolidated condensed financial statements and disclosures. In March 2016, the FASB issued ASU No. 2016-09, "Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." This amendment is intended to simplify several aspects of the accounting for share-based payment transactions, including (i) the recognition of excess tax benefits or deficiencies in the operating statement when compensatory stock awards are vested and settled, and the presentation of these tax benefits or deficiencies as an operating cash outflow on the statement of cash flows, (ii) the option to withhold the maximum statutory tax rate on the settlement of compensatory stock without triggering liability accounting, as well as presenting the shares withheld for the settlement of these taxes as a financing outflow on the statement of cash flows, and (iii) the option to elect a change in the accounting policy to account for forfeitures as they occur. This amendment became effective for the Company as of January 1, 2017. The Company adopted this ASU using the modified retrospective transition method with respect to the recognition of excess tax benefits in the consolidated condensed statement of operations. The adoption did not result in a cumulative-effect adjustment to equity as of January 1, 2017. The amendment related to the cash flow presentation of shares acquired to satisfy the Company's minimum tax withholding requirements in connection with the settlement of compensatory stock was applied retrospectively as a financing outflow. The adoption had no impact to any periods presented on the consolidated condensed statement of cash flows as these cash outflows have historically been presented as a financing activity. The Company elected not to change its accounting policy on the recognition of estimated forfeitures. In March 2016, the FASB issued ASU No. 2016-04, "Liabilities—Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products." The amendment clarifies when it is acceptable to recognize the unredeemed portion of prepaid gift cards into income, and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. As of September 30, 2017, the Company had $1,050,000 of deferred revenue related to unredeemed gift cards. The Company does not expect the adoption of this ASU will have a material impact on its consolidated condensed financial statements and disclosures. In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (i) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating the impact this ASU will have on its consolidated condensed financial statements and disclosures. In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments─Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." The amendment requires (i) equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, (ii) public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes and (iii) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables). This amendment eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost. This amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. As of September 30, 2017, the Company had an investment in Topgolf International, Inc. of $50,495,000 that was accounted for at cost in accordance with ASC Topic 325, “Investments—Other” (see Note 8). Based on prior observable market transactions, the Company believes that the fair value of its investment in Topgolf significantly exceeds its cost. However, the Company is currently unable to estimate the fair value of this investment as of September 30, 2017, as it was not practical to do so, and there were no recent identifiable events or changes in circumstances that had a significant effect on fair value. If there are any observable price changes related to this investment or a similar investment of the same issuer in fiscal years beginning after December 15, 2017, the Company would be required to write this investment up or down to its estimated fair value, which could have a significant effect on the Company's financial position and results of operations. In July 2015, the FASB issued ASU No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory." This amendment requires an entity to measure in-scope inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of this amendment did not have a material impact on the Company's consolidated condensed financial statements. In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers: (Topic 606)." This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosures regarding revenue and contracts with customers. |
Business Combinations (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition, Pro Forma Information [Table Text Block] | Pre-acquisition net sales and net income amounts for both OGIO and TravisMathew were derived from the books and records of OGIO and TravisMathew prepared prior to the respective acquisition and are presented for informational purposes only and do not purport to be indicative of the results of future operations or of the results that would have occurred had the acquisition taken place as of the dates noted below.
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Schedule of Business Acquisitions, by Acquisition [Table Text Block] | The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date based on the purchase price allocation (in thousands):
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date based on the purchase price allocation (in thousands):
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Earnings (Loss) per Common Share (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Basic and Diluted Earnings Per Share | The following table summarizes the computation of basic and diluted earnings per share (in thousands, except per share data):
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Inventories (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories are summarized below (in thousands):
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Goodwill and Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets by Major Asset Class | The following sets forth the intangible assets by major asset class (dollars in thousands):
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Amortization Expense Related to Intangible Assets | Amortization expense related to intangible assets at September 30, 2017 in each of the next five fiscal years and beyond is expected to be incurred as follows (in thousands):
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Product Warranty (Tables) |
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Guarantees [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Reserve for Warranty Expense | The following table provides a reconciliation of the activity related to the Company’s reserve for accrued warranty expense (in thousands):
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Income Taxes (Tables) |
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Sep. 30, 2017 | ||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||
Major Jurisdictions no Longer Subject to Income Tax Examinations by Tax Authorities | The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is generally no longer subject to income tax examinations by tax authorities in the following major jurisdictions:
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Commitments and Contingencies (Tables) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Future Purchase Commitments | Future minimum commitments as of September 30, 2017, are as follows (in thousands):
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Share-Based Employee Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs | The table below summarizes the amounts recognized in the financial statements for the three and nine months ended September 30, 2017 and 2016 for share-based compensation, including expense for stock options, restricted stock units, performance share units and cash settled stock appreciation rights. The increase in stock compensation expense was primarily due performance share units, which were adjusted to reflect the Company's anticipated performance level for these awards.
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Valuation of Foreign Currency Exchange Contracts by Pricing Levels | The following table summarizes the valuation of the Company’s foreign currency forward contracts (see Note 14) that are measured at fair value on a recurring basis by the above pricing levels at September 30, 2017 and December 31, 2016 (in thousands):
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Fair Value Relating to Financial Assets and Liabilities | The carrying values of cash and cash equivalents at September 30, 2017 and December 31, 2016 are categorized within Level 1 of the fair value hierarchy due to the short-term nature of these balances. The table below summarizes information about fair value relating to the Company’s financial assets and liabilities that are recognized in the accompanying consolidated balance sheets as of September 30, 2017 and December 31, 2016, as well as the fair value of contingent contracts that represent financial instruments (in thousands).
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Derivatives and Hedging (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Fair Value of Derivative Instruments by Contract Type and Location of Asset and/or Liability on Consolidated Condensed Balance Sheets | The following table summarizes the fair value of the Company's foreign currency forward contracts as well as the location of the asset and/or liability on the consolidated condensed balance sheets at September 30, 2017 and December 31, 2016 (in thousands):
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Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location | The following tables summarize the net effect of all cash flow hedges on the consolidated condensed financial statements for the three and nine months ended September 30, 2017 and 2016 (in thousands):
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Schedule of Accumulated Other Comprehensive Income (Loss) | The following table details the amounts reclassified from accumulated other comprehensive loss to cost of goods sold, as well as changes in foreign currency translation for the nine months ended September 30, 2017. Amounts are in thousands.
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Location of Gains in Consolidated Condensed Statements of Operations that were Recognized and Derivative Contract Type | The following table summarizes the location of net gains and losses in the consolidated condensed statements of operations that were recognized during the three and nine months ended September 30, 2017 and 2016, respectively (in thousands):
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Accumulated Other Comprehensive Income (Loss) (Tables) |
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | The following table details the amounts reclassified from accumulated other comprehensive loss to cost of goods sold, as well as changes in foreign currency translation for the nine months ended September 30, 2017. Amounts are in thousands.
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Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Segments | The table below contains information utilized by management to evaluate its operating segments for the interim periods presented (in thousands).
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Basis of Presentation (Details) $ in Thousands |
Sep. 30, 2017
USD ($)
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Unredeemed Gift Cards | |
Deferred Revenue Arrangement [Line Items] | |
Deferred revenue | $ 1,050 |
Basis of Presentation Cost-Method Investments (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
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Schedule of Cost-method Investments [Line Items] | ||
Investment in Topgolf | $ 50,495 | $ 48,997 |
Topgolf International Inc | ||
Schedule of Cost-method Investments [Line Items] | ||
Investment in Topgolf | $ 50,495 | $ 48,997 |
Earnings (Loss) per Common Share - Computation of Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
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Earnings (loss) per common share—basic | ||||
Net income | $ 3,060 | $ (5,866) | $ 60,192 | $ 66,629 |
Weighted-average common shares outstanding—basic (in shares) | 94,450 | 94,081 | 94,246 | 94,021 |
Basic earnings per common share (usd per share) | $ 0.03 | $ (0.06) | $ 0.64 | $ 0.71 |
Earnings (loss) per common share—diluted | ||||
Weighted-average common shares outstanding—basic (in shares) | 94,450 | 94,081 | 94,246 | 94,021 |
Options and restricted stock (in shares) | 2,429 | 0 | 2,097 | 1,666 |
Weighted-average common shares outstanding—diluted (in shares) | 96,879 | 94,081 | 96,343 | 95,687 |
Dilutive earnings (loss) per common share (usd per share) | $ 0.03 | $ (0.06) | $ 0.62 | $ 0.70 |
Earnings (Loss) per Common Share - Additional Information (Detail) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Earnings Per Share [Abstract] | ||||
Antidilutive securities excluded from computation of earnings per share (in shares) | 131 | 269 | 138 | 330 |
Inventories (Detail) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Inventories: | ||
Raw materials | $ 49,457 | $ 46,451 |
Work-in-process | 740 | 739 |
Finished goods | 136,388 | 142,210 |
Inventories | $ 186,585 | $ 189,400 |
Goodwill and Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Business Acquisition [Line Items] | |||
Goodwill (Note 6) | $ 56,091 | $ 25,593 | |
Decrease in goodwill offset amount due to foreign currency fluctuations | 1,178 | ||
Aggregate amortization expense on intangible assets | 280 | $ 59 | |
OGIO International, Inc. | |||
Business Acquisition [Line Items] | |||
Goodwill (Note 6) | 5,885 | ||
TravisMathew | |||
Business Acquisition [Line Items] | |||
Goodwill (Note 6) | $ 23,436 |
Goodwill and Intangible Assets - Amortization Expense Related to Intangible Assets (Detail) $ in Thousands |
Sep. 30, 2017
USD ($)
|
---|---|
Amortization expense related to intangible assets: | |
Remainder of 2017 | $ 267 |
2018 | 1,066 |
2019 | 1,053 |
2020 | 966 |
2021 | 910 |
2022 | 734 |
Thereafter | 2,665 |
Total | $ 7,661 |
Joint Venture (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Dec. 31, 2016 |
Jul. 01, 2016 |
|
Noncontrolling Interest [Line Items] | |||||
Net income attributable to non-controlling interests | $ 29 | $ 127 | $ 251 | ||
Dividend paid by joint venture to TSI | 974 | ||||
Stockholders' Equity Attributable to Noncontrolling Interest | $ 9,147 | $ 9,147 | $ 9,694 | ||
Callaway Apparel K.K. [Member] | |||||
Noncontrolling Interest [Line Items] | |||||
Noncontrolling Interest, Ownership Percentage by Parent | 52.00% | ||||
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners | 48.00% | ||||
Callaway Golf Company | |||||
Noncontrolling Interest [Line Items] | |||||
Noncontrolling Interest in Joint Ventures | $ 10,556 | ||||
TSI Groove & Sports Co, Ltd | |||||
Noncontrolling Interest [Line Items] | |||||
Noncontrolling Interest in Joint Ventures | $ 9,744 |
Product Warranty - Reconciliation of Reserve for Warranty Expense (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Guarantees [Abstract] | ||||
Warranty policy term | 2 years | |||
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward] | ||||
Beginning balance | $ 5,395 | $ 5,706 | ||
Provision | $ 4,371 | $ 1,163 | 8,495 | 4,403 |
Claims paid/costs incurred | (2,790) | (1,820) | (6,340) | (4,594) |
Ending balance | $ 7,550 | $ 5,515 | $ 7,550 | $ 5,515 |
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||||
Income tax provision | $ 1,486 | $ 1,294 | $ 30,742 | $ 4,632 | |
Liability for income taxes associated with uncertain tax positions | 9,295 | 9,295 | |||
Net amount of unrecognized tax benefit related to uncertain tax positions that would impact, if recognized, effective income tax rate | 1,624 | 1,624 | |||
Unrecognized tax benefit liabilities decrease | 426 | 426 | |||
Increase in gross liability for uncertain tax positions | 550 | 1,039 | |||
Provision expense (benefit) for income taxes related to interest and penalties | 132 | $ 54 | 241 | $ 83 | |
Income tax accrued for payment of interest and penalties | $ 1,558 | $ 1,558 | $ 1,317 |
Income Taxes - Major Jurisdictions No Longer Subject to Audit (Details) |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
U.S. federal | |
Income Tax Examination [Line Items] | |
Years No Longer Subject to Audit | 2010 and prior |
California (United States) | |
Income Tax Examination [Line Items] | |
Years No Longer Subject to Audit | 2008 and prior |
Canada | |
Income Tax Examination [Line Items] | |
Years No Longer Subject to Audit | 2009 and prior |
Japan | |
Income Tax Examination [Line Items] | |
Years No Longer Subject to Audit | 2010 and prior |
South Korea | |
Income Tax Examination [Line Items] | |
Years No Longer Subject to Audit | 2011 and prior |
United Kingdom | |
Income Tax Examination [Line Items] | |
Years No Longer Subject to Audit | 2012 and prior |
Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Long Term Purchase Commitment [Line Items] | ||
Unconditional purchase obligations, term | 6 years | |
Unconditional purchase obligations | $ 72,714 | |
Bank of America, N.A. | ||
Long Term Purchase Commitment [Line Items] | ||
Amount outstanding under letters of credit | $ 857 | $ 933 |
Minimum | ||
Long Term Purchase Commitment [Line Items] | ||
Unconditional purchase obligations, term | 1 year | |
Maximum | ||
Long Term Purchase Commitment [Line Items] | ||
Unconditional purchase obligations, term | 6 years |
Commitments and Contingencies - Future Purchase Commitments (Details) $ in Thousands |
Sep. 30, 2017
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Remainder of 2017 | $ 38,286 |
2018 | 19,702 |
2019 | 7,903 |
2020 | 5,488 |
2021 | 1,333 |
2022 | 2 |
Unconditional purchase obligations | $ 72,714 |
Fair Value of Financial Instruments - Foreign Currency Exchange Contracts Measured at Fair Value on Recurring Basis (Detail) - Fair Value, Measurements, Recurring - Foreign Exchange Contract - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Foreign currency forward contracts—asset position | $ 460 | $ 3,524 |
Foreign currency forward contracts—liability position | (1,403) | (85) |
Foreign currency forward contracts, net | (943) | 3,439 |
Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Foreign currency forward contracts—asset position | 460 | 3,524 |
Foreign currency forward contracts—liability position | (1,403) | (85) |
Foreign currency forward contracts, net | $ (943) | $ 3,439 |
Derivatives and Hedging - Summary of Fair Value of Derivative Instruments by Contract Type and Location of Asset and/or Liability on Consolidated Condensed Balance Sheets (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Other Current Assets | ||
Derivatives, Fair Value [Line Items] | ||
Foreign currency exchange contracts, asset derivatives designated as hedging instruments, fair value | $ 39 | $ 2,660 |
Foreign currency exchange contracts, asset derivatives not designated as hedging instruments, fair value | 421 | 864 |
Accounts payable and accrued expenses | ||
Derivatives, Fair Value [Line Items] | ||
Foreign currency exchange contracts, liability derivatives designated as hedging instruments, fair value | 195 | 28 |
Foreign currency exchange contracts, liability derivatives not designated as hedging instruments, fair value | $ 1,208 | $ 57 |
Derivatives and Hedging - Location of Gains in Consolidated Condensed Statements of Operations that were Recognized and Derivative Contract Type (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Forward points expensed on derivatives | $ 39 | $ 286 | ||
Other (expense) income, net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Net Gain (Loss) Recognized in Income on Derivative Instruments | (1,233) | $ (50) | (6,469) | $ (9,908) |
Foreign Exchange Forward | Cost Of Goods Sold | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain Reclassified from AOCI into COGS | $ 1,067 | $ 879 | $ 249 |
Segment Information - Information Utilized by Management to Evaluate its Operating Segments (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|---|
Apr. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Segment Reporting Information [Line Items] | ||||||
Gain on sale of preferred shares in Topgolf | $ 17,662 | $ 0 | $ 0 | $ 0 | $ 17,662 | |
Net sales | 243,604 | 187,850 | 857,079 | 707,497 | ||
Income before income taxes | 4,575 | (4,445) | 91,185 | 71,388 | ||
Additions to long-lived assets | 4,867 | 6,718 | 18,093 | 12,756 | ||
Other income (expense), net | (820) | 1,251 | (6,197) | (5,806) | ||
Assets | 935,983 | 935,983 | $ 801,282 | |||
Goodwill (Note 6) | 56,091 | 56,091 | 25,593 | |||
Operating segments | Golf Clubs | ||||||
Segment Reporting Information [Line Items] | ||||||
Net sales | 146,113 | 121,228 | 535,995 | 480,740 | ||
Income before income taxes | 10,420 | 2,224 | 83,818 | 55,638 | ||
Additions to long-lived assets | 1,316 | 4,339 | 7,928 | 8,308 | ||
Assets | 256,318 | 256,318 | 277,469 | |||
Goodwill (Note 6) | 26,770 | 26,770 | 25,593 | |||
Operating segments | Golf Balls | ||||||
Segment Reporting Information [Line Items] | ||||||
Net sales | 39,071 | 32,640 | 136,062 | 121,052 | ||
Income before income taxes | 5,040 | 3,845 | 27,500 | 21,985 | ||
Additions to long-lived assets | 2,784 | 1,135 | 7,872 | 2,707 | ||
Assets | 47,198 | 47,198 | 42,460 | |||
Goodwill (Note 6) | 0 | 0 | 0 | |||
Operating segments | Gear, Accessories and Other | ||||||
Segment Reporting Information [Line Items] | ||||||
Net sales | 58,420 | 33,982 | 185,022 | 105,705 | ||
Income before income taxes | 6,420 | 595 | 27,916 | 16,753 | ||
Additions to long-lived assets | 767 | 1,244 | 2,293 | 1,741 | ||
Assets | 229,416 | 229,416 | 38,270 | |||
Goodwill (Note 6) | 29,321 | 29,321 | 0 | |||
Reconciling Items | ||||||
Segment Reporting Information [Line Items] | ||||||
Income before income taxes | (17,305) | $ (11,109) | (48,049) | $ (22,988) | ||
Assets | $ 403,051 | $ 403,051 | $ 443,083 |
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