CARLSBAD, Calif., Aug. 2, 2018 /PRNewswire/ -- Callaway Golf
Company (NYSE:ELY) announced today record sales and earnings for
the second quarter and first half of 2018 and increased its full
year 2018 sales and earnings guidance.
In the second quarter of 2018, as compared to the same period in
2017, the Company's net sales increased $91
million (30%) to $396 million,
and earnings per share increased $0.30 (91%) to $0.63. These record financial results were
driven by increased sales in all operating segments, all major
product categories and all major regions. For the second quarter of
2018, compared to the second quarter of 2017, net sales increased
as follows:
Woods
|
+
5.2%
|
|
U.S.
|
+ 38.7%
|
Irons
|
+ 35.0%
|
|
Europe
|
+
8.0%
|
Putters
|
+ 12.4%
|
|
Japan
|
+ 24.5%
|
Golf Balls
|
+ 35.1%
|
|
Rest of
Asia
|
+ 36.5%
|
Gear &
Other
|
+ 64.1%
|
|
Other
|
+ 12.4%
|
As a result of the Company's better than expected first half,
the Company increased its full year 2018 sales guidance to
$1,210 million - $1,225 million as compared to its prior guidance
of $1,170 million - $1,185 million. The Company also increased its
full year 2018 earnings per share guidance to $0.95 - $1.00
compared to prior guidance of $0.77 -
$0.82.
"The excellent start in Q1 has continued through Q2," commented
Chip Brewer, President and Chief
Executive Officer of Callaway Golf Company. "Business around the
globe remains strong with all major regions reporting significant
sales growth and our new businesses, particularly TravisMathew,
performing at or above plan. On the product side, we have
strength across the entire line, especially with the Rogue line of
woods and irons as well as the new Chrome Soft golf balls. We
also continued to benefit from favorable market conditions. As a
result, our EBITDA increased 62% during the second quarter compared
to the prior year. I continue to be extremely pleased with
our performance and our long term outlook."
GAAP and Non-GAAP Results
In addition to the Company's results prepared in accordance
with GAAP, the Company provided information on a non-GAAP basis.
The purpose of this non-GAAP presentation is to provide additional
information to investors regarding the underlying performance of
the Company's business without non-recurring items. This non-GAAP
information presents the Company's financial results for the second
quarter and first half of 2017 excluding the non-recurring
transaction and transition expenses related to the OGIO
acquisition. The manner in which this non-GAAP information is
derived is discussed in more detail toward the end of this release,
and the Company has provided in the tables to this release a
reconciliation of the non-GAAP information to the most directly
comparable GAAP information.
Summary of Second Quarter 2018 Financial Results
The Company announced the following GAAP and non-GAAP financial
results for the second quarter of 2018 (in millions, except
EPS):
2018 RESULTS
(GAAP)
|
|
NON-GAAP
PRESENTATION
|
|
Q2
2018
|
Q2
2017
|
Change
|
|
Q2 2018
GAAP
|
Q2 2017
non-GAAP
|
Change
|
Net Sales
|
$396
|
$305
|
$91
|
|
$396
|
$305
|
$91
|
Gross Profit/
% of Sales
|
$193
48.6%
|
$148
48.7%
|
$45
(10 b.p.)
|
|
$193
48.6%
|
$148
48.7%
|
$45
(10 b.p.)
|
Operating
Expenses
|
$118
|
$99
|
$19
|
|
$118
|
$97
|
$21
|
Pre-Tax
Income
|
$78
|
$48
|
$30
|
|
$78
|
$50
|
$28
|
Income Tax
Provision
|
$17
|
$16
|
$1
|
|
$17
|
$17
|
$0
|
Net Income
|
$61
|
$31
|
$30
|
|
$61
|
$33
|
$28
|
EPS
|
$0.63
|
$0.33
|
$0.30
|
|
$0.63
|
$0.34
|
$0.29
|
|
Q2 2018
|
Q2 2017
|
Change
|
EBITDA
|
$85
|
$52
|
$33
|
For the second quarter of 2018, the Company's net sales
increased $91 million (30%) to
$396 million, compared to
$305 million for the same period in
2017. Net sales increased in all operating segments and regions,
and across all major product categories. The increase in net sales
is attributable to the strength of the Company's 2018 product line
and continued brand momentum, a $6
million favorable impact resulting from changes in foreign
currency rates, an increase in product launches during the first
half of the year and improved market conditions. In addition,
second quarter net sales of gear and accessories increased
significantly as a result of the Company's acquisition of
TravisMathew in the third quarter of 2017.
For the second quarter of 2018, the Company's gross margin
decreased 10 basis points to 48.6% compared to 48.7% for the second
quarter of 2017. This slight decrease was impacted by higher
product costs as more technology is incorporated into the new
launches, but was partially offset by increases in average selling
prices, the TravisMathew business, which is accretive to gross
margins, and the net favorable translation impact of changes in
foreign currency rates.
Operating expenses increased $19
million to $118 million in the
second quarter of 2018 compared to $99
million for the same period in 2017. This increase is
primarily due to the addition in 2018 of operating expenses from
the TravisMathew business as well as some variable expenses
associated with higher core business net sales.
Second quarter 2018 earnings per share increased $0.30 (91%) to $0.63, which is a record second quarter for the
Company, compared to $0.33 for the
second quarter of 2017. On a non-GAAP basis, 2017 second
quarter earnings per share was $0.34,
which excludes $0.01 per share
related to the impact of the non-recurring OGIO transaction and
transition expenses. The increased earnings in 2018 reflect
the increased sales in the core business, the addition of the
TravisMathew business, operating expense leverage, favorable
foreign currency rates and hedging activities and a lower tax rate
due to the tax reform legislation enacted at the end of
2017.
Summary of First Half 2018 Financial Results
The Company announced the following GAAP and non-GAAP financial
results for the first half of 2018 (in millions, except
EPS):
2018 RESULTS
(GAAP)
|
|
NON-GAAP
PRESENTATION
|
|
H1
2018
|
H1
2017
|
Change
|
|
H1 2018
GAAP
|
H1 2017
non-GAAP
|
Change
|
Net Sales
|
$800
|
$613
|
$187
|
|
$800
|
$613
|
$187
|
Gross Profit/
% of Sales
|
$393
49.2%
|
$296
48.2%
|
$97
100 b.p.
|
|
$393
49.2%
|
$296
48.2%
|
$97
100 b.p.
|
Operating
Expenses
|
$233
|
$203
|
$30
|
|
$233
|
$196
|
$37
|
Pre-Tax
Income
|
$158
|
$87
|
$71
|
|
$158
|
$93
|
$65
|
Income Tax
Provision
|
$34
|
$29
|
$5
|
|
$34
|
$31
|
$3
|
Net Income
|
$124
|
$57
|
$67
|
|
$124
|
$61
|
$63
|
EPS
|
$1.28
|
$0.59
|
$0.69
|
|
$1.28
|
$0.64
|
$0.64
|
|
H1 2018
|
H1 2017
|
Change
|
EBITDA
|
$171
|
$96
|
$75
|
For the first half of 2018, the Company's net sales increased
$187 million (30%) to $800 million, compared to $613 million for the same period in 2017. Net
sales increased in all operating segments and all regions, and
across all major product categories. The increase in net sales is
attributable to the strength of the Company's 2018 product line and
continued brand momentum, a $17
million favorable impact resulting from changes in foreign
currency rates, an increase in product launches during the first
half of 2018 versus 2017, and improved market conditions. In
addition, first half net sales of gear and accessories increased
significantly as a result of the Company's acquisition of
TravisMathew in the third quarter of 2017. For the first half
of 2018, compared to the first half of 2017, net sales increased as
follows:
Woods
|
+ 13.2%
|
|
U.S.
|
+ 35.2%
|
Irons
|
+ 46.0%
|
|
Europe
|
+ 11.4%
|
Putters
|
+ 18.3%
|
|
Japan
|
+ 36.6%
|
Golf Balls
|
+ 24.6%
|
|
Rest of
Asia
|
+ 35.9%
|
Gear &
Other
|
+ 48.9%
|
|
Other
|
+
9.9%
|
For the first half of 2018, the Company's gross margin increased
100 basis points to 49.2% compared to 48.2% for the first half of
2017. This increase reflects an overall increase in average
selling prices, the addition of the TravisMathew business, which is
accretive to gross margins, and the net favorable translation
impact of changes in foreign currency rates, partially offset by
higher product costs as more technology is incorporated into the
new launches.
Operating expenses increased $30
million to $233 million in the
first half of 2018 compared to $203
million for the same period in 2017. This increase is
primarily due to the addition in 2018 of operating expenses from
the TravisMathew business as well as some variable expenses
associated with higher core business net sales.
First half 2018 earnings per share increased $0.69 (117%) to $1.28, which is a record first half for the
Company, compared to $0.59 for the
first half of 2017. On a non-GAAP basis, 2017 first half
earnings per share was $0.64, which
excludes $0.05 per share related to
the impact of the non-recurring OGIO transaction and transition
expenses. The increased earnings in 2018 reflect the
increased sales in the core business, the addition of the
TravisMathew business, operating expense leverage, favorable
foreign currency rates and hedging activities and a lower tax rate
due to the tax reform legislation enacted at the end of
2017.
Business Outlook for 2018
Basis for 2017 Non-GAAP Results. In order to make
the 2018 guidance more comparable to 2017, as discussed above, the
Company has presented 2017 results on a non-GAAP basis by excluding
from 2017 the non-recurring expenses related to the OGIO and
TravisMathew acquisitions ($0.07 per
share for the full year and $0.02 for
the third quarter). Furthermore, the Company excluded from full
year 2017 earnings per share certain non-cash, non-recurring tax
adjustments ($0.04 per share).
Full Year 2018
Given the Company's financial performance during the first half
of 2018, the Company is increasing its full year 2018 financial
guidance as follows:
|
Revised
2018
GAAP
Estimate
|
Previous
2018
GAAP
Estimate
|
2017
Non-GAAP
Results
|
Net Sales
|
$1,210 - $1,225
million
|
$1,170 - $1,185
million
|
$1,049
million
|
Gross
Margins
|
46.8%
|
47.0%
|
46.0%
|
Operating
Expenses
|
$445
million
|
$444
million
|
$393
million
|
Earnings Per
Share
|
$0.95 -
$1.00
|
$0.77 -
$0.82
|
$0.53
|
The Company's revised 2018 net sales estimate of $1,210 million - $1,225
million represents an increase of $40
million over its prior estimate. This would result in
net sales growth of 15% - 17% in 2018 compared to 2017. The
estimated incremental sales growth versus previous estimates is
expected to be driven by further increases in the core business
(currently estimated at 8-10% full year sales growth compared to
2017, on a currency neutral basis), and increases in the
TravisMathew business. The increases in core business are
expected to be driven by the Rogue line of woods and irons, the new
Chrome Soft golf balls, including continued success of the Truvis
golf balls, and healthy market conditions. As a result of an
overall strengthening of foreign currencies during the first half
of 2018, the Company currently estimates that changes in foreign
currency rates will positively impact 2018 full year net sales by
approximately $14 million, a
$5 million decrease from when the
Company last gave guidance as the U.S. dollar strengthened during
the second quarter of 2018.
The Company currently estimates that its 2018 gross margin will
decrease 20 basis points from the prior estimate. This decrease is
expected to be driven in most part by a strengthening of the U.S.
dollar.
The Company estimates that its 2018 operating expenses will
increase $1 million compared to prior
estimates. Variable expenses related to higher sales are being
mostly offset by a strengthening U.S. dollar. The Company
continues to realize operating expense leverage as the top line
continues to expand.
The Company increased its GAAP earnings per share guidance to
$0.95 - $1.00 primarily due to the projected increase in
net sales, operating expense leverage, and a lower estimated tax
rate. The Company's 2018 earnings per share estimates currently
assume a tax rate of approximately 21.5% and a base of 97 million
shares.
The cadence of the Company's golf equipment launches in 2018 is
skewed toward the first half of the year compared to 2017. As a
result, all of the Company's projected sales and earnings growth
for 2018 is expected to occur during the first half of the year.
Consistent with the Company's expectations at the start of the
year, the second half of the year is planned to decrease slightly
compared to the same period in 2017. For the full year the
Company expects sales growth of 15% – 17% in 2018 compared to
2017.
Third Quarter 2018
The Company currently estimates the following results for the
third quarter of 2018 compared to 2017 non-GAAP results for the
same period:
|
Q3 2018
GAAP
Estimate
|
Q3 2017
Non-GAAP
Results
|
Net Sales
|
$243 - $253
million
|
$244
million
|
Earnings Per
Share
|
($0.03) -
$0.01
|
$0.05
|
The Company expects flat to 4% sales growth in the third quarter
of 2018 compared to the same period in 2017. This projection
reflects no major product launches in the third quarter of 2018
versus the 2017 launch of the Company's EPIC Star Irons and Hybrids
as well as the launch of the Odyssey Works Red & Black
Putters. The addition of the TravisMathew business will
partially offset the negative launch timing, and foreign currencies
are expected to be slightly negative in the quarter.
The Company's GAAP earnings per share for the third quarter of
2018 is estimated to decrease by $0.04 - $0.08
compared to $0.05 of non-GAAP
earnings per share for the third quarter of 2017. GAAP earnings per
share for the third quarter of 2017 was $0.03. This projected decrease is due to
launching fewer new products compared to the same period in 2017,
while continuing to invest in the core and new businesses, and is
partially offset by the favorable impact of the TravisMathew
business. The Company's 2018 third quarter earnings per share
estimates assume approximately 97 million shares, which is
consistent with the third quarter of 2017.
Conference Call and Webcast
The Company will be holding a conference call at 2:00 p.m. PDT today to discuss the Company's
financial results, outlook and business. The call will be broadcast
live over the Internet and can be accessed at
http://ir.callawaygolf.com/. To listen to the call, and to access
the Company's presentation materials, please go to the website at
least 15 minutes before the call to register and for instructions
on how to access the broadcast. A replay of the conference call
will be available approximately three hours after the call ends,
and will remain available through 9:00 p.m.
PDT on Thursday, August 9, 2018. The replay may be
accessed through the Internet at http://ir.callawaygolf.com/.
Non-GAAP Information
The GAAP results contained in this press release and the
financial statement schedules attached to this press release have
been prepared in accordance with accounting principles generally
accepted in the United States
("GAAP"). To supplement the GAAP results, the Company has
provided certain non-GAAP financial information as follows:
Constant Currency Basis. The Company provided certain
information regarding the Company's financial results or projected
financial results on a "constant currency basis." This information
estimates the impact of changes in foreign currency rates on the
translation of the Company's current or projected future period
financial results as compared to the applicable comparable
period. This impact is derived by taking the current or
projected local currency results and translating them into U.S.
Dollars based upon the foreign currency exchange rates for the
applicable comparable period. It does not include any other effect
of changes in foreign currency rates on the Company's results or
business.
Adjusted EBITDA. The Company provides information
about its results excluding interest, taxes, depreciation and
amortization expenses, as well as non-recurring OGIO and
TravisMathew transaction-related expenses.
Other Adjustments. The Company presents certain of its
financial results (i) excluding the 2017 non-recurring OGIO and
TravisMathew transaction-related expenses and (ii) excluding the
2017 non-cash, non-recurring tax adjustments.
In addition, the Company has included in the schedules to this
release a reconciliation of certain non-GAAP information to the
most directly comparable GAAP information. The non-GAAP
information presented in this release and related schedules should
not be considered in isolation or as a substitute for any measure
derived in accordance with GAAP. The non-GAAP information may also
be inconsistent with the manner in which similar measures are
derived or used by other companies. Management uses such
non-GAAP information for financial and operational decision-making
purposes and as a means to evaluate period-over-period comparisons
and in forecasting the Company's business going forward. Management
believes that the presentation of such non-GAAP information, when
considered in conjunction with the most directly comparable GAAP
information, provides additional useful comparative information for
investors in their assessment of the underlying performance of the
Company's business without regard to these items. The Company has
provided reconciling information in the attached schedules.
Forward-Looking Statements
Statements used in this press release that relate to future
plans, events, financial results, performance or prospects,
including statements relating to the Company's estimated 2018
sales, gross margins, operating expenses, and earnings per share
(or related tax rate and share count), future industry or market
conditions, and the assumed benefits to be derived from investments
in the Company's core business or the OGIO and TravisMathew
acquisitions, are forward-looking statements as defined under the
Private Securities Litigation Reform Act of 1995. These statements
are based upon current information and expectations. Accurately
estimating the forward-looking statements is based upon various
risks and unknowns, including unanticipated delays, difficulties or
increased costs in integrating the acquired OGIO and TravisMathew
businesses or implementing the Company's growth strategy generally;
any changes in U.S. trade, tax or other policies, including impacts
of the 2017 Tax Cuts and Jobs Act or restrictions on imports or an
increase in import tariffs; consumer acceptance of and demand for
the Company's products; the level of promotional activity in the
marketplace; unfavorable weather conditions; future consumer
discretionary purchasing activity, which can be significantly
adversely affected by unfavorable economic or market conditions;
future retailer purchasing activity, which can be significantly
negatively affected by adverse industry conditions and overall
retail inventory levels; and future changes in foreign currency
exchange rates and the degree of effectiveness of the Company's
hedging programs. Actual results may differ materially from those
estimated or anticipated as a result of these risks and unknowns or
other risks and uncertainties, including continued compliance with
the terms of the Company's credit facilities; delays, difficulties
or increased costs in the supply of components or commodities
needed to manufacture the Company's products or in manufacturing
the Company's products; the ability to secure professional tour
player endorsements at reasonable costs; 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;
a decrease in participation levels in golf; and 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. For additional
information concerning these and other risks and uncertainties that
could affect these statements, the golf industry, and the Company's
business, see the Company's Annual Report on Form 10-K for the year
ended December 31, 2017 as well as
other risks and uncertainties detailed from time to time in the
Company's reports on Forms 10-K, 10-Q and 8-K subsequently filed
with the Securities and Exchange Commission. Readers are cautioned
not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Company undertakes no
obligation to republish revised forward-looking statements to
reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events.
About Callaway Golf
Through an unwavering commitment to innovation, Callaway Golf
Company (NYSE:ELY) creates products designed to make every golfer a
better golfer. Callaway Golf Company manufactures and sells golf
clubs and golf balls, and sells bags, accessories and apparel in
the golf and lifestyle categories, under the Callaway Golf®,
Odyssey®, OGIO and TravisMathew brands worldwide. For more
information please visit www.callawaygolf.com,
www.odysseygolf.com, www.OGIO.com, and
www.travismathew.com.
Contacts:
|
Brian
Lynch
|
|
Patrick
Burke
|
|
(760)
931-1771
|
CALLAWAY GOLF
COMPANY
|
CONSOLIDATED
CONDENSED BALANCE SHEETS
|
(Unaudited)
|
(In
thousands)
|
|
|
June 30,
2018
|
|
December 31,
2017
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
57,748
|
|
|
|
$
|
85,674
|
|
Accounts receivable,
net
|
242,023
|
|
|
|
94,725
|
|
Inventories
|
237,068
|
|
|
|
262,486
|
|
Other current
assets
|
32,960
|
|
|
|
23,099
|
|
Total current
assets
|
569,799
|
|
|
|
465,984
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
77,604
|
|
|
|
70,227
|
|
Intangible assets,
net
|
281,279
|
|
|
|
282,187
|
|
Deferred taxes,
net
|
65,538
|
|
|
|
91,398
|
|
Investment in
golf-related ventures
|
70,777
|
|
|
|
70,495
|
|
Other
assets
|
10,425
|
|
|
|
10,866
|
|
Total
assets
|
$
|
1,075,422
|
|
|
|
$
|
991,157
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable and
accrued expenses
|
$
|
162,217
|
|
|
|
$
|
176,127
|
|
Accrued employee
compensation and benefits
|
30,754
|
|
|
|
40,173
|
|
Asset-based credit
facilities
|
96,140
|
|
|
|
87,755
|
|
Accrued warranty
expense
|
8,035
|
|
|
|
6,657
|
|
Other current
liabilities
|
2,389
|
|
|
|
2,367
|
|
Income tax
liability
|
9,792
|
|
|
|
1,295
|
|
Total current
liabilities
|
309,327
|
|
|
|
314,374
|
|
|
|
|
|
|
Long-term
liabilities
|
16,359
|
|
|
|
17,408
|
|
Total Callaway Golf
Company shareholders' equity
|
740,682
|
|
|
|
649,631
|
|
Non-controlling
interest in consolidated entity
|
9,054
|
|
|
|
9,744
|
|
Total liabilities and
shareholders' equity
|
$
|
1,075,422
|
|
|
|
$
|
991,157
|
|
CALLAWAY GOLF
COMPANY
|
CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
(In thousands,
except per share data)
|
|
|
Three Months
Ended
June 30,
|
|
2018
|
|
2017
|
Net sales
|
$
|
396,311
|
|
|
$
|
304,548
|
|
Cost of
sales
|
203,614
|
|
|
156,383
|
|
Gross
profit
|
192,697
|
|
|
148,165
|
|
Operating
expenses:
|
|
|
|
Selling
|
83,261
|
|
|
68,102
|
|
General and
administrative
|
24,408
|
|
|
22,155
|
|
Research and
development
|
10,708
|
|
|
8,863
|
|
Total operating
expenses
|
118,377
|
|
|
99,120
|
|
Income from
operations
|
74,320
|
|
|
49,045
|
|
Other income
(expense), net
|
3,861
|
|
|
(1,521)
|
|
Income before income
taxes
|
78,181
|
|
|
47,524
|
|
Income tax
provision
|
17,247
|
|
|
16,050
|
|
Net income
|
60,934
|
|
|
31,474
|
|
Less: Net income
attributable to non-controlling interest
|
67
|
|
|
31
|
|
Net income
attributable to Callaway Golf Company
|
$
|
60,867
|
|
|
$
|
31,443
|
|
|
|
|
|
Earnings per common
share:
|
|
|
|
Basic
|
$
|
0.65
|
|
|
$
|
0.33
|
|
Diluted
|
$
|
0.63
|
|
|
$
|
0.33
|
|
Weighted-average
common shares outstanding:
|
|
|
|
Basic
|
94,367
|
|
|
94,213
|
|
Diluted
|
96,928
|
|
|
96,197
|
|
|
|
|
|
|
Six Months
Ended June 30,
|
|
2018
|
|
2017
|
Net sales
|
$
|
799,502
|
|
|
$
|
613,475
|
|
Cost of
sales
|
406,343
|
|
|
317,595
|
|
Gross
profit
|
393,159
|
|
|
295,880
|
|
Operating
expenses:
|
|
|
|
Selling
|
166,221
|
|
|
139,864
|
|
General and
administrative
|
46,302
|
|
|
45,019
|
|
Research and
development
|
20,332
|
|
|
17,745
|
|
Total operating
expenses
|
232,855
|
|
|
202,628
|
|
Income from
operations
|
160,304
|
|
|
93,252
|
|
Other expense,
net
|
(2,173)
|
|
|
(6,642)
|
|
Income before income
taxes
|
158,131
|
|
|
86,610
|
|
Income tax
provision
|
34,466
|
|
|
29,256
|
|
Net income
|
123,665
|
|
|
57,354
|
|
Less: Net income
(loss) attributable to non-controlling interest
|
(57)
|
|
|
222
|
|
Net income
attributable to Callaway Golf Company
|
$
|
123,722
|
|
|
$
|
57,132
|
|
|
|
|
|
Earnings per common
share:
|
|
|
|
Basic
|
$1.31
|
|
|
$0.61
|
|
Diluted
|
$1.28
|
|
|
$0.59
|
|
Weighted-average
common shares outstanding:
|
|
|
|
Basic
|
94,670
|
|
|
94,142
|
|
Diluted
|
96,981
|
|
|
96,073
|
|
CALLAWAY GOLF
COMPANY
|
CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOW
|
(Unaudited)
|
(In
thousands)
|
|
|
Six Months
Ended June 30, 2018
|
|
2018
|
|
2017
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
123,665
|
|
|
$
|
57,354
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and amortization
|
9,766
|
|
|
8,497
|
|
Deferred
taxes, net
|
30,273
|
|
|
33,028
|
|
Non-cash
share-based compensation
|
6,464
|
|
|
5,402
|
|
(Gain)/loss on disposal of long-lived assets
|
(3)
|
|
|
1,035
|
|
Unrealized (gains)/losses on foreign currency hedges
|
(1,021)
|
|
|
1,550
|
|
Changes in assets and
liabilities
|
(164,057)
|
|
|
(80,542)
|
|
Net cash provided by
operating activities
|
5,087
|
|
|
26,324
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(17,107)
|
|
|
(12,186)
|
|
Investments in golf
related ventures
|
(282)
|
|
|
—
|
|
Acquisitions, net of
cash acquired
|
—
|
|
|
(57,890)
|
|
Proceeds from sales of
property and equipment
|
—
|
|
|
560
|
|
Net cash used in
investing activities
|
(17,389)
|
|
|
(69,516)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from
(repayments of) credit facilities, net
|
8,385
|
|
|
(5,735)
|
|
Repayments of long-term
debt
|
(1,083)
|
|
|
—
|
|
Exercise of stock
options
|
1,258
|
|
|
3,085
|
|
Dividends paid,
net
|
(1,897)
|
|
|
(1,882)
|
|
Acquisition of treasury
stock
|
(22,301)
|
|
|
(16,410)
|
|
Distributions to
non-controlling interests
|
(821)
|
|
|
(974)
|
|
Net cash used in
financing activities
|
(16,459)
|
|
|
(21,916)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
835
|
|
|
1,092
|
|
Net decrease in cash
and cash equivalents
|
(27,926)
|
|
|
(64,016)
|
|
Cash and cash
equivalents at beginning of period
|
85,674
|
|
|
125,975
|
|
Cash and cash
equivalents at end of period
|
$
|
57,748
|
|
|
$
|
61,959
|
|
CALLAWAY GOLF
COMPANY
|
Consolidated Net
Sales and Operating Segment Information
|
(Unaudited)
|
(In
thousands)
|
|
|
Net Sales by
Product Category
|
|
Net Sales by
Product Category
|
|
Three Months
Ended June 30,
|
|
Growth
|
|
Non-GAAP
Constant
Currency
vs.
2017(1)
|
|
Six Months
Ended June 30,
|
|
Growth
|
|
Non-GAAP
Constant
Currency
vs.
2017(1)
|
|
2018
|
|
2017
|
|
Dollars
|
|
Percent
|
|
Percent
|
|
2018
|
|
2017
|
|
Dollars
|
|
Percent
|
|
Percent
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Woods
|
$
|
93,958
|
|
|
$
|
89,276
|
|
|
$
|
4,682
|
|
|
5.2%
|
|
3.4%
|
|
$
|
222,760
|
|
|
$
|
196,851
|
|
|
$
|
25,909
|
|
|
13.2%
|
|
10.5%
|
Irons
|
111,059
|
|
|
82,285
|
|
|
28,774
|
|
|
35.0%
|
|
32.9%
|
|
206,268
|
|
|
141,296
|
|
|
64,972
|
|
|
46.0%
|
|
43.1%
|
Putters
|
27,785
|
|
|
24,730
|
|
|
3,055
|
|
|
12.4%
|
|
10.2%
|
|
61,215
|
|
|
51,735
|
|
|
9,480
|
|
|
18.3%
|
|
14.7%
|
Golf balls
|
65,882
|
|
|
48,767
|
|
|
17,115
|
|
|
35.1%
|
|
33.4%
|
|
120,804
|
|
|
96,991
|
|
|
23,813
|
|
|
24.6%
|
|
22.5%
|
Gear/Accessories/Other
|
97,627
|
|
|
59,490
|
|
|
38,137
|
|
|
64.1%
|
|
62.1%
|
|
188,455
|
|
|
126,602
|
|
|
61,853
|
|
|
48.9%
|
|
46.0%
|
|
$
|
396,311
|
|
|
$
|
304,548
|
|
|
$
|
91,763
|
|
|
30.1%
|
|
28.2%
|
|
$
|
799,502
|
|
|
$
|
613,475
|
|
|
$
|
186,027
|
|
|
30.3%
|
|
27.6%
|
(1)
Calculated by applying 2017 exchange rates to 2018 reported sales
in regions outside the U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales by
Region
|
|
Net Sales by
Region
|
|
Three Months
Ended June 30,
|
|
Growth
|
|
Non-GAAP
Constant
Currency
vs.
2017(1)
|
|
Six Months
Ended June 30,
|
|
Growth
|
|
Non-GAAP
Constant
Currency
vs.
2017(1)
|
|
2018
|
|
2017(2)
|
|
Dollars
|
|
Percent
|
|
Percent
|
|
2018
|
|
2017(2)
|
|
Dollars
|
|
Percent
|
|
Percent
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
$
|
233,373
|
|
|
$
|
168,253
|
|
|
$
|
65,120
|
|
|
38.7%
|
|
38.7%
|
|
$
|
468,534
|
|
|
$
|
346,517
|
|
|
$
|
122,017
|
|
|
35.2%
|
|
35.2%
|
Europe
|
46,325
|
|
|
42,912
|
|
|
3,413
|
|
|
8.0%
|
|
1.7%
|
|
97,527
|
|
|
87,529
|
|
|
9,998
|
|
|
11.4%
|
|
2.1%
|
Japan
|
59,666
|
|
|
47,908
|
|
|
11,758
|
|
|
24.5%
|
|
22.2%
|
|
128,941
|
|
|
94,410
|
|
|
34,531
|
|
|
36.6%
|
|
31.9%
|
Rest of
Asia
|
33,059
|
|
|
24,216
|
|
|
8,843
|
|
|
36.5%
|
|
30.9%
|
|
57,834
|
|
|
42,569
|
|
|
15,265
|
|
|
35.9%
|
|
29.4%
|
Other foreign
countries
|
23,888
|
|
|
21,259
|
|
|
2,629
|
|
|
12.4%
|
|
9.2%
|
|
46,666
|
|
|
42,450
|
|
|
4,216
|
|
|
9.9%
|
|
6.6%
|
|
$
|
396,311
|
|
|
$
|
304,548
|
|
|
$
|
91,763
|
|
|
30.1%
|
|
28.2%
|
|
$
|
799,502
|
|
|
$
|
613,475
|
|
|
$
|
186,027
|
|
|
30.3%
|
|
27.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Calculated by applying 2017 exchange rates to 2018 reported sales
in regions outside the U.S.
|
(2) Prior
period amounts have been reclassified to conform to the current
year presentation of regional sales related to OGIO-branded
products.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Segment
Information
|
|
|
|
Operating Segment
Information
|
|
|
|
Three Months
Ended June 30,
|
|
Growth
|
|
|
|
Six Months
Ended June 30,
|
|
Growth
|
|
|
|
2018
|
|
2017
|
|
Dollars
|
|
Percent
|
|
|
|
2018
|
|
2017
|
|
Dollars
|
|
Percent
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Golf Club
|
$
|
232,802
|
|
|
$
|
196,291
|
|
|
$
|
36,511
|
|
|
18.6%
|
|
|
|
$
|
490,243
|
|
|
$
|
389,882
|
|
|
$
|
100,361
|
|
|
25.7%
|
|
|
Golf Ball
|
65,882
|
|
|
48,767
|
|
|
17,115
|
|
|
35.1%
|
|
|
|
120,804
|
|
|
96,991
|
|
|
23,813
|
|
|
24.6%
|
|
|
Gear/Accessories/Other
|
97,627
|
|
|
59,490
|
|
|
38,137
|
|
|
64.1%
|
|
|
|
188,455
|
|
|
126,602
|
|
|
61,853
|
|
|
48.9%
|
|
|
|
$
|
396,311
|
|
|
$
|
304,548
|
|
|
$
|
91,763
|
|
|
30.1%
|
|
|
|
$
|
799,502
|
|
|
$
|
613,475
|
|
|
$
|
186,027
|
|
|
30.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Golf clubs
|
$
|
50,751
|
|
|
$
|
38,445
|
|
|
$
|
12,306
|
|
|
32.0%
|
|
|
|
$
|
117,338
|
|
|
$
|
73,398
|
|
|
$
|
43,940
|
|
|
59.9%
|
|
|
Golf balls
|
13,288
|
|
|
10,939
|
|
|
2,349
|
|
|
21.5%
|
|
|
|
25,813
|
|
|
22,460
|
|
|
3,353
|
|
|
14.9%
|
|
|
Gear/Accessories/Other
|
24,069
|
|
|
11,877
|
|
|
12,192
|
|
|
102.7%
|
|
|
|
44,406
|
|
|
21,496
|
|
|
22,910
|
|
|
106.6%
|
|
|
Reconciling
items(1)
|
(9,927)
|
|
|
(13,737)
|
|
|
3,810
|
|
|
-27.7%
|
|
|
|
(29,426)
|
|
|
(30,744)
|
|
|
1,318
|
|
|
4.3%
|
|
|
|
$
|
78,181
|
|
|
$
|
47,524
|
|
|
$
|
30,657
|
|
|
64.5%
|
|
|
|
$
|
158,131
|
|
|
$
|
86,610
|
|
|
$
|
71,521
|
|
|
82.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Represents corporate general and administrative expenses and other
income (expense) not utilized by management in determining segment
profitability.
|
CALLAWAY GOLF
COMPANY
|
Supplemental
Financial Information and Non-GAAP Reconciliation
|
(Unaudited)
|
(In
thousands)
|
|
|
Three Months Ended
June 30,
|
|
2018
|
|
2017
|
|
As
Reported
|
|
As
Reported
|
|
Acquisition
Costs(1)
|
|
Non-
GAAP
|
Net sales
|
$
|
396,311
|
|
|
$
|
304,548
|
|
|
$
|
—
|
|
|
$
|
304,548
|
|
Gross
profit
|
192,697
|
|
|
148,165
|
|
|
—
|
|
|
148,165
|
|
% of sales
|
48.6
|
%
|
|
48.7
|
%
|
|
—
|
|
|
48.7
|
%
|
Operating
expenses
|
118,377
|
|
|
99,120
|
|
|
2,254
|
|
|
96,866
|
|
Income (loss) from
operations
|
74,320
|
|
|
49,045
|
|
|
(2,254)
|
|
|
51,299
|
|
Other income
(expense), net
|
3,861
|
|
|
(1,521)
|
|
|
—
|
|
|
(1,521)
|
|
Income (loss) before
income taxes
|
78,181
|
|
|
47,524
|
|
|
(2,254)
|
|
|
49,778
|
|
Income tax provision
(benefit)
|
17,247
|
|
|
16,050
|
|
|
(761)
|
|
|
16,811
|
|
Net income
(loss)
|
60,934
|
|
|
31,474
|
|
|
(1,493)
|
|
|
32,967
|
|
Less: Net income
attributable to non-controlling interest
|
67
|
|
|
31
|
|
|
—
|
|
|
31
|
|
Net income (loss)
attributable to Callaway Golf Company
|
$
|
60,867
|
|
|
$
|
31,443
|
|
|
$
|
(1,493)
|
|
|
$
|
32,936
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share:
|
$
|
0.63
|
|
|
$
|
0.33
|
|
|
$
|
(0.01)
|
|
|
$
|
0.34
|
|
Weighted-average
shares outstanding:
|
96,928
|
|
|
96,197
|
|
|
96,197
|
|
|
96,197
|
|
|
(1)
Represents non-recurring costs associated with the acquisition of
Ogio International, Inc in January 2017.
|
CALLAWAY GOLF
COMPANY
|
Non-GAAP
Reconciliation and Supplemental Financial
Information
|
(Unaudited)
|
(In
thousands)
|
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
As
Reported
|
|
As
Reported
|
|
Ogio
Acquisition
Costs(1)
|
|
Non-GAAP
|
Net sales
|
$
|
799,502
|
|
|
$
|
613,475
|
|
|
$
|
—
|
|
|
$
|
613,475
|
|
Gross
profit
|
393,159
|
|
|
295,880
|
|
|
—
|
|
|
295,880
|
|
% of sales
|
49.2
|
%
|
|
48.2
|
%
|
|
—
|
|
|
48.2
|
%
|
Operating
expenses
|
232,855
|
|
|
202,628
|
|
|
6,210
|
|
|
196,418
|
|
Income (loss) from
operations
|
160,304
|
|
|
93,252
|
|
|
(6,210)
|
|
|
99,462
|
|
Other expense,
net
|
(2,173)
|
|
|
(6,642)
|
|
|
—
|
|
|
(6,642)
|
|
Income (loss) before
income taxes
|
158,131
|
|
|
86,610
|
|
|
(6,210)
|
|
|
92,820
|
|
Income tax provision
(benefit)
|
34,466
|
|
|
29,256
|
|
|
(2,098)
|
|
|
31,354
|
|
Net income
(loss)
|
123,665
|
|
|
57,354
|
|
|
(4,112)
|
|
|
61,466
|
|
Less: Net income
(loss) attributable to non-controlling interest
|
(57)
|
|
|
222
|
|
|
—
|
|
|
222
|
|
Net income (loss)
attributable to Callaway Golf Company
|
$
|
123,722
|
|
|
$
|
57,132
|
|
|
$
|
(4,112)
|
|
|
$
|
61,244
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share:
|
$
|
1.28
|
|
|
$
|
0.59
|
|
|
$
|
(0.05)
|
|
|
$
|
0.64
|
|
Weighted-average
shares outstanding:
|
96,981
|
|
|
96,073
|
|
|
96,073
|
|
|
96,073
|
|
|
(1)
Represents non-recurring costs associated with the acquisition of
Ogio International, Inc. in January 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Trailing
Twelve Month Adjusted EBITDA
|
|
2017 Trailing
Twelve Month Adjusted EBITDA
|
|
Quarter
Ended
|
|
Quarter
Ended
|
|
September
30,
|
|
December
31,
|
|
March
31,
|
|
June
30,
|
|
|
|
September
30,
|
|
December
31,
|
|
March
31,
|
|
June
30,
|
|
|
|
2017
|
|
2017
|
|
2018
|
|
2018
|
|
Total
|
|
2016
|
|
2016
|
|
2017
|
|
2017
|
|
Total
|
Net income
(loss)
|
$
|
3,060
|
|
|
$
|
(19,386)
|
|
|
$
|
62,855
|
|
|
$
|
60,867
|
|
|
$
|
107,396
|
|
|
$
|
(5,866)
|
|
|
$
|
123,271
|
|
|
$
|
25,689
|
|
|
$
|
31,443
|
|
|
$
|
174,537
|
|
Interest expense,
net
|
642
|
|
|
2,004
|
|
|
1,528
|
|
|
1,661
|
|
|
5,835
|
|
|
431
|
|
|
348
|
|
|
715
|
|
|
550
|
|
|
2,044
|
|
Income tax provision
(benefit)
|
1,486
|
|
|
(4,354)
|
|
|
17,219
|
|
|
17,247
|
|
|
31,598
|
|
|
1,294
|
|
|
(137,193)
|
|
|
13,206
|
|
|
16,050
|
|
|
(106,643)
|
|
Depreciation and
amortization expense
|
4,309
|
|
|
4,799
|
|
|
4,737
|
|
|
5,029
|
|
|
18,874
|
|
|
4,204
|
|
|
4,045
|
|
|
4,319
|
|
|
4,178
|
|
|
16,746
|
|
EBITDA
|
$
|
9,497
|
|
|
$
|
(16,937)
|
|
|
$
|
86,339
|
|
|
$
|
84,804
|
|
|
$
|
163,703
|
|
|
$
|
63
|
|
|
$
|
(9,529)
|
|
|
$
|
43,929
|
|
|
$
|
52,221
|
|
|
$
|
86,684
|
|
Ogio &
TravisMathew acquisition costs
|
3,377
|
|
|
1,677
|
|
|
—
|
|
|
—
|
|
|
5,054
|
|
|
—
|
|
|
—
|
|
|
3,956
|
|
|
2,254
|
|
|
6,210
|
|
Adjusted
EBITDA
|
$
|
12,874
|
|
|
$
|
(15,260)
|
|
|
$
|
86,339
|
|
|
$
|
84,804
|
|
|
$
|
168,757
|
|
|
$
|
63
|
|
|
$
|
(9,529)
|
|
|
$
|
47,885
|
|
|
$
|
54,475
|
|
|
$
|
92,894
|
|
CALLAWAY GOLF
COMPANY
|
Reconciliation of
Non-GAAP Third Quarter and Full Year 2017 Results
|
(Unaudited)
|
(In
thousands)
|
|
|
Three Months Ended
September 30, 2017
|
|
Total As
Reported
|
|
Acquisition
Costs(1)
|
|
Non-GAAP
|
Net sales
|
$
|
243,604
|
|
|
$
|
—
|
|
|
$
|
243,604
|
|
Gross
profit
|
104,902
|
|
|
(798)
|
|
|
105,700
|
|
% of sales
|
43.1
|
%
|
|
—
|
|
|
43.4
|
%
|
Operating
expenses
|
98,865
|
|
|
2,579
|
|
|
96,286
|
|
Income (loss) from
operations
|
6,037
|
|
|
(3,377)
|
|
|
9,414
|
|
Other expense,
net
|
(1,462)
|
|
|
—
|
|
|
(1,462)
|
|
Income (loss) before
income taxes
|
4,575
|
|
|
(3,377)
|
|
|
7,952
|
|
Income tax provision
(benefit)
|
1,486
|
|
|
(1,134)
|
|
|
2,620
|
|
Net income
(loss)
|
3,089
|
|
|
(2,243)
|
|
|
5,332
|
|
Less: Net income
attributable to non-controlling interest
|
29
|
|
|
—
|
|
|
29
|
|
Net income (loss)
attributable to Callaway Golf Company
|
$
|
3,060
|
|
|
$
|
(2,243)
|
|
|
$
|
5,303
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share:
|
$
|
0.03
|
|
|
$
|
(0.02)
|
|
|
$
|
0.05
|
|
Weighted-average
shares outstanding:
|
96,879
|
|
|
96,879
|
|
|
96,879
|
|
|
(1) Represents
non-recurring costs associated with the acquisitions of Ogio
International, Inc. in January 2017, and TravisMathew, LLC in
August 2017.
|
|
Year Ended
December 31, 2017
|
|
Total As
Reported
|
|
Acquisition
Costs(1)
|
|
Non-Cash Tax
Adjustment(2)
|
|
Non-GAAP
|
Net sales
|
$
|
1,048,736
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,048,736
|
|
Gross
profit
|
480,448
|
|
|
(2,439)
|
|
|
—
|
|
|
482,887
|
|
% of sales
|
45.8
|
%
|
|
—
|
|
|
—
|
|
|
46.0
|
%
|
Operating
expenses
|
401,611
|
|
|
8,825
|
|
|
—
|
|
|
392,786
|
|
Income (loss) from
operations
|
78,837
|
|
|
(11,264)
|
|
|
—
|
|
|
90,101
|
|
Other expense,
net
|
(10,782)
|
|
|
—
|
|
|
—
|
|
|
(10,782)
|
|
Income (loss) before
income taxes
|
68,055
|
|
|
(11,264)
|
|
|
—
|
|
|
79,319
|
|
Income tax provision
(benefit)
|
26,388
|
|
|
(4,118)
|
|
|
3,394
|
|
|
27,112
|
|
Net income
(loss)
|
41,667
|
|
|
(7,146)
|
|
|
(3,394)
|
|
|
52,207
|
|
Less: Net income
attributable to non-controlling interest
|
861
|
|
|
—
|
|
|
—
|
|
|
861
|
|
Net income (loss)
attributable to Callaway Golf Company
|
$
|
40,806
|
|
|
$
|
(7,146)
|
|
|
$
|
(3,394)
|
|
|
$
|
51,346
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share:
|
$0.42
|
|
|
($0.07)
|
|
|
($0.04)
|
|
|
$
|
0.53
|
|
Weighted-average
shares outstanding:
|
96,577
|
|
|
96,577
|
|
|
96,577
|
|
|
96,577
|
|
|
(1) Represents
non-recurring costs associated with the acquisitions of Ogio
International, Inc. in January 2017, and TravisMathew, LLC in
August 2017.
|
(2) Represents
approximately $7.5 million of non-recurring income tax expense
resulting from the 2017 Tax Cuts and Jobs Act, partially offset by
a non-recurring benefit of approximately $4.1 million related to
the revaluation of taxes on intercompany transactions, resulting
from the 2016 release of the valuation allowance against the
Company's U.S. deferred tax assets.
|
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SOURCE Callaway Golf Company