CARLSBAD, Calif., Oct. 24, 2018 /PRNewswire/ -- Callaway Golf
Company (NYSE:ELY) announced today its third quarter 2018 financial
results and increased its full year 2018 net sales and earnings
guidance.
In the third quarter of 2018, as compared to the same period in
2017, the Company's net sales increased $19
million (8%) to $263 million,
a record for the third quarter. The continued net sales growth was
led by increases in Gear, Accessories and Other (29%), Putters
(28%), Balls (14%), and Irons (7%). In addition to this sales
growth, the Company also significantly improved its profitability,
including a 77% increase in income from operations as compared to
the third quarter 2017.
As a result of this better than expected quarter, the Company
increased its full year sales guidance by $15 million - $20
million to $1,230 million -
$1,240 million as compared to prior
guidance of $1,210 million -
$1,225 million. The Company also
increased its full year 2018 earnings per share guidance to
$1.01 - $1.05 compared to prior guidance of $0.95 - $1.00.
"The third quarter results continue what has been a tremendous
year for Callaway," commented Chip
Brewer, President and Chief Executive Officer of Callaway
Golf Company. "All major regions and product categories continue to
perform at a high level, including our TravisMathew business which
we acquired in August 2017. On a
year-to-date basis, our net sales increased $205 million (24%) to $1,062 million, a record for the Company, while
gross margins increased 110 basis points, and adjusted EBITDA
increased $73 million or 63% compared
to the same period in 2017. This is a result of the continued
strength across our entire product line, favorable industry
conditions, and in the first half of the year favorable foreign
currency market conditions, as well as the investments we have made
the last couple of years in our core business and our acquired
businesses. I am pleased with our performance this year and remain
optimistic about 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 third
quarter and first nine months of 2017 excluding the non-recurring
transaction and transition expenses related to the OGIO and
TravisMathew acquisitions. 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 Third Quarter 2018 Financial Results
The Company announced the following GAAP and non-GAAP financial
results for the third quarter of 2018 (in millions, except
EPS):
2018 RESULTS
(GAAP)
|
|
NON-GAAP
PRESENTATION
|
|
Q3
2018
|
Q3
2017
|
Change
|
|
Q3 2018
GAAP
|
Q3 2017
non-GAAP
|
Change
|
Net Sales
|
$263
|
$244
|
$19
|
|
$263
|
$244
|
$19
|
Gross Profit/
% of Sales
|
$115
43.9%
|
$105
43.1%
|
$10
80 bps
|
|
$115
43.9%
|
$106
43.4%
|
$9
50 bps
|
Operating
Expenses
|
$105
|
$99
|
$6
|
|
$105
|
$96
|
$9
|
Pre-Tax
Income
|
$11
|
$5
|
$6
|
|
$11
|
$8
|
$3
|
Income Tax
Provision
|
$1
|
$1
|
$0
|
|
$1
|
$3
|
$2
|
Net Income
|
$10
|
$3
|
$7
|
|
$10
|
$5
|
$5
|
EPS
|
$0.10
|
$0.03
|
$0.07
|
|
$0.10
|
$0.05
|
$0.05
|
|
|
Q3 2018
|
Q3 2017
|
Change
|
Adj.
EBITDA
|
$17
|
$13
|
$4
|
For the third quarter of 2018, the Company's net sales increased
$19 million (8%) to $263 million, compared to $244 million for the same period in 2017. Net
sales increased in all major regions and all product categories
except Woods. The decrease in Woods sales for the quarter was
expected and is a result of the product launch timing for Woods in
2018 (on a year-to-date basis, net sales of Woods increased 4.8%).
The increase in net sales is attributable to the continued strength
of the Company's 2018 product line and brand momentum, the addition
of the TravisMathew business, and improved market conditions.
For the third quarter of 2018, the Company's gross margin
increased 80 basis points to 43.9% compared to 43.1% for the third
quarter of 2017. This increase was primarily driven by
increased average selling prices, favorable product mix, and the
TravisMathew business, which is accretive to gross margins, offset
slightly by higher product costs due to more technologically
advanced products.
Operating expenses increased $6
million to $105 million in the
third quarter of 2018 compared to $99
million for the same period in 2017. This increase is
primarily due to the addition of operating expenses from the
TravisMathew business in 2018 as well as some variable expenses
associated with higher core business net sales.
Third quarter 2018 earnings per share increased $0.07 (233%) to $0.10, compared to $0.03 for the third quarter of 2017. On a
non-GAAP basis, 2017 third quarter earnings per share was
$0.05, which excludes $0.02 per share related to the impact of the
non-recurring OGIO and TravisMathew transaction and transition
expenses. The increased earnings in 2018 are the result of the
increased sales in the core business, the addition of the
TravisMathew business, improved gross margins, operating expense
leverage, and a lower tax rate due to the tax reform legislation
enacted at the end of 2017.
Summary of First Nine Months 2018 Financial Results
The Company announced the following GAAP and non-GAAP financial
results for the first nine months of 2018 (in millions, except
EPS):
2018 RESULTS
(GAAP)
|
|
NON-GAAP
PRESENTATION
|
|
Q3 YTD
2018
|
Q3 YTD
2017
|
Change
|
|
Q3 YTD
2018 GAAP
|
Q3 YTD
2017 non-
GAAP
|
Change
|
Net Sales
|
$1,062
|
$857
|
$205
|
|
$1,062
|
$857
|
$205
|
Gross Profit/
% of Sales
|
$508
47.9%
|
$401
46.8%
|
$107
110 bps
|
|
$508
47.9%
|
$402
46.9%
|
$106
100 bps
|
Operating
Expenses
|
$337
|
$301
|
$36
|
|
$337
|
$293
|
$44
|
Pre-Tax
Income
|
$169
|
$91
|
$78
|
|
$169
|
$101
|
$68
|
Income Tax
Provision
|
$36
|
$31
|
$5
|
|
$36
|
$34
|
$2
|
Net Income
|
$133
|
$60
|
$73
|
|
$133
|
$67
|
$66
|
EPS
|
$1.37
|
$0.62
|
$0.75
|
|
$1.37
|
$0.69
|
$0.68
|
|
Q3 YTD
2018
|
Q3 YTD
2017
|
Change
|
Adj.
EBITDA
|
$188
|
$115
|
$73
|
For the first nine months of 2018, the Company's net sales
increased $205 million (24%) to a
record $1,062 million, compared to
$857 million for the same period in
2017. Net sales increased in all operating segments, all regions,
and across all product categories. The increase in net sales is
attributable to the strength of the Company's 2018 product line and
continued brand momentum, a $16
million favorable impact resulting from changes in foreign
currency rates, and improved market conditions. In addition, year
to date 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 nine months of 2018, the Company's gross margin
increased 110 basis points to 47.9% compared to 46.8% for the first
nine months 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 product line.
Operating expenses increased $36
million to $337 million in the
first nine months of 2018 compared to $301
million for the same period in 2017. This increase is
primarily due to the addition of operating expenses from the
TravisMathew business in 2018 as well as some variable expenses
associated with higher core business net sales and continued
investment in the core business.
First nine months 2018 earnings per share increased $0.75 (121%) to $1.37, compared to $0.62 for the first nine months of 2017. On a
non-GAAP basis, 2017 first nine months earnings per share was
$0.69, which excludes $0.07 per share related to the impact of the
non-recurring OGIO and TravisMathew transaction and transition
expenses. The increased earnings in 2018 reflect the increased
sales in the core business, the addition of the TravisMathew
business, improved gross margins, 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). Furthermore, the Company excluded from
full year 2017 earnings per share certain non-cash, non-recurring
tax adjustments that had a negative $0.04 per share impact on 2017 earnings per
share.
Full Year 2018
Given the Company's financial performance during the first nine
months 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
|
$1,230 - $1,240
million
|
$1,210 - $1,225
million
|
$1,049
million
|
Gross
Margins
|
46.8%
|
46.8%
|
46.0%
|
Operating
Expenses
|
$447
million
|
$445
million
|
$393
million
|
Earnings Per
Share
|
$1.01 -
$1.05
|
$0.95 -
$1.00
|
$0.53
|
The Company's revised 2018 net sales estimate of $1,230 million - $1,240
million represents an increase of $15
million - $20 million over its
prior estimate. This would result in net sales growth of 17%
- 18% in 2018 compared to 2017. The estimated incremental
sales growth compared to previous estimates is expected to be
driven by further increases in the core business (currently
estimated at 12-13% full year sales growth compared to 2017).
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 continued
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, consistent
with previous guidance.
The Company estimates that its 2018 operating expenses will
increase $2 million compared to prior
estimates. Variable expenses related to higher sales are causing
the increase. The Company continues to realize operating
expense leverage as the top line increases.
The Company increased its GAAP earnings per share guidance to
$1.01 - $1.05 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 21.0% and a base of 97 million
shares.
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 Wednesday, October 31, 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)
|
|
|
|
|
|
September 30,
2018
|
|
December 31,
2017
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
70,821
|
|
|
|
$
|
85,674
|
|
Accounts receivable,
net
|
|
130,033
|
|
|
|
94,725
|
|
Inventories
|
|
237,472
|
|
|
|
262,486
|
|
Other current
assets
|
|
34,790
|
|
|
|
23,099
|
|
Total current
assets
|
|
473,116
|
|
|
|
465,984
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
82,074
|
|
|
|
70,227
|
|
Intangible assets,
net
|
|
281,064
|
|
|
|
282,187
|
|
Deferred taxes,
net
|
|
65,045
|
|
|
|
91,398
|
|
Investment in
golf-related ventures
|
|
70,777
|
|
|
|
70,495
|
|
Other
assets
|
|
10,625
|
|
|
|
10,866
|
|
Total
assets
|
|
$
|
982,701
|
|
|
|
$
|
991,157
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
142,661
|
|
|
|
$
|
176,127
|
|
Accrued employee
compensation and benefits
|
|
38,425
|
|
|
|
40,173
|
|
Asset-based credit
facilities
|
|
4,300
|
|
|
|
87,755
|
|
Accrued warranty
expense
|
|
8,532
|
|
|
|
6,657
|
|
Other current
liabilities
|
|
2,400
|
|
|
|
2,367
|
|
Income tax
liability
|
|
10,827
|
|
|
|
1,295
|
|
Total current
liabilities
|
|
207,145
|
|
|
|
314,374
|
|
|
|
|
|
|
|
Long-term
liabilities
|
|
15,792
|
|
|
|
17,408
|
|
Total Callaway Golf
Company shareholders' equity
|
|
750,727
|
|
|
|
649,631
|
|
Non-controlling
interest in consolidated entity
|
|
9,037
|
|
|
|
9,744
|
|
Total liabilities and
shareholders' equity
|
|
$
|
982,701
|
|
|
|
$
|
991,157
|
|
CALLAWAY GOLF
COMPANY
|
CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
(In thousands,
except per share data)
|
|
|
|
Three Months
Ended
September 30,
|
|
2018
|
|
2017
|
Net sales
|
$
|
262,654
|
|
|
$
|
243,604
|
|
Cost of
sales
|
147,415
|
|
|
138,702
|
|
Gross
profit
|
115,239
|
|
|
104,902
|
|
Operating
expenses:
|
|
|
|
Selling
|
68,605
|
|
|
65,754
|
|
General and
administrative
|
26,706
|
|
|
23,957
|
|
Research and
development
|
9,229
|
|
|
9,154
|
|
Total operating
expenses
|
104,540
|
|
|
98,865
|
|
Income from
operations
|
10,699
|
|
|
6,037
|
|
Other income
(expense), net
|
376
|
|
|
(1,462)
|
|
Income before income
taxes
|
11,075
|
|
|
4,575
|
|
Income tax
provision
|
1,335
|
|
|
1,486
|
|
Net income
|
9,740
|
|
|
3,089
|
|
Less: Net income
attributable to non-controlling interest
|
223
|
|
|
29
|
|
Net income
attributable to Callaway Golf Company
|
$
|
9,517
|
|
|
$
|
3,060
|
|
|
|
|
|
Earnings per common
share:
|
|
|
|
Basic
|
$
|
0.10
|
|
|
$
|
0.03
|
|
Diluted
|
$
|
0.10
|
|
|
$
|
0.03
|
|
Weighted-average
common shares outstanding:
|
|
|
|
Basic
|
94,477
|
|
|
94,450
|
|
Diluted
|
97,320
|
|
|
96,879
|
|
|
|
|
|
|
Nine Months
Ended
September
30,
|
|
2018
|
|
2017
|
Net sales
|
$
|
1,062,156
|
|
|
$
|
857,079
|
|
Cost of
sales
|
553,758
|
|
|
456,297
|
|
Gross
profit
|
508,398
|
|
|
400,782
|
|
Operating
expenses:
|
|
|
|
Selling
|
234,826
|
|
|
205,618
|
|
General and
administrative
|
73,008
|
|
|
68,976
|
|
Research and
development
|
29,561
|
|
|
26,899
|
|
Total operating
expenses
|
337,395
|
|
|
301,493
|
|
Income from
operations
|
171,003
|
|
|
99,289
|
|
Other expense,
net
|
(1,797)
|
|
|
(8,104)
|
|
Income before income
taxes
|
169,206
|
|
|
91,185
|
|
Income tax
provision
|
35,801
|
|
|
30,742
|
|
Net income
|
133,405
|
|
|
60,443
|
|
Less: Net income
attributable to non-controlling interest
|
166
|
|
|
251
|
|
Net income
attributable to Callaway Golf Company
|
$
|
133,239
|
|
|
$
|
60,192
|
|
|
|
|
|
Earnings per common
share:
|
|
|
|
Basic
|
$1.41
|
|
|
$0.64
|
|
Diluted
|
$1.37
|
|
|
$0.62
|
|
Weighted-average
common shares outstanding:
|
|
|
|
Basic
|
94,605
|
|
|
94,246
|
|
Diluted
|
97,076
|
|
|
96,343
|
|
CALLAWAY GOLF
COMPANY
|
CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOW
|
(Unaudited)
|
(In
thousands)
|
|
|
|
Nine Months
Ended
September
30,
|
|
2018
|
|
2017
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
133,405
|
|
|
$
|
60,443
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and amortization
|
14,762
|
|
|
12,806
|
|
Inventory step-up
|
—
|
|
|
1,701
|
|
Deferred
taxes, net
|
30,123
|
|
|
32,586
|
|
Non-cash
share-based compensation
|
9,975
|
|
|
9,583
|
|
(Gain)/loss on disposal of long-lived assets
|
(30)
|
|
|
1,035
|
|
Unrealized (gains)/losses on foreign currency hedges
|
(1,138)
|
|
|
1,373
|
|
Changes in assets and
liabilities
|
(66,198)
|
|
|
(8,742)
|
|
Net cash provided by
operating activities
|
120,899
|
|
|
110,785
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(26,103)
|
|
|
(16,846)
|
|
Investments in golf
related ventures
|
(282)
|
|
|
(1,499)
|
|
Acquisitions, net of
cash acquired
|
—
|
|
|
(181,824)
|
|
Proceeds from sales
of property and equipment
|
43
|
|
|
560
|
|
Net cash used in
investing activities
|
(26,342)
|
|
|
(199,609)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
(Repayments of)
proceeds from credit facilities, net
|
(83,455)
|
|
|
58,652
|
|
Repayments of
long-term debt
|
(1,632)
|
|
|
—
|
|
Exercise of stock
options
|
1,636
|
|
|
4,205
|
|
Dividends paid,
net
|
(2,841)
|
|
|
(2,827)
|
|
Acquisition of
treasury stock
|
(22,373)
|
|
|
(16,479)
|
|
Distributions to
non-controlling interests
|
(821)
|
|
|
(974)
|
|
Net cash (used in)
provided by financing activities
|
(109,486)
|
|
|
42,577
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
76
|
|
|
2,293
|
|
Net decrease in cash
and cash equivalents
|
(14,853)
|
|
|
(43,954)
|
|
Cash and cash
equivalents at beginning of period
|
85,674
|
|
|
125,975
|
|
Cash and cash
equivalents at end of period
|
$
|
70,821
|
|
|
$
|
82,021
|
|
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
September
30,
|
|
Growth/(Decline)
|
|
Non-GAAP
Constant
Currency
vs.
2017(1)
|
|
Nine Months
Ended
September
30,
|
|
Growth
|
|
Non-GAAP
Constant
Currency
vs.
2017(1)
|
|
2018
|
|
2017
|
|
Dollars
|
|
Percent
|
|
Percent
|
|
2018
|
|
2017
|
|
Dollars
|
|
Percent
|
|
Percent
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Woods
|
$
|
52,420
|
|
|
$
|
65,846
|
|
|
$
|
(13,426)
|
|
|
-20.4%
|
|
-20.0%
|
|
$
|
275,180
|
|
|
$
|
262,697
|
|
|
$
|
12,483
|
|
|
4.8%
|
|
2.9%
|
Irons
|
65,098
|
|
|
60,830
|
|
|
4,268
|
|
|
7.0%
|
|
7.6%
|
|
271,366
|
|
|
202,126
|
|
|
69,240
|
|
|
34.3%
|
|
32.4%
|
Putters
|
24,878
|
|
|
19,437
|
|
|
5,441
|
|
|
28.0%
|
|
28.2%
|
|
86,093
|
|
|
71,172
|
|
|
14,921
|
|
|
21.0%
|
|
18.4%
|
Golf balls
|
44,661
|
|
|
39,071
|
|
|
5,590
|
|
|
14.3%
|
|
14.8%
|
|
165,465
|
|
|
136,062
|
|
|
29,403
|
|
|
21.6%
|
|
20.3%
|
Gear/Accessories/Other
|
75,597
|
|
|
58,420
|
|
|
17,177
|
|
|
29.4%
|
|
29.9%
|
|
264,052
|
|
|
185,022
|
|
|
79,030
|
|
|
42.7%
|
|
40.9%
|
|
$
|
262,654
|
|
|
$
|
243,604
|
|
|
$
|
19,050
|
|
|
7.8%
|
|
8.3%
|
|
$
|
1,062,156
|
|
|
$
|
857,079
|
|
|
$
|
205,077
|
|
|
23.9%
|
|
22.1%
|
|
(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
September
30,
|
|
Growth/(Decline)
|
|
Non-GAAP
Constant
Currency
vs.
2017(1)
|
|
Nine Months
Ended
September
30,
|
|
Growth
|
|
Non-GAAP
Constant
Currency
vs.
2017(1)
|
|
2018
|
|
2017
|
|
Dollars
|
|
Percent
|
|
Percent
|
|
2018
|
|
2017(2)
|
|
Dollars
|
|
Percent
|
|
Percent
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
$
|
142,048
|
|
|
$
|
123,817
|
|
|
$
|
18,231
|
|
|
14.7%
|
|
14.7%
|
|
$
|
608,768
|
|
|
$
|
470,335
|
|
|
$
|
138,433
|
|
|
29.4%
|
|
29.4%
|
Europe
|
33,086
|
|
|
32,470
|
|
|
616
|
|
|
1.9%
|
|
3.1%
|
|
130,613
|
|
|
119,999
|
|
|
10,614
|
|
|
8.8%
|
|
2.4%
|
Japan
|
54,434
|
|
|
53,062
|
|
|
1,372
|
|
|
2.6%
|
|
3.0%
|
|
183,375
|
|
|
147,472
|
|
|
35,903
|
|
|
24.3%
|
|
21.5%
|
Rest of
Asia
|
20,878
|
|
|
20,384
|
|
|
494
|
|
|
2.4%
|
|
2.0%
|
|
78,712
|
|
|
62,952
|
|
|
15,760
|
|
|
25.0%
|
|
20.6%
|
Other foreign
countries
|
12,208
|
|
|
13,871
|
|
|
(1,663)
|
|
|
-12.0%
|
|
-7.6%
|
|
60,688
|
|
|
56,321
|
|
|
4,367
|
|
|
7.8%
|
|
6.4%
|
|
$
|
262,654
|
|
|
$
|
243,604
|
|
|
$
|
19,050
|
|
|
7.8%
|
|
8.3%
|
|
$
|
1,062,156
|
|
|
$
|
857,079
|
|
|
$
|
205,077
|
|
|
23.9%
|
|
22.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
September
30,
|
|
Growth/(Decline)
|
|
|
|
Nine Months
Ended
September
30,
|
|
Growth
|
|
|
|
2018
|
|
2017
|
|
Dollars
|
|
Percent
|
|
|
|
2018
|
|
2017
|
|
Dollars
|
|
Percent
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Golf Club
|
$
|
142,396
|
|
|
$
|
146,113
|
|
|
$
|
(3,717)
|
|
|
-2.5%
|
|
|
|
$
|
632,639
|
|
|
$
|
535,995
|
|
|
$
|
96,644
|
|
|
18.0%
|
|
|
Golf Ball
|
44,661
|
|
|
39,071
|
|
|
5,590
|
|
|
14.3%
|
|
|
|
165,465
|
|
|
136,062
|
|
|
29,403
|
|
|
21.6%
|
|
|
Gear/Accessories/Other
|
75,597
|
|
|
58,420
|
|
|
17,177
|
|
|
29.4%
|
|
|
|
264,052
|
|
|
185,022
|
|
|
79,030
|
|
|
42.7%
|
|
|
|
$
|
262,654
|
|
|
$
|
243,604
|
|
|
$
|
19,050
|
|
|
7.8%
|
|
|
|
$
|
1,062,156
|
|
|
$
|
857,079
|
|
|
$
|
205,077
|
|
|
23.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Golf clubs
|
$
|
13,587
|
|
|
$
|
10,420
|
|
|
$
|
3,167
|
|
|
30.4%
|
|
|
|
$
|
130,925
|
|
|
$
|
83,818
|
|
|
$
|
47,107
|
|
|
56.2%
|
|
|
Golf balls
|
4,201
|
|
|
5,040
|
|
|
(839)
|
|
|
-16.6%
|
|
|
|
30,014
|
|
|
27,500
|
|
|
2,514
|
|
|
9.1%
|
|
|
Gear/Accessories/Other
|
8,482
|
|
|
6,420
|
|
|
2,062
|
|
|
32.1%
|
|
|
|
52,888
|
|
|
27,916
|
|
|
24,972
|
|
|
89.5%
|
|
|
Reconciling
items(1)
|
(15,195)
|
|
|
(17,305)
|
|
|
2,110
|
|
|
-12.2%
|
|
|
|
(44,621)
|
|
|
(48,049)
|
|
|
3,428
|
|
|
7.1%
|
|
|
|
$
|
11,075
|
|
|
$
|
4,575
|
|
|
$
|
6,500
|
|
|
142.1%
|
|
|
|
$
|
169,206
|
|
|
$
|
91,185
|
|
|
$
|
78,021
|
|
|
85.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
September 30,
|
|
|
|
2018
|
|
2017
|
|
|
|
As
Reported
|
|
As
Reported
|
|
Acquisition
Costs(1)
|
|
Non-
GAAP
|
|
|
Net sales
|
$
|
262,654
|
|
|
$
|
243,604
|
|
|
$
|
—
|
|
|
$
|
243,604
|
|
|
|
Gross
profit
|
115,239
|
|
|
104,902
|
|
|
(798)
|
|
|
105,700
|
|
|
|
% of sales
|
43.9
|
%
|
|
43.1
|
%
|
|
—
|
|
|
43.4
|
%
|
|
|
Operating
expenses
|
104,540
|
|
|
98,865
|
|
|
2,579
|
|
|
96,286
|
|
|
|
Income (loss) from
operations
|
10,699
|
|
|
6,037
|
|
|
(3,377)
|
|
|
9,414
|
|
|
|
Other income
(expense), net
|
376
|
|
|
(1,462)
|
|
|
—
|
|
|
(1,462)
|
|
|
|
Income (loss) before
income taxes
|
11,075
|
|
|
4,575
|
|
|
(3,377)
|
|
|
7,952
|
|
|
|
Income tax provision
(benefit)
|
1,335
|
|
|
1,486
|
|
|
(1,134)
|
|
|
2,620
|
|
|
|
Net income
(loss)
|
9,740
|
|
|
3,089
|
|
|
(2,243)
|
|
|
5,332
|
|
|
|
Less: Net income
attributable to non-controlling interest
|
223
|
|
|
29
|
|
|
—
|
|
|
29
|
|
|
|
Net income (loss)
attributable to Callaway Golf Company
|
$
|
9,517
|
|
|
$
|
3,060
|
|
|
$
|
(2,243)
|
|
|
$
|
5,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share:
|
$
|
0.10
|
|
|
$
|
0.03
|
|
|
$
|
(0.02)
|
|
|
$
|
0.05
|
|
|
|
Weighted-average
shares outstanding:
|
97,320
|
|
|
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.
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
2018
|
|
2017
|
|
|
As
Reported
|
|
As
Reported
|
|
Acquisition
Costs(1)
|
|
Non-
GAAP
|
|
Net sales
|
$
|
1,062,156
|
|
|
$
|
857,079
|
|
|
$
|
—
|
|
|
$
|
857,079
|
|
|
Gross
profit
|
508,398
|
|
|
400,782
|
|
|
(798)
|
|
|
401,580
|
|
|
% of sales
|
47.9
|
%
|
|
46.8
|
%
|
|
—
|
|
|
46.9
|
%
|
|
Operating
expenses
|
337,395
|
|
|
301,493
|
|
|
8,789
|
|
|
292,704
|
|
|
Income (loss) from
operations
|
171,003
|
|
|
99,289
|
|
|
(9,587)
|
|
|
108,876
|
|
|
Other expense,
net
|
(1,797)
|
|
|
(8,104)
|
|
|
—
|
|
|
(8,104)
|
|
|
Income (loss) before
income taxes
|
169,206
|
|
|
91,185
|
|
|
(9,587)
|
|
|
100,772
|
|
|
Income tax provision
(benefit)
|
35,801
|
|
|
30,742
|
|
|
(3,232)
|
|
|
33,974
|
|
|
Net income
(loss)
|
133,405
|
|
|
60,443
|
|
|
(6,355)
|
|
|
66,798
|
|
|
Less: Net income
attributable to non-controlling interest
|
166
|
|
|
251
|
|
|
—
|
|
|
251
|
|
|
Net income (loss)
attributable to Callaway Golf Company
|
$
|
133,239
|
|
|
$
|
60,192
|
|
|
$
|
(6,355)
|
|
|
$
|
66,547
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share:
|
$
|
1.37
|
|
|
$
|
0.62
|
|
|
$
|
(0.07)
|
|
|
$
|
0.69
|
|
|
Weighted-average
shares outstanding:
|
97,076
|
|
|
96,343
|
|
|
96,343
|
|
|
96,343
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Represents non-recurring costs associated with the acquisitions of
Ogio International, Inc. in January 2017 and TravisMathew, LLC in
August 2017.
|
CALLAWAY GOLF
COMPANY
|
Non-GAAP
Reconciliation and Supplemental Financial
Information
|
(Unaudited)
|
(In
thousands)
|
|
|
|
|
|
2018 Trailing
Twelve Month Adjusted EBITDA
|
|
2017 Trailing
Twelve Month Adjusted EBITDA
|
|
Quarter
Ended
|
|
Quarter
Ended
|
|
December
31,
|
|
March
31,
|
|
June
30,
|
|
September
30,
|
|
|
|
December
31,
|
|
March
31,
|
|
June
30,
|
|
September
30,
|
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
Total
|
|
2016
|
|
2017
|
|
2017
|
|
2017
|
|
Total
|
Net income
(loss)
|
$
|
(19,386)
|
|
|
$
|
62,855
|
|
|
$
|
60,867
|
|
|
$
|
9,517
|
|
|
$
|
113,853
|
|
|
$
|
123,271
|
|
|
$
|
25,689
|
|
|
$
|
31,443
|
|
|
$
|
3,060
|
|
|
$
|
183,463
|
|
Interest expense,
net
|
2,004
|
|
|
1,528
|
|
|
1,661
|
|
|
1,056
|
|
|
6,249
|
|
|
348
|
|
|
715
|
|
|
550
|
|
|
642
|
|
|
2,255
|
|
Income tax provision
(benefit)
|
(4,354)
|
|
|
17,219
|
|
|
17,247
|
|
|
1,335
|
|
|
31,447
|
|
|
(137,193)
|
|
|
13,206
|
|
|
16,050
|
|
|
1,486
|
|
|
(106,451)
|
|
Depreciation and
amortization expense
|
4,799
|
|
|
4,737
|
|
|
5,029
|
|
|
4,996
|
|
|
19,561
|
|
|
4,045
|
|
|
4,319
|
|
|
4,178
|
|
|
4,309
|
|
|
16,851
|
|
EBITDA
|
$
|
(16,937)
|
|
|
$
|
86,339
|
|
|
$
|
84,804
|
|
|
$
|
16,904
|
|
|
$
|
171,110
|
|
|
$
|
(9,529)
|
|
|
$
|
43,929
|
|
|
$
|
52,221
|
|
|
$
|
9,497
|
|
|
$
|
96,118
|
|
Ogio &
TravisMathew acquisition costs
|
1,677
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,677
|
|
|
—
|
|
|
3,956
|
|
|
2,254
|
|
|
3,377
|
|
|
9,587
|
|
Adjusted
EBITDA
|
$
|
(15,260)
|
|
|
$
|
86,339
|
|
|
$
|
84,804
|
|
|
$
|
16,904
|
|
|
$
|
172,787
|
|
|
$
|
(9,529)
|
|
|
$
|
47,885
|
|
|
$
|
54,475
|
|
|
$
|
12,874
|
|
|
$
|
105,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CALLAWAY GOLF
COMPANY
|
Reconciliation of
Non-GAAP Third Quarter and Full Year 2017 Results
|
(Unaudited)
|
(In
thousands)
|
|
|
|
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