Callaway 2015 Annual Report Download - page 106

Download and view the complete annual report

Please find page 106 of the 2015 Callaway annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 118

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118

F-36
Fair
Value Level 1 Level 2 Level 3
2015
Foreign currency forward contracts —asset position............................................ $ 680 $ — $ 680 $ —
Foreign currency forward contracts —liability position ....................................... (342)—
(342)—
$ 338 $ — $ 338 $ —
2014
Foreign currency forward contracts —asset position............................................ $ 40 $ — $ 40 $ —
Foreign currency forward contracts —liability position ....................................... (246)—
(246)—
$(206)$ — $ (206)$ —
The fair value of the Company’s foreign currency forward contracts is based on observable inputs that are corroborated
by market data. Gains and losses from the remeasurement of qualifying hedges are recorded as a component of other
comprehensive income and released into earnings as a component of cost of goods sold 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).
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. In 2015, 2014 and 2013, the Company did not recognize
any impairment losses on these assets.
Disclosures about the Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable, trade payables and accrued expenses at
December 31, 2015 and 2014 are reasonable estimates of fair value due to the short-term nature of these balances and are
therefore classified as Level 1. The table below illustrates information about fair value relating to the Company’s financial
assets and liabilities that are recognized on the accompanying consolidated balance sheets as of December 31, 2015 and 2014,
as well as the fair value of contingent contracts that represent financial instruments (in thousands):
December 31, 2015 December 31, 2014
Carrying
Value Fair Value
Carrying
Value Fair Value
Convertible notes(1)..................................................................................... $ — $ — $ 108,574 $ 126,222
ABL Facility(2) ............................................................................................ $ — $ — $ 15,235 $ 15,235
Japan ABL Facility(2) .................................................................................. $ 14,969 $ 14,969 $ — $ —
Standby letters of credit(3)........................................................................... $ 1,030 $ 1,030 $ 1,142 $ 1,142
(1) In 2015, the convertible notes were eliminated pursuant to certain exchange transactions and shareholder conversions,
which resulted, among other things, in the issuance of shares of the Company's common stock (see Note 3). The carrying
value of the convertible notes at December 31, 2014 is net of the unamortized discount of $3,926,000. The fair value of
the convertible notes was determined based on secondary quoted market prices, and as such is classified as Level 2 in
the fair value hierarchy.
(2) The carrying value of amounts outstanding under the Company's ABL Facility and Japan ABL Facility approximates the
fair value due to the short term nature of this obligation. The fair value of this debt is categorized within Level 2 of the
fair value hierarchy. See Note 3 for information on the ABL Facility, including certain risks and uncertainties.
(3) 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. There were no amounts outstanding under
these letters of credit at December 31, 2015 or 2014. The fair value of this contingent obligation is categorized within
Level 2 of the fair value hierarchy.