Callaway 2015 Annual Report Download - page 86

Download and view the complete annual report

Please find page 86 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-16
Other Income (Expense), Net
Other income (expense), net primarily includes gains and losses on foreign currency forward contracts and foreign
currency transactions. The components of other income (expense), net are as follows:
Years Ended December 31,
2015 2014 2013
(In thousands)
Foreign currency forward contract gains, net ................................................................. $ 2,877 $ 6,356 $ 6,764
Foreign currency transaction losses, net......................................................................... (1,611)(6,198)(821)
Other ............................................................................................................................... 199 (206)62
$ 1,465 $ (48) $ 6,005
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) includes the impact of foreign currency translation adjustments and
the change in fair value of derivative instruments designated for hedge accounting. As the Company has met the permanent
reinvestment criteria, it does not accrue income taxes on foreign currency translation adjustments. The total equity adjustment
from foreign currency translation included in accumulated other comprehensive income were losses of $11,542,000 and
$12,973,000 as of December 31, 2015 and 2014, respectively. The total equity adjustment from the change in fair value of
derivative instruments was a net gain of $525,000 as of December 31, 2015. The Company did not have derivative instruments
that qualified for hedge accounting as of December 31, 2014. See Note 16 "Derivatives and Hedging" for a tabular roll-forward
of accumulated other comprehensive income (loss).
Segment Information
The Company’s operating segments are organized on the basis of products and consist of golf clubs and golf balls. The
golf clubs segment consists primarily of Callaway Golf woods, hybrids, irons, wedges and putters as well as Odyssey putters,
pre-owned clubs, golf-related accessories and royalties from licensing of the Company’s trademarks and service marks. The
golf balls segment consists of Callaway Golf balls that are designed, manufactured and sold by the Company. The Company
also discloses information about geographic areas. This information is presented in Note 18 “Segment Information.”
Concentration of Risk
The Company operates in the golf equipment industry and has a concentrated customer base, which is primarily comprised
of golf equipment retailers (including pro shops at golf courses and off-course retailers), sporting goods retailers and mass
merchants and foreign distributors. On a consolidated basis, no one customer accounted for more than 9% of the Company’s
consolidated revenues in 2015, and no one customer accounted for more than 8% of the Company's consolidated revenue in
each of 2014 and 2013. The Company's top five customers accounted for approximately 26% of the Company's consolidated
revenues in 2015, 25% in 2014 and 23% in 2013. With respect to the Company's segments, in 2015 and 2014, the Company's
top five golf club customers accounted for approximately 25% of total consolidated golf club sales, and approximately 23%
of total consolidated golf club sales in 2013. The top five golf ball customers accounted for approximately 30% of total
consolidated golf ball sales in each of 2015 and 2014, and 27% in 2013. A loss of one or more of these customers could have
a significant effect on the Company's net sales.
With respect to the Company's trade receivables, the Company performs ongoing credit evaluations of its customers’
financial condition and generally requires no collateral from these customers. The Company maintains reserves for estimated
credit losses, which it considers adequate to cover any such losses. At December 31, 2015, the Company had one customer
with an outstanding balance greater than 10% of the Company's outstanding consolidated accounts receivable. At December
31, 2014, no single customer represented over 9% of the Company’s outstanding accounts receivable balance. Managing
customer-related credit risk is more difficult in regions outside of the United States. Of the Company’s total net sales,
approximately 47% was derived from sales outside of the United States in 2015, and approximately 52% in each of 2014 and
2013, respectively. Prolonged unfavorable economic conditions could significantly increase the Company’s credit risk with
respect to its outstanding accounts receivable.
The Company is dependent on a limited number of suppliers for its clubheads and shafts, some of which are single
sourced. Furthermore, some of the Company’s products require specially developed manufacturing techniques and processes