<SEC-DOCUMENT>0001193125-16-691335.txt : 20161006
<SEC-HEADER>0001193125-16-691335.hdr.sgml : 20161006
<ACCEPTANCE-DATETIME>20160825134754
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ACCESSION NUMBER:		0001193125-16-691335
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20160825

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CALLAWAY GOLF CO
		CENTRAL INDEX KEY:			0000837465
		STANDARD INDUSTRIAL CLASSIFICATION:	 [3949]
		IRS NUMBER:				953797580
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		2180 RUTHERFORD RD
		CITY:			CARLSBAD
		STATE:			CA
		ZIP:			92008-8815
		BUSINESS PHONE:		7609311771

	MAIL ADDRESS:	
		STREET 1:		2180 RUTHERFORD ROAD
		CITY:			CARLSBAD
		STATE:			CA
		ZIP:			92008

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CALLAWAY GOLF
		DATE OF NAME CHANGE:	20070604

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CALLAWAY GOLF CO
		DATE OF NAME CHANGE:	20070604

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CALLAWAY GOLF CO /CA
		DATE OF NAME CHANGE:	19940222
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<TYPE>CORRESP
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right">August&nbsp;25, 2016 </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">United States Securities and Exchange Commission </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Division of
Corporation Finance </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">100 F Street, N.E. </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Washington, D.C.
20549 </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Attention: Andrew Mew, Senior Assistant Chief Accountant </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD VALIGN="top"><B>Re:</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Callaway Golf Company</B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Form 10-K
for Fiscal Year Ended December&nbsp;31, 2015</B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Filed March&nbsp;4, 2016</B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman"><B>File No.&nbsp;001-10962</B></P></TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Dear Mr.&nbsp;Mew: </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">This letter is in response to the comment letter dated August&nbsp;4, 2016, of the Staff of the Division of Corporation Finance (the
&#147;Staff&#148;) regarding the above-referenced filing for Callaway Golf Company (the &#147;Company&#148;). Set forth below is the Staff&#146;s comment followed by the Company&#146;s response. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Form 10-K for the Year Ended December&nbsp;31, 2015 </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Management&#146;s Discussion and Analysis Years ended December&nbsp;31, 2015 and 2014, page 28 </U></B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Staff Comment: </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>1.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Within your MD&amp;A disclosures, we note you discuss several reasons for the change in sales between periods, including a shift in product launch timing and softer market conditions. In addition, on page 30 you
describe price increases on certain current year products. Please revise your discussion within this section to quantify the extent to which changes in net sales from year to year are attributable to increases in prices or volume sold. See
Item&nbsp;303(a)(3)(iii) of Regulation S-K. Additionally, in light of the numerous factors disclosed affecting gross profit and segment profitability measures, please revise to quantify each factor attributable to the change, or provide amounts
necessary to put these changes in proper context. </B></TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Company&#146;s Response: </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">We respectfully acknowledge the Staff&#146;s comment. The Company will provide additional disclosure in future filings in accordance with
Item&nbsp;303(a)(3)(iii) of Regulation S-K to quantify the extent to which significant changes in net sales year over year are attributable to increases in prices or volumes sold. This level of detail will be provided at the product category level
rather than at the consolidated net sales level as it more relevant and meaningful to discuss changes in volume and price by product, and in order to avoid </P>

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redundancy. We will also quantify significant factors affecting gross profit and segment profitability. The following are examples of the additional disclosures as applied to the Company&#146;s
comparative consolidated gross profit, net sales for the woods product category and segment profitability for the golf balls segment for the years ended December&nbsp;31, 2015 and 2014. The examples have been marked to show the changes from the
Company&#146;s prior disclosures. Similar disclosures also will be included in future filings for segment profitability for the golf clubs operating segment and for net sales for the other product categories. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Example: Gross Profit </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">Gross profit
decreased $0.3 million to $357.6 million in 2015 from $357.9 million in 2014. Gross profit as a percent of net sales (&#147;gross margin&#148;) increased 200 basis points to 42.4% in 2015 from 40.4% in 2014. This increase in gross margin was
primarily due to <STRIKE>(i)&nbsp;</STRIKE><U>an improvement of 419 basis points in price and product mix as a result of</U> a favorable shift in product mix within the irons, putters and golf ball categories<STRIKE>; (ii)</STRIKE><U>,</U> an
increase in average selling prices, primarily within the woods category<STRIKE>; (iii)</STRIKE><U>&nbsp;and</U> a decrease in closeouts and promotional activity<STRIKE>; and (iv)</STRIKE><U>, combined with an increase of 244 basis points as a result
of a decline in production costs due to </U>improved operational efficiencies. These <STRIKE>increases</STRIKE><U> improvements</U> were partially offset by the decrease in net sales as discussed above, <STRIKE>unfavorable</STRIKE><U> the negative
impact of</U> changes in foreign currency <STRIKE>exchange </STRIKE>rates <STRIKE>period over period, and</STRIKE><U> on the Company&#146;s sales in foreign regions, which impacted gross margin by 396 basis points, and </U>an increase in club
component costs, <U>which negatively impacted gross margin by 65 basis points </U>due to higher cost materials and technology incorporated into certain hybrid and putter product models. On a constant currency basis, gross margin would have increased
by 510 basis points in 2015 compared to the gross margin reported in 2014. For a further discussion of gross margin, see &#147;Segment Profitability&#148; below. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Example: Sales by Product </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">Net sales of
woods decreased $47.3 million (18%)&nbsp;to $222.2 million for the year ended December&nbsp;31, 2015 compared to the prior year. <U>In 2015, changes in foreign currency rates had a negative impact of 6% on net sales of woods.</U> On a constant
currency basis, net sales of woods would have decreased by 12% compared to the reported net sales in 2014. This decrease resulted from a <U>15%</U> decline in sales volume primarily due to a shift in product launch timing resulting in fewer woods
product launches during 2015 compared to the prior year. This was partially offset by <U>a 3% increase in average selling prices as a result of</U> price increases on certain current year products compared to their predecessors in 2014. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Example: Segment Profitability </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">Pre-tax
income in the Company&#146;s golf balls operating segment improved to $17.7 million for 2015 from $15.2 million for 2014. This increase was attributable to <STRIKE>an increase in gross margin as well as an</STRIKE><U> a $6.1 million </U>increase in
net sales as discussed above<STRIKE>, offset by</STRIKE><U> combined with a $1.0 decrease in cost of goods sold, which resulted in a $7.1 million increase in gross profit (or </U>an increase <STRIKE>in operating expenses. </STRIKE><U>of 100 basis
points in gross</U> </P>

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<U>margin).</U> The increase in gross margin was primarily due to a <U>62 basis point improvement as a result of a </U>favorable shift in <U>price and</U> product mix due to sales of
<STRIKE>the</STRIKE> higher margin Chrome Soft golf balls in 2015, compared to <STRIKE>higher</STRIKE> sales of lower margin mid- and value-priced golf balls in 2014, partially offset by unfavorable changes in foreign currency exchange rates period
over period. The increase in <U>gross profit was partially offset by a $4.6 million increase in</U> operating expenses <STRIKE>was due to</STRIKE> <U>resulting primarily from</U> an increase in marketing spending on golf balls period over period,
partially offset by favorable changes in foreign currency exchange rates on expenses. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Acknowledgment </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">As requested, the Company acknowledges the following: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
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<TD ALIGN="left" VALIGN="top">the company is responsible for the adequacy and accuracy of the disclosure in the filing; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
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<TD ALIGN="left" VALIGN="top">staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
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<TD ALIGN="left" VALIGN="top">the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. </TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Please contact Brian Lynch at (760)&nbsp;804-4056 if you have any further questions or require any further information. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Very truly yours, </P><DIV ALIGN="right">
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<TD VALIGN="top" STYLE="BORDER-BOTTOM:1px solid #000000">/s/ Jennifer Thomas</TD></TR>
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<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Jennifer Thomas</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Vice President</I></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman"><I>and Chief Accounting Officer</I></P></TD></TR>
</TABLE></DIV> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Cc: Ms.&nbsp;Kristin Shifflett </P>
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