Segment Information

6 Months Ended

Jun. 30, 2019

Note 18. Segment Information

As of December 31, 2018, the Company had three operating and reportable segments, namely Golf Clubs, Golf Balls and Gear, Accessories and Other. Due to the Company's acquisition of the outdoor apparel company Jack Wolfskin in January 2019, combined with the continued growth of TravisMathew and OGIO branded soft goods, the Company anticipates significant future

growth in its soft goods business. The Company therefore reassessed its operating segments during the first quarter of 2019 and evaluated its global business platform, including its management structure, operations, supply chain and distribution, and changed the composition of its operating and reportable segments on the basis of golf equipment and soft goods products. As a result, and based on the Company's assessment, as of January 1, 2019, the Company has two reportable operating segments, namely the Golf Equipment operating segment and the Apparel, Gear and Other operating segment. The Company's Golf Equipment reportable segment consists of Callaway Golf branded woods, hybrids, irons, wedges, Odyssey putters, including Toulon Design putters by Odyssey, packaged sets, Callaway Golf and Strata branded golf balls and sales of pre-owned golf clubs. The Apparel, Gear and Other reportable segment consists of Jack Wolfskin, TravisMathew and OGIO branded apparel, gear and accessories, and Callaway branded golf apparel and footwear, golf bags, golf gloves, travel gear, headwear and other golf-related accessories, and royalties from licensing of the Company’s trademarks and service marks for various soft goods products. Comparative periods have been reclassified to reflect these changes. There are no significant intersegment transactions.

The tables below contain information utilized by management to evaluate its operating segments for the interim periods presented (in thousands).



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018⁽¹⁾			2019			2018⁽¹⁾
Net sales:
Golf Equipment	$	292,353		$	298,684		$	615,972		$	611,047
Apparel, Gear and Other	154,355			97,627			346,933			188,455
	$	446,708		$	396,311		$	962,905		$	799,502
Income before income taxes:
Golf Equipment	$	55,665		$	63,948		$	125,658		$	141,457
Apparel, Gear and Other	11,314			24,082			34,033			43,531
Reconciling items⁽²⁾	(30,873		)	(9,849		)	(65,528		)	(26,857		)
	$	36,106		$	78,181		$	94,163		$	158,131
Additions to long-lived assets:
Golf Equipment	$	7,924		$	8,837		$	13,341		$	14,270
Apparel, Gear and Other	4,289			1,176			8,682			2,558
	$	12,213		$	10,013		$	22,023		$	16,828


(1)	The Company changed its operating segments as of January 1, 2019. Accordingly, prior period amounts have been reclassified to conform with the current period presentation.

(2)

Reconciling items represent corporate general and administrative expenses and other income (expense) not included by management in determining segment profitability. The increase in reconciling items for the three and six months ended June 30, 2019 compared to 2018 includes incremental corporate general and administrative expenses associated with the addition of the Jack Wolfskin business in January 2019, as well as non-recurring charges of $1,603,000 and $6,326,000 for the three and six months ended June 30, 2019, respectively, primarily related to the acquisition of Jack Wolfskin that was completed in January 2019. Reconciling items also include incremental interest expense of $8,436,000 and $16,547,000, for the three and six months ended June 30, 2019, respectively, due to the new Term Loan Facility to fund the purchase of Jack Wolfskin combined with higher outstanding borrowings on the Company's credit facilities period over period. See Note 5 for information on the Company's credit facilities and long-term debt obligations.



	June 30, 2019		December 31, 2018⁽¹⁾
Total Assets:
Golf Equipment	$	387,501	$	437,604
Apparel, Gear and Other	973,065		269,432
Reconciling items⁽²⁾	576,655		345,908
	$	1,937,221	$	1,052,944
Goodwill:
Golf Equipment	$	26,204	$	26,183
Apparel, Gear and Other	183,569		29,633
	$	209,773	$	55,816


(1)	The Company changed its operating segments as of January 1, 2019. Accordingly, prior period amounts have been reclassified to conform with the current period presentation.

(2)

Total assets by reportable segment are comprised of net inventory, certain property, plant and equipment, intangible assets and goodwill. Reconciling items represent unallocated corporate assets not segregated between the three segments including cash and cash equivalents, net accounts receivable, and deferred tax assets.