United States securities and exchange commission logo
December 21, 2020
Brian Lynch
Executive Vice President, Chief Financial Officer
CALLAWAY GOLF CO
2180 Rutherford Road
Carlsbad, CA 92008
Re: CALLAWAY GOLF CO
Registration
Statement on Form S-4
Filed November 24,
2020
File No. 333-250903
Dear Mr. Lynch:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form S-4 filed November 24, 2020
Treatment of Topgolf Equity Awards . . .,, page 5
1. Please provide an
example that shows how the formula you discuss will operate in
practice.
Completion of the Merger may trigger change in control . . .,, page 30
2. Please revise to
clarify whether the change in control provisions discussed here will
actually be triggered
and, if so, quantify the amounts to be paid.
The Merger, page 82
3. Based on your
disclosures within this filing and on page 27 of your Form 10-Q for the
Brian Lynch
FirstName LastNameBrian
CALLAWAY GOLF CO Lynch
Comapany21,
December NameCALLAWAY
2020 GOLF CO
December
Page 2 21, 2020 Page 2
FirstName LastName
quarterly period ended September 30, 2020, we note that you have made
multiple
investments in Topgolf International, Inc. ("Topgolf"), resulting in
an ownership interest
of approximately 14.3%, and that you account for the investment at
cost less
impairments. Please address the following comments related to your
pre-existing
Topgolf investment:
Tell us, in number of shares and dollar amounts, how your
investment balance is split
between common and preferred stock. Also tell us, by fiscal year,
each material
investment you have made.
Considering your investment balance has included several
discrete purchases over
time, including a Series H preferred stock investment in
September 2020, please tell
us why such subsequent investments do not represent observable
price changes in
orderly transactions under ASC 321-10-35-2 that require
remeasurement of your
investment.
Certain Topgolf Unaudited Financial Forecasts, page 113
4. Please revise to explain the assumptions underlying the forecasted
revenue growth for the
years presented. Include any material assumptions related to COVID-19
and its effect on
your business.
Equity Awards Under the 2004 Incentive Plan, page 116
5. Please revise to clarify the performance conditions applicable to the
PRSUs awarded in
connection with the merger.
Topgolf Make-Whole Payments, page 120
6. Please disclose who received the payments and the amounts received.
Grant of Callaway Equity Awards, page 121
7. We note that "certain" employees, including Mr. Davenport, will
receive the equity
awards you discuss. Revise to clarify who are these employees and the
amounts of the
awards. We note, in this regard, the disclosure on page 96 that the
purpose of such awards
is to incentivize the Topgolf management team.
Consequences of the Merger to U.S. Holders of Topgolf Stock, page 125
8. We note that you intend for the transaction to qualify as a
reorganization under Section
368(a) of the Code, please revise your disclosures here to more
clearly state counsel's tax
opinion on whether the transaction will qualify as a reorganization.
Also, state in your
disclosure here that the discussion is the opinion of tax counsel.
Whenever there is
significant doubt about the tax consequences of the transaction, it is
permissible for the tax
opinion to use should rather than will, but counsel
providing the opinion must explain
Brian Lynch
FirstName LastNameBrian
CALLAWAY GOLF CO Lynch
Comapany21,
December NameCALLAWAY
2020 GOLF CO
December
Page 3 21, 2020 Page 3
FirstName LastName
why it cannot give a will opinion and describe the degree of
uncertainty in the opinion.
Please refer to Sections III.B and C of Staff Legal Bulletin 19. Add
risk factor disclosure,
as appropriate.
Topgolf's Management's Discussion and Analysis of Financial Condition and
Results of
Operations
Topgolf Performance Measures, page 199
9. You disclose on the top of page 201 that the change in Topgolf's same
venue sales was
(15.8)% for the first three quarters of 2020. Please explicitly
disclose within this section
that the measure excludes venues that were closed as a result of the
COVID-19 pandemic.
Exclusive Forum, page 251
10. We note that your forum selection provision identifies the Court of
Chancery of the State
of Delaware as the exclusive forum for certain litigation, including
any derivative
action. Please disclose whether this provision applies to actions
arising under the
Securities Act or Exchange Act. In that regard, we note that Section
27 of the Exchange
Act creates exclusive federal jurisdiction over all suits brought to
enforce any duty or
liability created by the Exchange Act or the rules and regulations
thereunder, and Section
22 of the Securities Act creates concurrent jurisdiction for federal
and state courts over all
suits brought to enforce any duty or liability created by the
Securities Act or the rules and
regulations thereunder. If the provision applies to Securities Act
claims, please also revise
your prospectus to state that there is uncertainty as to whether a
court would enforce such
provision and that investors cannot waive compliance with the federal
securities laws and
the rules and regulations thereunder. If this provision does not apply
to actions arising
under the Securities Act or Exchange Act, please also ensure that the
exclusive forum
provision in the governing documents states this clearly, or tell us
how you will inform
investors in future filings that the provision does not apply to any
actions arising under the
Securities Act or Exchange Act.
Topgolf International, Inc. Audited Consolidated Financial Statements
Report of Independent Auditors, page F-2
11. Please have the auditors revise their report to correctly opine on the
consolidated financial
position of Topgolf International, Inc. at December 29, 2019 and
December 30, 2018, and
the results of its operations and its cash flows for the three years
then ended.
Notes to Consolidated Financial Statements
Property and Equipment, page F-9
12. We note your disclosure that buildings capitalized in conjunction with
deemed landlord
financings are depreciated, less residual value, over the 20 year term
of the lease. Please
tell us the specific building assets that you believe will have
residual value at the end of
the lease term and explain why they will have value that is
recoverable by you in the event
Brian Lynch
CALLAWAY GOLF CO
December 21, 2020
Page 4
the lease is not renewed. In addition, tell us your basis in GAAP for
deducting residual
value in arriving at the depreciation expense recorded over the
20-year lease term and
explain how you arrived at the residual values used.
Revenue Recognition, page F-10
13. We note that you recognize revenues from purchases of virtual currency
over the average
life of a player. Please quantify for us the amount of these revenues
and tell us why you
do not recognize such revenues when the virtual currency is redeemed.
In addition, tell us
if you recognize virtual currency sales on a gross or net basis for
purchases made through
storefronts and payment processors and explain how you determined your
treatment
complied with ASC 606-10-55-36 through -40. We note your disclosure on
page 187 that
storefronts "generally" charge you 30% of customer payments.
Note 10. Leases, page F-21
14. Please clarify for us how you account for leasing arrangements under
ASC 842 where you
are deemed the owner of the assets during construction. In doing so,
ensure your response
addresses the following items:
Citing authoritative accounting guidance, specify how you
account for these
arrangements prior to and upon commencement of the lease. Explain
how you
evaluate them under sale and leaseback guidance and tell us
whether and the extent to
which you account for the transfers as sales and/or financings.
See ASC 842-40-25
and ASC 842-40-30.
We note that you capitalize the construction costs funded by
landlords related to
leased premises and "recognize a corresponding liability for
those costs as
construction advances during the construction period or deemed
landlord financing
following the opening of the venue." Tell us and disclose the
amount of this
obligation that relates to advances during the construction
period and the amount that
relates to post-opening deemed landlord financing. Also tell us,
and revise your
disclosures to clarify, if the post-opening obligation represents
financing obligations
related to transactions that did not qualify as sales.
We note your disclosure in footnote 6 on page F-18 that your
"buildings" line item
includes capitalized landlord construction costs where you are deemed
to be the
accounting owner. To the extent not addressed above, tell us and
revise your
disclosures to specify what this balance represents. For example,
disclose if the
FirstName LastNameBrian Lynch
balance represents leased assets related to transactions accounted
for as financings.
Comapany NameCALLAWAY GOLF CO
21,
December To 2020
the extent
Page applicable,
4 provide the disclosures required by ASC
842-40-50-2.
FirstName LastName
Brian Lynch
FirstName LastNameBrian
CALLAWAY GOLF CO Lynch
Comapany21,
December NameCALLAWAY
2020 GOLF CO
December
Page 5 21, 2020 Page 5
FirstName LastName
Note 16. Commitments and Contingencies, page F-31
15. We note from your disclosure on page F-24 that you recorded a
regulatory settlement
reserve of approximately $1.8 million during fiscal 2019. To the
extent it is reasonably
possible you will incur losses in excess of recorded amounts related
to this and/or
other contingent liabilities, please provide the applicable
disclosures required by ASC
450-20-50-3 through -4, including the amount or range of reasonably
possible losses in
excess of recorded amounts. Alternatively, if no amount of loss in
excess of recorded
amounts is believed to be reasonably possible, please state this in
your disclosure.
Unaudited Pro Forma Condensed Combined Financial Statements, page F-53
16. We note your disclosure on pages 116 and 121 that you will grant
restricted stock units
and performance-based restricted stock units to your executive
officers and "certain
employees" of Topgolf in connection with the merger. Considering these
awards are
being granted in connection with the merger and vest over several
years, please reflect
their impact within your pro forma balance sheet and statements of
operations or tell us
why you believe such pro forma adjustments are not required.
Unaudited Pro Forma Condensed Combined Balance Sheet, page F-54
17. We note your disclosure on page 120 that a consulting agreement with
WestRiver
Management, LLC will terminate upon consummation of the merger and
require a
termination payment. Please reflect this termination fee within your
pro forma balance
sheet or tell us why you believe a pro forma adjustment is not
required.
18. We note your disclosure on page F-61 that you recorded a pro forma
adjustment
to eliminate Topgolf's historical accumulated deficit balance of
$840.9 million. Please tell
us and disclose the nature of the remaining adjustments to the
retained earnings line item.
Notes to Unaudited Pro Forma Condensed Combined Financial Statements, page F-57
19. We note the disclosure on page 42 of your Form 10-Q for the quarterly
period ended
September 30, 2020 that, in response to the COVID-19 pandemic, there
were temporary
reductions in salaries and certain benefits for all employees and
voluntary reductions in
compensation by the Board of Directors, the Chief Executive Officer
and other members
of senior management. We also note the disclosure on page 120 of the
Form S-4
that Topgolf was permitted under the merger agreement to pay
make-whole payments to
Topgolf service providers who had taken voluntary reductions in
salaries in response to
the COVID-19 pandemic, including all of Topgolf s executive
officers. Please tell us and
disclose within the footnotes of your pro forma financial statements
the nature and amount
of any "temporary" expense reductions that are not reflected in the
historical financial
statements but will resume going forward.
20. We note that the accumulated deficit, net loss before income taxes and
net loss amounts
presented in the historical Topgolf columns of the pro forma
statements are not consistent
Brian Lynch
CALLAWAY GOLF CO
December 21, 2020
Page 6
with its historical financial statements elsewhere in the filing. Please
revise the basis of
presentation note to briefly describe the reclassifications or other
adjustments made that
resulted in these changes to the Topgolf historical financial statements,
or advise us.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Andrew Blume at (202) 551-3254 or Martin James, Senior
Advisor, at
(202) 551-3671 if you have questions regarding comments on the financial
statements and
related matters. Please contact Geoff Kruczek at (202) 551-3641 or Jay Ingram,
Legal Branch
Chief, at (202) 551-3397 with any other questions.
Sincerely,
FirstName LastNameBrian Lynch
Division of
Corporation Finance
Comapany NameCALLAWAY GOLF CO
Office of
Manufacturing
December 21, 2020 Page 6
cc: Craig Garner
FirstName LastName