SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
or
[_] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ____________________
Commission file number 1-10962
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
CALLAWAY GOLF COMPANY
401(k) PROFIT SHARING PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
CALLAWAY GOLF COMPANY
2285 RUTHERFORD ROAD
CARLSBAD, CA 92008
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Callaway Golf Company 401(k) Profit
Sharing Plan
Report, Financial Statements and
Supplemental Schedule
December 31, 1999 and 1998
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Callaway Golf Company
401(k) Profit Sharing Plan
Index to Report, Financial Statements and Supplemental Schedule
December 31, 1999 and 1998
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Page
Report of Independent Accountants 4
Financial Statements:
Statements of Net Assets Available for Benefits at
December 31, 1999 and 1998 5
Statements of Changes in Net Assets Available for Benefits for the
Years Ended December 31, 1999 and 1998 6
Notes to Financial Statements 7-10
Supplemental Schedule:*
Schedule I - Schedule of Assets Held for Investment Purposes at
December 31, 1999 11
*Other schedules required by 29 CFR 2520.103-10 of the Department of Labor Rules
and Regulations for Reporting and Disclosure under ERISA have been omitted
because they are not applicable.
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Report of Independent Accountants
To the Participants and Administrator of the
Callaway Golf Company 401(k) Profit Sharing Plan
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the net assets available for benefits
of the Callaway Golf Company 401(k) Profit Sharing Plan (the "Plan") at December
31, 1999 and 1998 and the changes in net assets available for benefits for the
years then ended, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Plan's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes is presented for the purpose of additional analysis and
is not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental schedule is the responsibility of the Plan's
management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
San Diego, California
June 9, 2000
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Callaway Golf Company 401(K) Profit Sharing Plan
Statements of Net Assets Available for Benefits
December 31, 1999 and 1998
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1999 1998
Assets
Investments, at fair value
Mutual Funds $ 55,266,000 $ 42,250,000
Callaway Golf Company Common Stock 22,892,000 11,554,000
Participant loans 5,370,000 6,236,000
------------ ------------
83,528,000 60,040,000
Receivables
Company contributions 3,605,000 -
Accrued interest and dividends - 44,000
------------ ------------
Net assets available for benefits $ 87,133,000 $ 60,084,000
============ ============
The accompanying notes are an integral part of these financial statements.
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Callaway Golf Company 401(K) Profit Sharing Plan
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
Additions to Net Assets Attributed to
Investment income
Interest and dividends $ 1,356,000 $ 2,549,000
Net appreciation (depreciation) in fair
value of investments 23,786,000 (13,685,000)
Participant contributions 5,490,000 5,601,000
Company contributions 8,116,000 4,673,000
Participant rollover contributions 590,000 1,284,000
------------ ------------
Total additions 39,338,000 422,000
------------ ------------
Deductions from Net Assets Attributed to
Distributions to participants (12,289,000) (3,576,000)
------------ ------------
Total deductions (12,289,000) (3,576,000)
------------ ------------
Net increase (decrease) 27,049,000 (3,154,000)
Transfer of Odyssey Golf 401(K) Plan assets
(Note 1) - 778,000
Net assets available for benefits at beginning
of year 60,084,000 62,460,000
------------ ------------
Net assets available for benefits at end
of year $ 87,133,000 $ 60,084,000
============ ============
The accompanying notes are an integral part of these financial statements.
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Callaway Golf Company 401(K) Profit Sharing Plan
Notes to Financial Statements
December 31, 1999 and 1998
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1. Description of Plan
General
Callaway Golf Company (the "Company") adopted on December 12, 1991,
effective January 1, 1991, a voluntary deferred compensation and profit
sharing plan, the Callaway Golf Company 401(k) Profit Sharing Plan, as
amended, (the "Plan"), to enable eligible employees to make pre-tax savings
deferrals and to share in the Company's earnings, thereby providing
employees with an opportunity to accumulate funds for their retirement.
Eligible employees who are employed for at least six months and accrue 500
hours of service, and are age eighteen or older, may participate in the
Plan.
The Plan is administered by the Company and Wells Fargo Bank serves as the
trustee. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA").
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of net
assets available for benefits and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount
of changes in net assets available for benefits during the reporting
period. Actual results could differ from those estimates.
Plan Merger
On December 31, 1998, the Odyssey Golf 401(k) Plan (the "Odyssey Plan")
merged with and into the Plan. As a result, $778,000 in net assets were
transferred to the Plan.
Contributions
Participants can elect to defer from 1% to 10% of their compensation,
subject to the maximum permitted under Federal law. Participants also may
contribute amounts representing distributions (or "rollovers") from other
qualified plans.
During 1999 and 1998, the Company made matching contributions each pay
period equal to 100% of the deferral rate elected by participants for
deferral rates up to 6% of annual compensation.
The Company also may make discretionary profit sharing contributions. For
the Plan year 1999, the profit sharing contribution authorized by the
Company and accrued by the Plan was $3,605,000. The entire contribution was
received by the Plan in February 2000. Plan participants do not accrue
earnings on contributions until such contributions are received by the
Plan. There were no discretionary profit sharing contributions for the Plan
year 1998.
Participant Accounts
Each participant's account is credited with the participant's contributions
and an allocation of: (a) the Company's matching and profit sharing
contributions; (b) Plan earnings; and (c) forfeitures related to terminated
participants' nonvested balances. Only participants who are actively
employed on the last day of the Plan year or have completed more than 500
hours of service during the year will be allocated forfeitures and profit
sharing contributions. Allocations of the Company's profit sharing
contributions and Plan forfeitures are based on each participant's
compensation in relation to total compensation of all Plan participants.
Plan forfeitures totaled $273,000 and $223,000 for the years then ended
December 31, 1999 and 1998, respectively.
Vesting
Participants are fully vested in their pre-tax contributions and vest in
Company matching and profit sharing contributions at a rate of 25% per
year, becoming fully vested after the completion of four years of
employment.
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Callaway Golf Company 401(K) Profit Sharing Plan
Notes to Financial Statements
December 31, 1999 and 1998
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During 1998, the Plan was amended to allow certain participants terminated
by the Company to receive, upon termination, 100% accelerated vesting in
the unvested portion of their matching employer contributions account.
Distributions
Distributions to participants are payable when a participant retires, or is
terminated and requests distribution of the vested value of his or her
account. If the vested value of the participant's account exceeds $5,000,
the participant is allowed by law to leave benefits on deposit with the
Plan. The amount left on deposit and the interest earned thereon are not
forfeitable.
Investment Options
Upon enrollment in the Plan, a participant may direct contributions to any
of the following investment options:
. Wells Fargo Money Market Fund - Invests primarily in U.S. Government
and corporate debt securities with an average maturity of 30 to 45
days.
. Wells Fargo Short-term Intermediate U.S. Government Fund - Invests in
short to intermediate term debt obligations of the U.S. Treasury,
government agencies, corporations, and mortgage and asset-backed
securities. The average maturity of the fund is not to exceed 10
years. This investment is no longer available to participants for
future contributions.
. Wells Fargo Equity Value Fund - Seeks to provide long-term capital
appreciation by investing in common stocks which the fund manager
believes are undervalued.
. Wells Fargo S&P 500 Stock Fund - Seeks to provide total returns
comparable to the returns of the S&P 500 Stock Index by investing in
the same stocks and in substantially the same percentages as the S&P
500 Index.
. Wells Fargo Managed Investment Fund - Seeks a high level of total
return consistent with reasonable risk by shifting investments among
common stocks, bond and money market instruments. This fund became
available to participants as of October 1, 1999.
. T. Rowe Price Science and Technology Fund - Seeks long-term growth of
capital by investing primarily in companies which are expected to
benefit from the development, advancement, and use of science and
technology.
. Janus Flexible Income Fund - Invests in various types of income-
producing securities.
. Strong Government Securities Fund - Invests in fixed income securities
issued or guaranteed by the U.S. Government and its agencies or
instrumentalities and in investment-grade corporate securities.
. Templeton Foreign Fund - Invests in stocks and debt obligations of
companies and governments outside of the United States.
. Dreyfus Founders Discovery Fund - Seeks capital appreciation by
investing primarily in equities of small, rapidly growing U.S.
companies. This fund became available to participants as of October 1,
1999.
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Callaway Golf Company 401(K) Profit Sharing Plan
Notes to Financial Statements
December 31, 1999 and 1998
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. Callaway Common Stock Fund - Invests in the common stock of the
Company. Included in the Callaway Common Stock Fund are funds held in
a money market account that will be used to purchase or redeem shares
of the Company's common stock.
Plan Administrative Expenses
Plan administrative expenses are paid by the Company.
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements are prepared on the accrual basis of accounting.
Investment Valuation
Investments are valued at quoted market prices. Participant loans are
stated at amortized cost which approximates fair value.
The Plan presents in the statement of changes in net assets available for
benefits the net appreciation (depreciation) in the fair value of its
investments which consists of the realized gains or losses and the
unrealized appreciation (depreciation) on those investments.
Contributions
Participant contributions and Company matching contributions are recorded
in the period during which the Company makes payroll deductions from the
participants' earnings. Company profit sharing contributions are recorded
by the Plan when and if approved by the Company's Board of Directors.
Distributions to Participants
Distributions to participants are recorded when paid.
3. Participant Loans
Participants may borrow up to 50% of their vested account balance in loan
amounts ranging from a minimum of $1,000 to a maximum of $50,000. Such
loans must be repaid within 5 years or, if used to purchase a principal
residence, 15 years. The loans are secured by the balances in the
participants' accounts, and bear interest equal to the current prime rate
at the inception of the loan. The prime rate was 8.50% at December 31, 1999
and 7.75% at December 31, 1998.
4. Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. If the Plan is
terminated, participants will become fully vested in their accounts.
However, the Plan assets will first be used to pay any expenses of the
Plan.
5. Income Taxes
The Internal Revenue Service has determined, and informed the Company by a
letter dated May 23, 1995, that the Plan and related trust are designed in
accordance with the applicable sections of the Internal Revenue Code. The
Plan has been amended since such determination, however, the Plan's
administrator believes that the Plan is designed and is currently being
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Callaway Golf Company 401(K) Profit Sharing Plan
Notes to Financial Statements
December 31, 1999 and 1998
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operated in compliance with the applicable requirements of the Internal
Revenue Code. Accordingly, no provision for income taxes has been reported
in the accompanying financial statements.
6. Reconciliation to Form 5500
Net assets available for benefits per the accrual basis financial
statements and the cash basis Form 5500 differ by $3,605,000 and $44,000 at
December 31, 1999 and 1998, respectively. These differences are due to the
following accrual adjustments reflected in the financial statements:
1999 1998
Company contributions receivable $ 3,605,000 $ -
Accrued interest and dividends receivable - 44,000
Net assets available for benefits per the Form 5500 83,528,000 60,040,000
--------------- ------------------
Net assets available for benefits per the
financial statements $87,133,000 $60,084,000
=============== ==================
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Schedule I
Callaway Golf Company 401(k) Profit Sharing Plan
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes
December 31, 1999
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Identity of Issuer,
Borrower, Lessor Carrying
or Similar Party Description of Investment Value
Mutual Funds
Wells Fargo* Money Market Fund $ 7,168,000
Wells Fargo* Short-term Intermediate U.S. Government Fund 55,000
Wells Fargo* Equity Value Fund 6,510,000
Wells Fargo* S&P 500 Stock Fund 9,875,000
Wells Fargo* Managed Investment Fund 196,000
T. Rowe Price Science and Technology Fund 24,114,000
Janus Flexible Income Fund 1,890,000
Strong Government Securities Fund 1,565,000
Templeton Foreign Fund 3,403,000
Dreyfus Founders Discovery Fund 490,000
-----------
55,266,000
Callaway Golf Company* Common stock 22,892,000
Participant loans** 5,370,000
-----------
$83,528,000
===========
* Represents a party-in-interest.
** Other required information has been omitted because such information is not
available.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Administration Committee of the Callaway Golf Company 401(k) Profit Sharing
Plan has duly caused this annual report to be signed by the undersigned hereunto
duly authorized.
ADMINISTRATION COMMITTEE
OF THE
CALLAWAY GOLF COMPANY
401(k) PROFIT SHARING PLAN
Date: June 26, 2000 /s/ Kenneth Wolf
------------------
Kenneth Wolf
Senior Vice President, Finance & Controller
Callaway Golf Company
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Exhibit Index
Exhibit No. Description
- ---------- -----------
23 Consent of Independent Accountants
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