Callaway 2004 Annual Report Download - page 38

resulting from the integration of the Callaway Golf and Top-Flite operations (see above ""Top-Flite
Acquisition''). These decreases were partially oÅset by current year capital expenditures of $26.0 million.
At December 31, 2004, the Company's goodwill balance increased $10.3 million to $30.5 million from
$20.2 million at December 31, 2003. This increase is primarily due to the $9.1 million of goodwill recorded in
connection with the FrogTrader acquisition in May 2004.
Liquidity and Capital Resources
Sources of Liquidity
The Company's principal sources of liquidity are cash Öows provided by operations and the Company's
credit facilities in eÅect from time to time. The Company currently expects this to continue. EÅective
November 5, 2004, the Company amended and restated its line of credit to provide for a new Ñve year
revolving line of credit from Bank of America, N.A. and certain other lenders (the ""Line of Credit''),
providing for revolving loans of up to $250.0 million (with the possible expansion of the Line of Credit to
$300.0 million upon the satisfaction of certain conditions and the agreement of the lenders). Actual borrowing
availability under the Line of Credit is eÅectively limited by the Ñnancial covenants set forth in the agreement
governing the Line of Credit. At December 31, 2004 the maximum amount that could be borrowed under the
Line of Credit was approximately $141.3 million and $13.0 million of that amount was outstanding.
Under the Line of Credit, the Company is required to pay certain fees, including an unused commitment
fee of between 17.5 to 35.0 basis points per annum of the unused commitment amount, with the exact amount
determined based upon the Company's consolidated leverage ratio and trailing four quarters earnings before
income taxes, depreciation and amortization (EBITDA) (each as deÑned in the agreement governing the
Line of Credit). Outstanding borrowings under the Line of Credit accrue interest, at the Company's election,
based upon the Company's consolidated leverage ratio and trailing four quarters EBITDA, of (i) the higher of
(a) the Federal Funds Rate plus 50.0 basis points or (b) Bank of America's prime rate, and in either case,
plus a margin of 00.0 to 75.0 basis points or (ii) the Eurodollar Rate (as deÑned in the agreement governing
the Line of Credit) plus a margin of 75.0 to 200.0 basis points. The Company has agreed that repayment of
amounts under the Line of Credit will be guaranteed by certain of the Company's domestic subsidiaries and
will be secured by substantially all of the assets of the Company and such guarantor subsidiaries. The
collateral (other than 65% of the stock of the Company's foreign subsidiaries) could be released upon the
satisfaction of certain Ñnancial conditions.
The agreement governing the Line of Credit requires the Company to maintain certain Ñnancial
covenants, including a maximum leverage ratio, a minimum asset coverage ratio, a maximum capitalization
ratio, a minimum interest coverage ratio and a minimum consolidated EBITDA. The agreement also includes
certain other restrictions, including restrictions limiting additional indebtedness, dividends, stock repurchases,
transactions with aÇliates, capital expenditures, asset sales, acquisitions, mergers, liens and encumbrances and
other restrictions. The agreement also contains other provisions, including aÇrmative covenants, representa-
tions and warranties and events of default. As of December 31, 2004, the Company was in compliance with
the covenants and other terms thereof.
The total origination fees incurred in connection with the Line of Credit were $1.3 million and are being
amortized into interest expense over Ñve years (the term of the Line of Credit agreement). The unamortized
origination fees were $1.2 million as of December 31, 2004 and have been included in prepaid and other
current assets in the accompanying consolidated balance sheet.
Share Repurchases
In August 2001 and May 2002, the Company announced that its Board of Directors authorized it to
repurchase its Common Stock in the open market or in private transactions, subject to the Company's
assessment of market conditions and buying opportunities from time to time, up to a maximum cost to the
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