Callaway 2003 Annual Report Download - page 60

CALLAWAY GOLF COMPANY 57
Note 7. Financing Arrangements
Effective June 16, 2003, the Company terminated its prior
revolving credit facility with GE Capital Corporation and other
lenders and entered into a revolving credit facility with Bank
of America, N.A. for a $50,000,000 line of credit that was
scheduled to be available until September 16, 2005, subject to
earlier termination in accordance with its terms.
Effective November 10, 2003, the Company terminated its
$50,000,000 line of credit with Bank of America, N.A. and
obtained a new $100,000,000 revolving line of credit from
Bank of America, N.A. and certain other lenders. The new
$100,000,000 credit facility is scheduled to be available until
November 2004, subject to earlier termination in accordance
with its terms and subject to extension upon agreement of all
parties. Upon the expiration of the new revolving credit facility,
provided the Company is not in default of the terms of the new
revolving credit facility and subject to certain conditions, the
Company has the option to convert the amounts outstanding
under the new revolving credit facility into a one-year term
loan. At December 31, 2003, there were no borrowings
out
standing under the $100,000,000 line of credit and the
Company was in compliance with the covenants and other
terms thereof.
Subject to the terms of the new credit facility, the Company
can borrow up to a maximum of $100,000,000. The Company
is required to pay certain fees, including an unused commitment
fee equal to 12.5 to 20.0 basis points per annum of the unused
commitment amount, with the exact amount determined
based upon the Company’s Consolidated Leverage Ratio. For
purposes of the new credit facility, “Consolidated Leverage
Ratio” means, as of any date of determination, the ratio of
“Consolidated Funded Indebtedness” as of such date to
“Consolidated EBITDA” for the four most recent fiscal quarters
(as such terms are defined in the new credit facility agreement).
Outstanding borrowings under the new credit facility accrue
interest at the Company’s election at (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 less a margin of 50.0
to 100.0 basis points depending upon the Company’s
Consolidated Leverage Ratio or (ii) the Eurodollar Rate (as
such term is defined in the new credit facility agreement) plus
a margin of 75.0 to 125.0 basis points depending upon the
Company’s Consolidated Leverage Ratio. The Company has
agreed that repayment of amounts under the new credit
facility will be guaranteed by certain of the Company’s
domestic subsidiaries and will be secured by the Company’s
pledge of 65% of the stock it holds in certain of its foreign
subsidiaries and by certain intercompany debt securities and
proceeds thereof.
The new credit facility agreement requires the Company to
maintain certain minimum financial covenants. Specifically, (i)
the Company’s Consolidated Leverage Ratio may not exceed
1.25 to 1.00 and (ii) Consolidated EBITDA (which would
exclude certain non-cash charges related to the restructuring
of the Company’s golf ball operations) for any four consecutive
quarters may not be less than $50,000,000. The new credit
facility agreement also includes certain other restrictions,
including restrictions limiting additional indebtedness, dividends,
stock repurchases, transactions with affiliates, capital expenditures,
asset sales, acquisitions, mergers, liens and encumbrances and
other matters customarily restricted in loan documents. The
new credit facility also contains other customary provisions,
including affirmative covenants, representations and
war
ranties and events of default.
Fees incurred in connection with these facilities are recorded
in interest expense. At the time the Company entered into
these facilities, the Company paid certain fees, including
origination fees, which are amortized over the term of the
facilities. The amortization of fees was approximately
$265,000 in 2003 and approximately $556,000 in both 2002
and 2001, respectively. During 2003, the Company expensed
$583,000 of unamortized fees associated with the facilities
terminated during the year. The Company also paid unused
facility fees for each of the facilities in the amount of approx-
imately $221,000 in 2003 and approximately $300,000 in
both 2002 and 2001, respectively.
In connection with the Top-Flite Acquisition, the Company
assumed long-term debt related to a warehouse located in
Chicopee, Massachusetts, payable in full in 2018 and secured
by the warehouse. Interest on the outstanding balance accrued
at an annual rate of 300 basis points over the one-year U.S.