Callaway 2005 Annual Report Download - page 51

Under the Line of Credit, the Company is required to pay certain fees, including an unused commitment fee
of between 12.5 to 27.5 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 defined 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 25.0 basis points or (ii) the Eurodollar Rate (as defined in the agreement governing the Line of Credit)
plus a margin of 62.5 to 150.0 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 financial
conditions.
The Line of Credit requires the Company to meet certain financial covenants, including a minimum tangible
net worth covenant and includes certain other restrictions, including restrictions limiting dividends, stock
repurchases, capital expenditures and asset sales. As of December 31, 2005, the Company was in compliance
with the covenants and other terms of the Line of Credit, as then applicable.
The total origination fees incurred in connection with the Line of Credit were $1.3 million and are being
amortized into interest expense over the remaining term of the Line of Credit agreement. Unamortized
origination fees were $1.0 million as of December 31, 2005, of which $0.3 million were included in prepaid and
other current assets in the accompanying consolidated balance sheet. In January 2006, the Company incurred
additional fees of approximately $0.3 million in connection with the Second Amendment.
Share Repurchases
In November 2005, the Company announced that its Board of Directors authorized it to repurchase shares of
its Common Stock in the open market or in private transactions, subject to the Company’s assessment of market
conditions and buying opportunities, up to a maximum cost to the Company of $50.0 million. The new stock
repurchase program supersedes the May 2002 repurchase program and all prior stock repurchase authorizations.
There were no repurchases under this authorization during the fourth quarter of 2005.
During 2005, the Company repurchased 3,000 shares of its Common Stock at an average cost per share of
$12.36 through the withholding of shares in satisfaction of employee tax obligations related to the vesting of
employee restricted stock awards. There were no share repurchases during the fourth quarter of 2005. The
Company’s repurchases of shares of Common Stock are recorded at average cost in Common Stock held in
treasury and result in a reduction of shareholders’ equity.
Other Significant Cash and Contractual Obligations
The following table summarizes certain significant cash obligations as of December 31, 2005 that will affect
the Company’s future liquidity (in millions):
Payments Due By Period
Total
Less than
1 Year 1-3 Years 4-5 Years
More than
5 Years
Operating leases(1) .................................. 10.2 5.6 4.2 0.3 0.1
Capital leases(2) .................................... 0.1 0.1 — — —
Unconditional purchase obligations(3) .................. 111.9 26.4 55.4 25.9 4.2
Deferred compensation(4) ............................ 8.3 1.2 0.7 0.6 5.8
Total(5) ........................................... $130.5 $33.3 $60.3 $26.8 $10.1
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