Callaway 2009 Annual Report Download - page 59

The preferred stock is convertible at any time at the holder’s option into common stock of the Company at
an initial conversion rate of 14.1844 shares of Callaway’s common stock per share of preferred stock, which is
equivalent to an initial conversion price of approximately $7.05 per share.
Share Repurchases
In November 2007, 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 $100.0 million, which would
remain in effect until completed or otherwise terminated by the Board of Directors. The November 2007
repurchase program supersedes all prior stock repurchase authorizations.
During 2009, the Company repurchased 55,000 shares of its common stock under the November 2007
repurchase program at an average cost per share of $8.40 for a total cost of $459,000. These shares were
repurchased to settle shares withheld for taxes due by holders of Restricted Stock awards. The Company’s
repurchases of shares of common stock are recorded at cost and result in a reduction of shareholders’ equity. As
of December 31, 2009, the Company remained authorized to repurchase up to an additional $75.9 million of its
common stock under this program.
Other Significant Cash and Contractual Obligations
The following table summarizes certain significant cash obligations as of December 31, 2009 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
Unconditional purchase obligations(1) .................. $113.5 $46.3 $48.2 $19.0 $—
Dividends on convertible preferred stock(2) .............. 26.3 10.9 15.4 — —
Operating leases(3) ................................. 21.6 7.9 6.5 3.0 4.2
Uncertain tax contingencies(4) ........................ 15.8 5.1 0.3 6.0 4.4
Deferred compensation(5) ............................ 3.0 3.0 — — —
Total ............................................ $180.2 $73.2 $70.4 $28.0 $ 8.6
(1) During the normal course of its business, the Company enters into agreements to purchase goods and
services, including purchase commitments for production materials, endorsement agreements with
professional golfers and other endorsers, employment and consulting agreements, and intellectual property
licensing agreements pursuant to which the Company is required to pay royalty fees. It is not possible to
determine the amounts the Company will ultimately be required to pay under these agreements as they are
subject to many variables including performance-based bonuses, reductions in payment obligations if
designated minimum performance criteria are not achieved, and severance arrangements. The amounts listed
approximate minimum purchase obligations, base compensation, and guaranteed minimum royalty
payments the Company is obligated to pay under these agreements. The actual amounts paid under some of
these agreements may be higher or lower than the amounts included. In the aggregate, the actual amount
paid under these obligations is likely to be higher than the amounts listed as a result of the variable nature of
these obligations. In addition, the Company also enters into unconditional purchase obligations with various
vendors and suppliers of goods and services in the normal course of operations through purchase orders or
other documentation or that are undocumented except for an invoice. Such unconditional purchase
obligations are generally outstanding for periods less than a year and are settled by cash payments upon
delivery of goods and services and are not reflected in this line item.
(2) The Company may elect, on or prior to June 15, 2012, to mandatorily convert some or all of the preferred
stock into shares of the Company’s common stock if the closing price of the Company’s common stock has
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