Callaway 2010 Annual Report Download - page 60

Other Significant Cash and Contractual Obligations
The following table summarizes certain significant cash obligations as of December 31, 2010 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) .................. $ 88.1 $41.9 $37.7 $ 8.5 $—
Dividends on convertible preferred stock(2) .............. 15.3 10.5 4.8 — —
Operating leases(3) ................................. 39.6 12.5 14.2 7.5 5.4
Uncertain tax contingencies(4) ........................ 9.1 — 0.2 5.5 3.4
Total ............................................ $152.1 $64.9 $56.9 $21.5 $ 8.8
(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
exceeded 150% of the conversion price for at least 20 of the 30 consecutive trading days ending the day
before the Company sends the notice of mandatory conversion. Given these factors, if the Company elects
to mandatorily convert any preferred stock, it will make a payment on the preferred stock equal to the
aggregate amount of dividends that would have accrued and become payable through and including June 15,
2012, less any dividends already paid on preferred stock (see Note 4 to the Consolidated Financial
Statements—“Preferred Stock Offering” in this Form 10-K). The amounts included in the table above
represent the Company’s total commitment to pay preferred dividends through June 15, 2012 should it opt
to mandatorily convert any preferred stock. However, if the preferred stock were to remain outstanding
subsequent to June 15, 2012, the Company would be required to continue to pay dividends subject to the
terms and conditions of the preferred stock. These additional dividends are not reflected in this table.
(3) The Company leases certain warehouse, distribution and office facilities, vehicles and office equipment
under operating leases. The amounts presented in this line item represent commitments for minimum lease
payments under noncancelable operating leases.
(4) Amount represents total uncertain income tax positions pursuant to the adoption of ASC Topic 740-25-6.
For further discussion see Note 16 to the Consolidated Financial Statements—“Income Taxes” in this
Form 10-K.
During its normal course of business, the Company has made certain indemnities, commitments and
guarantees under which it may be required to make payments in relation to certain transactions. These include
(i) intellectual property indemnities to the Company’s customers and licensees in connection with the use, sale
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