Callaway 2011 Annual Report Download - page 58

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. In addition, the Company has made contractual
commitments to each of its officers and certain other employees providing for severance payments upon the
termination of employment.
(2) 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 or redeem 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. See Note 4 “Preferred Stock Offering” to the Notes
to Consolidated Financial Statements in this Form 10-K.
(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 “Income Taxes” to the Notes to Consolidated Financial Statements 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
and/or license of Company products or trademarks, (ii) indemnities to various lessors in connection with facility
leases for certain claims arising from such facilities or leases, (iii) indemnities to vendors and service providers
pertaining to the goods or services provided to the Company or based on the negligence or willful misconduct of
the Company and (iv) indemnities involving the accuracy of representations and warranties in certain contracts.
In addition, the Company has made contractual commitments to each of its officers and certain other employees
providing for severance payments upon the termination of employment. The Company also has consulting
agreements that provide for payment of nominal fees upon the issuance of patents and/or the commercialization
of research results. The Company has also issued guarantees in the form of a standby letter of credit as security
for contingent liabilities under certain workers’ compensation insurance policies. The duration of these
indemnities, commitments and guarantees varies, and in certain cases may be indefinite. The majority of these
indemnities, commitments and guarantees do not provide for any limitation on the maximum amount of future
payments the Company could be obligated to make. Historically, costs incurred to settle claims related to
indemnities have not been material to the Company’s financial position, results of operations or cash flows. In
addition, the Company believes the likelihood is remote that payments under the commitments and guarantees
described above will have a material effect on the Company’s financial condition. The fair value of indemnities,
commitments and guarantees that the Company issued during the fiscal year ended December 31, 2011 was not
material to the Company’s financial position, results of operations or cash flows.
In addition to the contractual obligations listed above, the Company’s liquidity could also be adversely
affected by an unfavorable outcome with respect to claims and litigation that the Company is subject to from
time to time. See Note 17 “Commitments and Contingencies” to the Notes to Consolidated Financial Statements
in this Form 10-K.
Sufficiency of Liquidity
Based upon its current operating plan, analysis of its consolidated financial position and projected future
results of operations, the Company believes that its operating cash flows, together with its current or future credit
facilities, will be sufficient to finance current operating requirements, planned capital expenditures, contractual
obligations and commercial commitments, for at least the next 12 months. There can be no assurance, however,
that future industry-specific or other developments (including noncompliance with the financial covenants under
its ABL Facility), general economic trends, foreign currency exchange rates, or other matters will not adversely
affect the Company’s operations or its ability to meet its future cash requirements (see above, “Sources of
Liquidity” and “Certain Factors Affecting Callaway Golf Company” contained in Item 1A).
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