Callaway 2011 Annual Report Download - page 89

$16,329,000 of charges related to these initiatives, of which $1,251,000 and $15,078,000 were recognized in cost
of goods sold and operating expenses, respectively. Total charges absorbed by the Company’s golf clubs and golf
balls operating segments were $5,642,000 and $1,329,000 respectively. The Company expects future estimated
charges of $1,000,000, to be settled in cash, in 2012.
The table below depicts the activity and liability balances recorded as part of the Company’s GOS
Initiatives and Reorganization and Reinvestment Initiatives as well as the current estimated future charges
relating to these initiatives (in thousands). Amounts payable as of December 31, 2011 and December 31, 2010
were included in accounts payable and accrued expenses, and accrued employee compensation and benefits on
the accompanying consolidated balance sheets.
GOS Initiatives
Reorganization
and
Reinvestment
Initiatives
Workforce
Reductions
Transition
Costs
Asset
Write-offs
Workforce
Reductions Total
Charges to cost and expense .................. $5,177 $ 7,861 $ 1,778 $ — $ 14,816
Non-cash items ............................ — — (1,778) — (1,778)
Cash payments ............................ (1,909) (7,477) — — (9,386)
Restructuring payable balance, December 31,
2010 .................................. 3,268 384 — — 3,652
Charges to cost and expense .................. 4,702 17,527 2,451 16,329 41,009
Non-cash items ............................ — — (2,451) (2,126) (4,577)
Cash payments ............................ (6,751) (17,856) — (8,846) (33,453)
Restructuring payable balance, December 31,
2011 .................................. $1,219 $ 55 $ — $ 5,357 $ 6,631
Total future estimated charges as of December 31,
2011 .................................. $ — $ — $ — $ 1,000 $ 1,000
Note 4. Preferred Stock Offering
On June 15, 2009, the Company sold 1,400,000 shares of its 7.50% Series B Cumulative Perpetual Convertible
Preferred Stock, $0.01 par value (the “preferred stock”). The Company received gross proceeds of $140,000,000
and incurred costs of $6,085,000, which were recorded as an offset to additional paid in capital in the consolidated
statement of shareholders’ equity. The terms of the preferred stock provide for a liquidation preference of $100 per
share and cumulative dividends from the date of original issue at a rate of 7.50% per annum (equal to an annual rate
of $7.50 per share), subject to adjustment in certain circumstances. As of December 31, 2011, the liquidation
preference would have been $140,438,000. Dividends on the preferred stock are payable quarterly in arrears subject
to declaration by the Board of Directors and compliance with the Company’s line of credit and applicable law.
The preferred stock is generally 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 Golf’s common stock per share of preferred
stock, which is equivalent to an initial conversion price of approximately $7.05 per share. Based on the initial
conversion rate, approximately 19,900,000 shares of common stock would be issuable upon conversion of all of
the outstanding shares of preferred stock.
The Company may also 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. If the Company elects to mandatorily convert any
preferred stock, it will make an additional payment on the preferred stock equal to the aggregate amount of
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