Callaway 2011 Annual Report Download - page 93

these retail channels would abate over time as the economy began to improve, the Company has concluded that
this practice appears more permanent in nature, and accordingly has reduced its estimates of the amount of future
cash flows that will be generated from these intangible assets.
In completing the impairment analysis, the Company determined that the discounted expected cash flows
from the trade names and trademarks associated with the Top-Flite acquisition was $5,413,000 less than the
carrying value of those assets. As a result, during the second quarter of 2011, the Company recorded an
impairment charge of $5,413,000 in order to write-down these assets to fair value. During the fourth quarter of
2010, the Company also recorded an impairment charge of $7,547,000 related to the trade names and trademarks
of the Top-Flite acquisition. Both charges were reflected in general and administrative expenses in the
accompanying statement of operations for the years ended December 31, 2011 and 2010.
In addition, in the fourth quarter of 2011, the Company conducted an impairment test on goodwill related to
its reporting unit in Australia. Due to the negative impact of significant flooding and inclimate weather as well as
a decline in economic conditions in that region during 2011, the Company determined that the estimated fair
value for this unit was $1,120,000 less than the unit’s net book value including goodwill. As a result, the
Company recorded an impairment charge of $1,120,000 to write-off the goodwill balance related to this reporting
unit.
Note 10. Financing Arrangements
The Company’s has a Loan and Security Agreement with Bank of America N.A. (as amended, the “ABL
Facility”) which provides a senior secured asset-based revolving credit facility of up to $230,000,000, comprised
of a $158,333,000 U.S. facility (of which $20,000,000 is available for letters of credit), a $31,667,000 Canadian
facility (of which $5,000,000 is available for letters of credit) and a $40,000,000 United Kingdom facility (of
which $2,000,000 is available for letters of credit), in each case subject to borrowing base availability under the
applicable facility. Borrowing under the U.K. facility will be permitted upon satisfaction of customary conditions
relating to delivery of U.K. collateral security documents. The aggregate amount outstanding under the
Company’s letters of credit was $500,000 at December 31, 2011. The amounts outstanding under the ABL
Facility are secured by certain assets, including inventory and accounts receivable, of the Company’s U.S.,
Canadian and U.K. legal entities.
As of December 31, 2011, the Company had no borrowings outstanding under the ABL Facility and had
$43,023,000 of cash and cash equivalents. Generally, during the first quarter, the Company will rely more
heavily on its credit facilities to fund operations as cash inflows from operations begin to increase during the
second and third quarters as a result of cash collections from customers. The maximum amount of Consolidated
Funded Indebtedness, including borrowings under the ABL Facility, that could have been outstanding on
December 31, 2011, was approximately $87,700,000. Average outstanding borrowings during the twelve months
ended December 31, 2011 were $25,086,000. Amounts borrowed under the ABL Facility may be repaid and
borrowed as needed. The entire outstanding principal amount (if any) is due and payable at maturity on June 30,
2016.
The interest rate applicable to outstanding loans under the ABL Facility fluctuates depending on the
Company’s trailing-twelve month EBITDA (as defined by the ABL Facility) combined with the Company’s
“availability ratio” (as defined below). At December 31, 2011, the Company’s interest rate applicable to its
outstanding loans under the ABL Facility was 4.75%.
The Company’s “availability ratio” is the ratio, expressed as a percentage, of (a) the average daily
availability under the ABL Facility to (b) the sum of the Canadian, the U.K. and the U.S. borrowing bases, as
adjusted. All applicable margins will be permanently reduced by 0.25% if EBITDA, as defined in the ABL
Facility, meets or exceeds $25,000,000 over any trailing twelve-month period, and will be permanently reduced
by an additional 0.25% if EBITDA meets or exceeds $50,000,000 over any trailing twelve-month period.
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