Callaway 2012 Annual Report Download - page 93

charges of approximately $5,900,000 over the next twelve months. These estimates are based upon current
information and expectations; however, the amount, nature, or timing of these charges could vary as the
Company further develops and implements these initiatives.
During the year ended December 31, 2012, the Company recognized charges of $54,061,000 in connection
with the Cost Reduction Initiatives. Amounts recognized in cost of sales and operating expenses totaled
$36,228,000 and $17,833,000, respectively, during the year ended December 31, 2012. See Note 19 for charges
absorbed by the Company’s operating segments.
The table below depicts the total charges recognized in 2012, the liability balances, and the current
estimated future charges relating to the Cost Reduction Initiatives (in thousands). Amounts payable as of
December 31, 2012 are included in accrued employee compensation and benefits and accounts payable and
accrued expenses in the accompanying consolidated balance sheet.
Cost Reduction Initiatives
Workforce
Reductions
Transition
Costs
Asset
Write-offs Total
Charges to cost and expense .............................. $14,506 $ 6,719 $ 32,836 $ 54,061
Non-cash items ........................................ (448) (4,311) (32,836) (37,595)
Cash payments ......................................... (9,527) (1,817) — (11,344)
Restructuring payable balance, December 31, 2012 ............ $ 4,531 $ 591 $ — $ 5,122
Total future estimated charges as of December 31, 2012 ........ $ 1,300 $ 4,600 $ — $ 5,900
Note 4. Financing Arrangements
In addition to cash on hand as well as cash generated from operations, the Company relies on its asset-based
revolving credit facility to manage seasonal fluctuations in liquidity and to provide additional liquidity when the
Company’s operating cash flows are not sufficient to fund the Company’s requirements. The Company’s ability
to generate sufficient positive cash flows from operations is subject to many risks and uncertainties, including
future economic trends and conditions, the success of the Company’s 2012 restructuring initiatives (Note 3),
demand for the Company’s products, foreign currency exchange rates, and the other risks and uncertainties
applicable to the Company and its business. If the Company is unable to generate sufficient cash flows to fund its
business due to a further decline in sales or otherwise, and is unable to reduce its manufacturing costs and
operating expenses to offset such decline the Company will need to increase its reliance on its credit facility for
needed liquidity. If the Company’s current credit facility is not available or sufficient and the Company could not
secure alternative financing arrangements, the Company’s future operations would be significantly, adversely
affected. The Company believes that its current credit facility, along with its cash on hand and cash flows
expected to be generated from operations is sufficient to meet the Company’s liquidity requirements for at least
the next 12 months.
Asset-Based Revolving Credit Facility
The Company 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. The aggregate amount outstanding under the Company’s letters of credit was $3,265,000 at
December 31, 2012. 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.
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