Callaway 2012 Annual Report Download - page 94

As of December 31, 2012, the Company had no borrowings outstanding under the ABL Facility and had
$52,003,000 of cash and cash equivalents. The maximum amount of Indebtedness (as defined by the ABL
Facility) that could have been outstanding on December 31, 2012, after outstanding borrowings, letters of credit
and certain reserves and the $25,000,000 fixed charge coverage ratio covenant (defined below) was
approximately $40,500,000 resulting in total available liquidity of $92,503,000. The maximum availability under
the ABL Facility fluctuates with the general seasonality of the business and increases and decreases with changes
in the Company’s inventory and accounts receivable balances. The maximum availability is at its highest during
the first half of the year when the Company’s inventory and accounts receivable balances are high and then
decreases during the second half of the year when the Company’s accounts receivable balance is lower due to an
increase in cash collections. Average outstanding borrowings during the year ended December 31, 2012 was
$50,300,000 and average available liquidity, defined as cash on hand combined with amounts available under the
ABL Facility after outstanding borrowings was $105,900,000. 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 ABL Facility includes certain restrictions including, among other things, restrictions on incurrence of
additional debt, liens, dividends and other restricted payments, asset sales, investments, mergers, acquisitions and
affiliate transactions. As of December 31, 2012, the Company was in compliance with all covenants of the ABL
Facility. Additionally, the Company is subject to compliance with a fixed charge coverage ratio covenant during,
and continuing 30 days after, any period in which the Company’s borrowing base availability falls below
$25,000,000. The Company would not have met the fixed charge coverage ratio as of December 31, 2012,
however, the Company’s borrowing base availability was above $25,000,000 during the year ended December
31, 2012, and as such the Company was not subject to compliance with the fixed charge coverage ratio.
The interest rate applicable to outstanding loans under the ABL Facility fluctuates depending on the
Company’s trailing 12 month EBITDA (as defined by the ABL Facility) combined with the Company’s
“availability ratio” (as defined below). 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 may be permanently reduced by 0.25% if EBITDA meets or
exceeds $25,000,000 over any trailing 12 month period, and may be permanently reduced by an additional 0.25%
if EBITDA meets or exceeds $50,000,000 over any trailing 12 month period. At December 31, 2012, the
Company’s interest rate applicable to its outstanding loans under the ABL Facility was 4.50%.
In addition, the ABL Facility provides for monthly fees ranging from 0.375% to 0.5% of the unused portion
of the ABL Facility, depending on the prior month’s average daily balance of revolver loans and stated amount of
letters of credit relative to lenders’ commitments.
The origination fees incurred in connection with the ABL Facility totaled $4,265,000, which will be
amortized into interest expense over the term of the ABL Facility agreement. Unamortized origination fees as of
December 31, 2012 and 2011 were $3,171,000 and $2,925,000, respectively, of which $906,000 and $650,000,
respectively, was included in other current assets and $2,265,000 and $2,275,000, respectively, was included in
other long-term assets in the accompanying consolidated balance sheets.
Convertible Senior Notes
On August 29, 2012, the Company issued $112,500,000 of 3.75% Convertible Senior Notes (the
“convertible notes”) due August 15, 2019, of which $63,227,000 in aggregate principal amount was exchanged
for 632,270 shares of the Company’s outstanding 7.50% Series B Cumulative Perpetual Convertible Preferred
Stock, $0.01 par value in separate, privately negotiated exchange transactions (see Note 5), and $49,273,000 in
aggregate principal amount was issued in private placement transactions for cash.
The convertible notes were priced at 95.02% of the principal amount with an effective yield to maturity of
4.59% and pay interest of 3.75% per year on the principal amount, payable semiannually in arrears in cash on
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