Callaway 2013 Annual Report Download - page 88

F-18
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 $1,297,000 at December 31, 2013. 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, 2013, the Company had $25,660,000 outstanding under the ABL Facility and had $36,793,000
of cash and cash equivalents. The maximum amount of additional indebtedness (as defined by the ABL Facility) that
could have been outstanding on December 31, 2013, after outstanding borrowings, letters of credit and certain reserves
and the $25,000,000 fixed charge coverage ratio covenant (defined below) was approximately $23,191,000 resulting in
total available liquidity of $59,984,000. 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, 2013 was $37,175,000 and average available liquidity, defined as cash on hand combined with amounts
available under the ABL Facility after outstanding borrowings was $88,550,000. 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, stock repurchases and other restricted payments, asset sales, investments, mergers, acquisitions
and affiliate transactions. As of December 31, 2013, 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, 2013, however, the Company’s borrowing
base availability was above $25,000,000 during the year ended December 31, 2013, 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, which is
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, 2013, the Company's
EBITDA over the trailing 12 months exceeded $25,000,000, which resulted in a permanent reduction of 0.25% in the
applicable interest rate margins. This reduction will take effect in February 2014. At December 31, 2013, 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 $4,302,000, which will be amortized into
interest expense over the term of the ABL Facility agreement. Unamortized origination fees as of December 31, 2013
and 2012 were $2,295,000 and $3,171,000, respectively, of which $918,000 and $906,000, respectively, was included in
other current assets and $1,377,000 and $2,265,000, respectively, was included in other long-term assets in the
accompanying consolidated balance sheets.