Callaway 2014 Annual Report Download - page 86

F-18
will need to increase its reliance on its credit facilities for needed liquidity. If the Company’s current credit facilities are not
available or sufficient and the Company is not able to secure alternative financing arrangements, the Company’s future
operations would be materially adversely affected. The Company believes that its current credit facilities, 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 $160,000,000 U.S.
facility, a $25,000,000 Canadian facility, and a $45,000,000 United Kingdom facility, in each case subject to borrowing base
availability under the applicable facility. The amounts outstanding under the ABL Facility are secured by certain assets,
including cash (to the extent pledged by the Company), inventory and accounts receivable, of the Company’s subsidiaries in
the United States, Canada and the United Kingdom.
As of December 31, 2014, the Company had $15,235,000 outstanding under the ABL Facility, $1,142,000 in outstanding
letters of credit, and $37,635,000 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, 2014, after outstanding borrowings and letters of
credit was approximately $55,611,000, resulting in total available liquidity of $93,246,000. 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 higher, and is lower during the second half of the
year when the Company's inventory levels decrease and its accounts receivable decrease as a result of cash collections. Average
outstanding borrowings during the year ended December 31, 2014 were $64,996,000 and average available liquidity, defined
as cash on hand combined with amounts available under the ABL Facility after outstanding borrowings and letters of credit,
was approximately $84,813,000. 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 the earlier of (i) the date that is six months prior to the
maturity of the Company’s 3.75% Convertible Senior Notes maturing on August 15, 2019 or (ii) June 30, 2019, if a qualifying
refinancing of the Company’s 3.75% Convertible Senior Notes due 2019 has occurred at least six months prior to their maturity.
The ABL Facility includes certain restrictions including, among other things, restrictions on the incurrence of additional
debt, liens, stock repurchases and other restricted payments, asset sales, investments, mergers, acquisitions and affiliate
transactions. In addition, the ABL Facility imposes restrictions on the amount the Company could pay in annual cash dividends,
including meeting certain requirements on the amount of additional indebtedness and the fixed charge coverage ratio. At
December 31, 2014, the Company could have distributed an additional $21,100,000 in cash dividends as a result of these
restrictions. As of December 31, 2014, 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 $23,000,000. The Company’s borrowing base
availability was above $23,000,000 during the year ended December 31, 2014. Had the Company not been in compliance
with the fixed charge coverage ratio as of December 31, 2014, the Company's maximum amount of additional indebtedness
that could have been outstanding on December 31, 2014 would have been reduced by $23,000,000.
The interest rate applicable to outstanding loans under the ABL Facility, as amended, fluctuates depending on the
Company’s “availability ratio," which is expressed as a percentage of (i) the average daily availability under the ABL Facility
to (ii) the sum of the Canadian, the U.K. and the U.S. borrowing bases, as adjusted. The applicable margin for any month
will be reduced by 0.25% if the Company’s availability ratio is greater than or equal to 67% and the Company’s “leverage
ratio” (as defined below) is less than 4.0 to 1.0 as of the last day of the month for which financial statements have been
delivered, so long as no default or event of default exists. The Company’s “leverage ratio” is the ratio of the amount of debt
for borrowed money to the 12 month trailing EBITDA (as defined in the ABL Facility), each determined on a consolidated
basis. At December 31, 2014, 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 0.25% to 0.375% 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.