Callaway 2014 Annual Report Download - page 98

F-30
Lease Commitments
The Company leases certain warehouse, distribution and office facilities, vehicles and office equipment under operating
leases, and certain office equipment under capital leases. Lease terms range from one to five years expiring at various dates
through September 2020, with options to renew operating leases at varying terms. Commitments for minimum lease payments
under non-cancelable operating and capital leases as of December 31, 2014 are as follows (in thousands):
Operating
Leases
Capital
Leases
2015..................................................................................................................................................... $ 9,902 $ 619
2016..................................................................................................................................................... 5,519 124
2017..................................................................................................................................................... 4,034 62
2018..................................................................................................................................................... 1,635 15
2019..................................................................................................................................................... 794 —
Thereafter ............................................................................................................................................ 710 —
$ 22,594 $ 820
Rent expense for the Company’s operating lease commitments for the years ended December 31, 2014, 2013 and 2012
was $12,479,000, $13,686,000 and $18,420,000, respectively. At December 31, 2014, the minimum rental payments under
capital leases totaled $820,000. Minimum rental payments under operating leases with initial or remaining terms of one year
or more totaled $22,594,000, net of sublease receipts of $3,553,000 at December 31, 2014.
Unconditional Purchase Obligations
During the normal course of its business, the Company enters into agreements to purchase goods and services, including
purchase commitments for production materials, endorsement agreements with professional golfers and other endorsers,
employment and consulting agreements, and intellectual property licensing agreements pursuant to which the Company is
required to pay royalty fees. It is not possible to determine the amounts the Company will ultimately be required to pay under
these agreements as they are subject to many variables including performance-based bonuses, severance arrangements, the
Company’s sales levels, and reductions in payment obligations if designated minimum performance criteria are not achieved.
As of December 31, 2014, the Company has entered into many of these contractual agreements with terms ranging from one
to four years. The minimum obligation that the Company is required to pay under these agreements is $46,222,000 over the
next four years. In addition, the Company also enters into unconditional purchase obligations with various vendors and suppliers
of goods and services in the normal course of operations through purchase orders or other documentation or that are
undocumented except for an invoice. Such unconditional purchase obligations are generally outstanding for periods less than
a year and are settled by cash payments upon delivery of goods and services and are not reflected in this total. Future purchase
commitments as of December 31, 2014, are as follows (in thousands):
2015.......................................................................................................................................................................... $ 30,587
2016.......................................................................................................................................................................... 12,175
2017.......................................................................................................................................................................... 3,304
2018.......................................................................................................................................................................... 156
$ 46,222
Other Contingent Contractual Obligations
During its normal course of business, the Company has made certain indemnities, commitments and guarantees under
which it may be required to make payments in relation to certain transactions. These include (i) intellectual property indemnities
to the Company’s customers and licensees in connection with the use, sale and/or license of Company product or trademarks,
(ii) indemnities to various lessors in connection with facility leases for certain claims arising from such facilities or leases,
(iii) indemnities to vendors and service providers pertaining to the goods and services provided to the Company or based on
the negligence or willful misconduct of the Company and (iv) indemnities involving the accuracy of representations and
warranties in certain contracts. In addition, the Company has consulting agreements that provide for payment of nominal fees
upon the issuance of patents and/or the commercialization of research results. The Company has also issued guarantees in the
form of standby letters of credit of $1,142,000 as of December 31, 2014.