Callaway 2015 Annual Report Download - page 53

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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, demand for the Company’s products, foreign currency exchange
rates, and other risks and uncertainties applicable to the Company and its business (see “Risk Factors” contained in Part I,
Item 1A in this Form 10-K). While the Company's operational and financial performance has improved significantly since
2012, no assurance can be given that the Company will be able to generate sufficient operating cash flows in the future or
maintain or grow its existing cash balances. If the Company is unable to generate sufficient cash flows to fund its business
due to a 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 facilities for needed liquidity. If the credit facilities are
not then available or sufficient and the Company could not secure alternative financing arrangements, the Company’s future
operations would be materially adversely affected.
To further enhance its liquidity position, the Company may obtain additional financing, which could consist of equity
or debt financing from public and/or private credit and capital markets. In 2014, the Company filed a universal shelf registration
statement with the Commission for the future sale of up to $200.0 million of debt securities, common stock, preferred stock,
depositary shares, warrants, rights, stock purchase contracts, stock purchase units and units. The securities may be offered
from time to time, separately or together, directly by the Company or through underwriters, dealers or agents at amounts,
prices, interest rates and other terms to be determined at the time of the offering.
In connection with the Company's investment in Topgolf International, Inc., doing business as the Topgolf Entertainment
Group (“Topgolf”), on February 22, 2016, Topgolf announced that it intends to repurchase shares from its existing shareholders.
The Company has agreed to sell approximately 9.6% to 10.9% of the total shares it owns in Topgolf in connection with this
repurchase program. If the intended repurchase is consummated, the Company could receive one-time cash proceeds of
approximately $23.1 million to $26.1 million. For further discussion, see Note 7 "Investments" in the Notes to Consolidated
Financial Statements in this Form 10-K.
As of December 31, 2015, approximately 85% of the Company’s total cash is held in regions outside of the United
States. If the Company were to repatriate such cash, outside of settling intercompany balances during the normal course of
operations, it would need to accrue and pay incremental U.S. federal and state income taxes, reduced by the current amount
of available U.S. federal and state net operating loss and tax credit carryforwards. The Company has not, nor does it intend
to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including
liquidity needs associated with its domestic debt service requirements. In 2015 and 2014, the Company ceased its business
operations in Thailand and Malaysia, respectively, and accordingly, the Company no longer maintains a permanent reinvestment
assertion with respect to these two entities. The Company intends to repatriate the undistributed earnings from these two
entities to the United States at the time that the winding-down process has been completed. As of December 31, 2015, the
Company has accrued for the estimated incremental U.S. income taxes related to reversing its permanent indefinite reinvestment
assertion. However, these incremental U.S. income taxes are expected to be offset by the utilization of the Company's cumulative
U.S. net operating losses incurred through December 31, 2015. Except for the Company's foreign subsidiaries in Thailand
and Malaysia, the Company considers the undistributed earnings of its foreign subsidiaries to be permanently reinvested and,
accordingly, no U.S. income taxes have been provided thereon.
Share Repurchases
In August 2014, the Company's Board of Directors authorized a $50.0 million share repurchase program under which
the Company is authorized to repurchase shares of its common stock in the open market or in private transactions, subject to
the Company’s assessment of market conditions and buying opportunities. The repurchases will be made consistent with the
terms of the Company's ABL Facility which defines the amount of stock that can be repurchased. The repurchase program
will remain in effect until completed or until terminated by the Board of Directors.
During 2015, the Company repurchased approximately 217,000 shares of its common stock under the 2014 repurchase
program at an average cost per share of $9.03 for a total cost of $2.0 million. The Company acquired these shares to satisfy
the Company's tax withholding obligations in connection with the vesting and settlement of employee restricted stock unit
awards. The Company’s repurchases of shares of common stock are recorded at cost and result in a reduction of shareholders’
equity. As of December 31, 2015, the total amount remaining under the repurchase authorization was $47.0 million.