Callaway 2015 Annual Report Download - page 88

F-18
transactions. In addition, the ABL Facility imposes restrictions on the amount the Company could pay in annual cash dividends,
including meeting certain restrictions on the amount of additional indebtedness and requirements to maintain a certain fixed
charge coverage ratio under certain circumstances. As of December 31, 2015, the Company was in compliance with all financial
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, as amended, falls below
$23,000,000. The Company’s borrowing base availability was above $23,000,000 during the year ended December 31, 2015,
and the Company was in compliance with the fixed charge coverage ratio as of December 31, 2015. Had the Company not
been in compliance with the fixed charge coverage ratio as of December 31, 2015, the Company's maximum amount of
additional indebtedness that could have been outstanding on December 31, 2015 would have been reduced by $23,000,000.
The interest rate applicable to outstanding loans under the ABL Facility 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,
2015, the Company’s trailing 12 months average interest rate applicable to its outstanding loans under the ABL Facility,
including the fees described below, was 4.43%.
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.
The fees incurred in connection with the origination and amendment of the ABL Facility totaled $4,961,000, which will
be amortized into interest expense over the term of the ABL Facility agreement. Unamortized origination fees as of
December 31, 2015 and 2014 were $1,781,000 and $2,233,000, respectively, of which $509,000 and $496,000, respectively,
was included in other current assets and $1,272,000 and $1,737,000, respectively, was included in other long-term assets in
the accompanying consolidated balance sheets.
Japan ABL Facility
In January 2015, the Company entered into a separate asset-based loan and guarantee agreement (the "Japan ABL
Facility") between its subsidiary in Japan and The Bank of Tokyo-Mitsubishi UFG, Ltd and The Development Bank of Japan.
The Company can borrow up to 2 billion Yen (or $16,632,000, using the exchange rate in effect as of December 31, 2015)
over a one-year term, and the amounts outstanding are secured by certain assets, including eligible inventory. The Japan ABL
Facility is subject to an effective interest rate of 1.48%, and includes certain restrictions including covenants related to certain
pledged assets and financial performance metrics. As of December 31, 2015, the Company was in compliance with these
covenants. The Company had $14,969,000 outstanding under this facility at December 31, 2015, and the maximum amount
that could have been outstanding at December 31, 2015 was $16,632,000.
In January 2016, the Company renewed the Japan ABL Facility for an additional two-year term, subject to an effective
interest rate equal to TIBOR plus 0.25%. The agreement expires on January 22, 2018
Convertible Senior Notes
In August 2012, the Company issued $112,500,000 of 3.75% Convertible Senior Notes (the “convertible notes”). The
convertible notes were convertible, at the option of the note holder, at any time on or prior to the close of business on the
business day immediately preceding August 15, 2019, into shares of common stock at an initial conversion rate of 133.3333
shares per $1,000 principal amount of convertible notes, which is equal to an aggregate of 15,000,000 shares of common stock
at a conversion price of approximately $7.50 per share, subject to customary anti-dilution adjustments. The Company incurred
transactional fees of $3,537,000 which were being amortized over the term of the convertible notes.
During the second half of 2015, the convertible notes were eliminated pursuant to certain exchange transactions and
shareholder conversions, which resulted, among other things, in the issuance of 15,000,000 shares of common stock to the
note holders. In connection with the elimination of the convertible notes, the Company recorded $108,955,000 in shareholders'
equity as of December 31, 2015, net of the outstanding discount of $3,395,000. There were no convertible notes outstanding
as of December 31, 2015.