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Financing Arrangements | 9 Months Ended
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Sep. 30, 2019
Debt Disclosure [Abstract] |
Financing Arrangements | Note 5. Financing Arrangements In addition to cash on hand, as well as cash generated from operations, the Company relies on its primary and Japan asset-based revolving credit facilities to manage seasonal fluctuations in liquidity and to provide additional liquidity when the Company’s operating cash flows are not sufficient to fund the Company’s requirements. As of September 30, 2019, the Company had $110,711,000 outstanding under these facilities, $1,014,000 in outstanding letters of credit, and $88,216,000 in cash and cash equivalents. As of September 30, 2019, the Company's available liquidity, which is comprised of cash on hand and amounts available under both facilities, after letters of credit and outstanding borrowings, was $340,186,000. As of September 30, 2018, the Company had $4,300,000 outstanding under these facilities, $1,205,000 in outstanding letters of credit, and $70,821,000 in cash and cash equivalents. As of September 30, 2018, the Company's available liquidity, which is comprised of cash on hand and amounts available under both facilities, after letters of credit and outstanding borrowings, was $330,220,000. Primary Asset-Based Revolving Credit Facility In May 2019, the Company amended and restated its primary credit facility (the Fourth Amended and Restated Loan and Security Agreement) with Bank of America N.A. and other lenders (the “ABL Facility”), which provides a senior secured asset-based revolving credit facility of up to $400,000,000, comprised of a $260,000,000 U.S. facility, a $70,000,000 German 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), the Company's intellectual property, certain eligible real estate, inventory and accounts receivable of the Company’s subsidiaries in the United States, Germany, Canada and the United Kingdom. The real estate and intellectual property components of the borrowing base under the ABL Facility are both amortizing. The amount available for the real estate portion is reduced quarterly over a 15-year period, and the amount available for the intellectual property portion is reduced quarterly over a 3-year period. As of September 30, 2019, the Company had $62,596,000 in borrowings outstanding under the ABL Facility and $1,014,000 in outstanding letters of credit. Amounts available under the ABL Facility fluctuate with the general seasonality of the business and increase and decrease with changes in the Company’s inventory and accounts receivable balances. Inventory balances are generally higher in the fourth and first quarters and accounts receivable are generally higher during the first half of the year. Average outstanding borrowings during the nine months ended September 30, 2019 were $147,289,000, and average amounts available under the ABL Facility during the nine months ended September 30, 2019, after outstanding borrowings and letters of credit, was approximately $161,009,000. Amounts borrowed under the ABL Facility may be repaid and borrowed as needed. The entire outstanding principal amount (if any) is due and payable in May 2024. 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 certain restrictions on the amount of additional indebtedness and requirements to maintain a certain fixed charge coverage ratio under certain circumstances. These restrictions do not materially limit the Company's ability to pay future dividends at the current dividend rate. As of September 30, 2019, 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 10% of the maximum facility amount or $40,000,000. The Company’s borrowing base availability was above $40,000,000 during the nine months ended September 30, 2019, and the Company was in compliance with the fixed charge coverage ratio as of September 30, 2019. Had the Company not been in compliance with the fixed charge coverage ratio as of September 30, 2019, the maximum amount of additional indebtedness that could have been outstanding on September 30, 2019 would have been reduced by $40,000,000. 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 German, the U.K. and the U.S. borrowing bases, as adjusted. At September 30, 2019 the Company’s trailing 12 month average interest rate applicable to its outstanding loans under the ABL Facility was 4.69%. Additionally, the ABL Facility provides for monthly fees of 0.25% of the unused portion of the ABL Facility. The fees incurred in connection with the origination and amendment of the ABL Facility totaled $3,296,000, which are amortized into interest expense over the term of the ABL Facility agreement. Unamortized origination fees at September 30, 2019 and December 31, 2018 were $2,298,000 and $1,825,000, respectively, of which $745,000 and $476,000, respectively, were included in other current assets and $1,553,000 and $1,349,000, respectively, were included in other long-term assets in the accompanying consolidated condensed balance sheets. Japan ABL Facilities In January 2018, the Company refinanced the asset-based loan agreement between its subsidiary in Japan and The Bank of Tokyo-Mitsubishi UFJ, Ltd (the "2018 Japan ABL Facility"), which provides a credit facility of up to 4,000,000,000 Yen (or U.S. $37,012,000, using the exchange rate in effect as of September 30, 2019) over a three-year term, subject to borrowing base availability under the 2018 Japan ABL Facility. The amounts outstanding are secured by certain assets, including eligible inventory and eligible accounts receivable. The Company had 3,200,000,000 Yen (or U.S. $29,609,000, using the exchange rate in effect as of September 30, 2019) in borrowings outstanding under the 2018 Japan ABL Facility as of September 30, 2019. The 2018 Japan ABL Facility also includes certain restrictions including covenants related to certain pledged assets and financial performance metrics. As of September 30, 2019, the Company was in compliance with these covenants. The 2018 Japan ABL Facility is subject to an effective interest rate equal to the Tokyo Interbank Offered Rate (TIBOR) plus 0.80%. The average interest rate under the 2018 Japan ABL Facility during 2019 was 0.86%. The 2018 Japan ABL Facility expires in January 2021. On July 31, 2019, the Company entered into a new one-year asset-based loan facility ("2019 Japan ABL Facility" and collectively with the 2018 Japan ABL Facility, the "Japan ABL Facility") between its subsidiary in Japan and MUFG Bank, Ltd. for 2,000,000,000 Yen, (or approximately U.S. $18,506,000 using the exchange rate in effect as of September 30, 2019) and had 2,000,000,000 Yen in borrowings outstanding under the 2019 Japan ABL Facility as of September 30, 2019. The amounts outstanding are secured by certain assets, including eligible inventory and eligible accounts receivable.The 2019 Japan ABL Facility is subject to an effective interest rate equal to the TIBOR plus 1.0%, and is subject to certain restrictions including covenants related to certain pledged assets and financial performance metrics. The average interest rate under the 2019 Japan ABL Facility during 2019 was 1.07%. Long-Term Debt Equipment Notes In December 2017, the Company entered into a long-term financing agreement (the "2017 Equipment Note") secured by certain equipment at the Company's golf ball manufacturing facility. As of September 30, 2019 and December 31, 2018, the Company had $7,933,000 and $9,629,000, respectively, outstanding under the 2017 Equipment Note, of which $2,444,000 and $2,411,000 was reported in current liabilities, respectively, and $5,489,000 and $7,218,000 was reported in long-term liabilities, respectively, in the accompanying consolidated condensed balance sheets. The Company's interest rate applicable to outstanding borrowings was 3.79%. Total interest expense related to the 2017 Equipment Note recognized during the nine months ended September 30, 2019 was $252,000. The 2017 Equipment Note amortizes over a 5-year term. In August 2019, the Company entered into a second long-term financing agreement (the "2019 Equipment Note") secured by certain equipment at the Company's golf ball manufacturing facility. As of September 30, 2019 the Company had $12,969,000 outstanding under the 2019 Equipment Note, of which $2,642,000 was reported in current liabilities and $10,327,000 was reported in long-term liabilities in the accompanying consolidated condensed balance sheets. The Company's interest rate applicable to outstanding borrowings was 3.21%. Total interest expense related to the 2019 Equipment Note recognized during the three and nine months ended September 30, 2019 was $36,000. The 2019 Equipment Note amortizes over a 5-year term. The 2017 Equipment Note and 2019 Equipment Note are subject to compliance with the financial covenants in the Company's ABL Facility. As of September 30, 2019, the Company was in compliance with these covenants. Term Loan B Facility In January 2019, to fund the purchase price of the Jack Wolfskin acquisition, the Company entered into a Credit Agreement (the “Credit Agreement”) with Bank of America, N.A and other lenders party to the Credit Agreement (the "Term Lenders"). The Credit Agreement provides for a Term Loan B facility (the “Term Loan Facility”) in an aggregate principal of $480,000,000, which was issued less $9,600,000 in original issue discount and other transaction fees. Such principal amount may be increased pursuant to incremental facilities in the form of additional tranches of term loans or new commitments, up to a maximum incremental amount of $225,000,000, or an unlimited amount subject to compliance with a first lien net leverage ratio of 2.25 to 1.00. The Term Loan Facility is due in January 2026. As of September 30, 2019, the Company had $447,600,000 outstanding under the Term Loan Facility, of which $4,800,000 is reflected in current liabilities. The amount outstanding as of September 30, 2019 was offset by unamortized debt issuance costs of $16,186,000, of which $2,590,000 was reflected in the short-term portion of the facility, and $13,597,000 was reflected in the long-term portion of the facility in the accompanying consolidated condensed balance sheet. Total interest and amortization expense recognized during the three and nine months ended September 30, 2019 was $7,902,000 and $24,449,000, respectively. Loans under the Term Loan Facility are subject to interest at a rate per annum equal to either, at the Company's option, the LIBOR rate or the base rate, plus 4.50% or 3.50%, respectively, and any amounts outstanding are secured by the Company's assets. Principal payments of $1,200,000 are due quarterly, and an amount equal to the outstanding unpaid principal is due on the maturity date. The Company has the option to prepay any outstanding loan balance in whole or in part without premium or penalty. In addition, the Term Loan Facility requires annual excess cash flow payments beginning after December 31, 2019. In order to mitigate the risk of interest rate fluctuations under the Term Loan Facility, the Company entered into agreements with the lenders party to the Credit Agreement to swap the floating rate of LIBOR plus 4.50% to a fixed rate of 4.60% on $200,357,000 of the total principal outstanding under the Term Loan Facility. This was achieved by entering into an interest rate hedge agreement and a cross-currency debt swap agreement, converting the $200,357,000 principal into €176,200,000, both of which mature in January 2025. During the three and nine months ended September 30, 2019, the Company recognized interest income of $1,578,000 and $3,865,000, respectively, under the cross-currency swap to offset the interest expense recognized under the Term Loan Facility. Loans outstanding under this facility are guaranteed by the Company's domestic subsidiaries. The loans and guaranties are secured by substantially all the assets of the Company and guarantors. The Credit Agreement contains a cross-default provision with respect to any indebtedness of the Company as defined in the Credit Agreement, as well as customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on incurrence of additional debt, liens, dividends and other restricted payments, asset sales, investments, mergers, acquisitions and affiliate transactions. Events of default permitting acceleration under the Credit Agreement include, among others, nonpayment of principal or interest, covenant defaults, material breaches of representations and warranties, bankruptcy and insolvency events, certain cross defaults or a change of control. The following table presents the Company's combined aggregate amount of maturities for its 2017 Equipment Note, 2019 Equipment Note and Term Loan Facility over the next five years and thereafter as of September 30, 2019. Amounts payable under the Term Loan Facility included below represent the minimum principal repayment obligations. As of September 30, 2019, the Company does not anticipate excess cash flow repayments as defined by the Term Loan Facility.
|  | (in thousands)
Remainder of 2019 |  | $ | 2,387 |
2020 |  | 9,653 |
2021 |  | 9,825 |
2022 |  | 10,003 |
2023 |  | 7,546 |
2024 |  | 6,680 |
Thereafter |  | 422,400 |
|  | $ | 468,494 |

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- Definition The entire disclosure for debt and capital lease obligations can be reported. Information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. Also includes descriptions and amounts of capital leasing arrangements that consist of direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -URI http://asc.fasb.org/topic&trid=2208923 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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