Callaway 2004 Annual Report Download - page 88

CALLAWAY GOLF COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Treasury Stock
In August 2001 and May 2002, the Company announced that its Board of Directors authorized it to
repurchase its Common Stock in the open market or in private transactions, subject to the Company's
assessment of market conditions and buying opportunities from time to time, up to a maximum cost to the
Company of $100,000,000 and $50,000,000, respectively. The following schedule summarizes the Company's
repurchase programs:
Year Ended December 31,
2004 2003 2002
Average Average Average
Shares Cost Per Shares Cost Per Shares Cost Per
Repurchased Share Repurchased Share Repurchased Share
(In thousands, except per share data)
Authority Announced in
August 2001ÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì 866 $17.86
Authority Announced in
May 2002 ÏÏÏÏÏÏÏÏÏÏÏ 353 $17.84 373 $12.77 1,967 $15.75
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 353 $17.84 373 $12.77 2,833 $16.40
The Company has completed its August 2001 repurchase program. As of December 31, 2004, the
Company is authorized to repurchase up to $7,968,000 of its Common Stock under the repurchase program
announced in May 2002. The Company's repurchases of shares of Common Stock are recorded at average cost
in Common Stock held in treasury and result in a reduction of shareholders' equity.
Grantor Stock Trust
In July 1995, the Company established the Callaway Golf Company Grantor Stock Trust (the ""GST'')
for the purpose of funding the Company's obligations with respect to one or more of the Company's non-
qualiÑed or qualiÑed employee beneÑt plans. The GST shares are used primarily for the settlement of
employee stock option exercises and employee stock plan purchases. The existence of the GST will have no
impact upon the amount of beneÑts or compensation that will be paid under the Company's employee beneÑt
plans. The GST acquires, holds and distributes shares of the Company's Common Stock in accordance with
the terms of the trust. Shares held by the GST are voted in accordance with voting directions from eligible
employees of the Company as speciÑed in the GST.
In conjunction with the formation of the GST, the Company issued 4,000,000 shares of newly issued
Common Stock to the GST in exchange for a promissory note in the amount of $60,575,000 ($15.14 per
share). In December 1995, the Company issued an additional 1,300,000 shares of newly issued Common
Stock to the GST in exchange for a promissory note in the amount of $26,263,000 ($20.20 per share). In July
2001, the Company issued 5,837,000 shares of Common Stock held in treasury to the GST in exchange for a
promissory note in the amount of $90,282,000 ($15.47 per share). The issuance of these shares to the GST
had no net impact on shareholders' equity.
For Ñnancial reporting purposes, the GST is consolidated with the Company. The value of shares owned
by the GST are accounted for as a reduction to shareholders' equity until used in connection with the
settlement of employee stock option exercises, employee stock plan purchases or other awards. Each period,
the shares owned by the GST are valued at the closing market price, with corresponding changes in the GST
balance reÖected in additional paid-in capital. The issuance of shares by the GST is accounted for by reducing
the GST and additional paid-in capital accounts proportionately as the shares are released. The GST does not
impact the determination or amount of compensation expense for the beneÑt plans being settled. The
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