Callaway 2004 Annual Report Download - page 90

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CALLAWAY GOLF COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The following summarizes stock option transactions for the years ended December 31, 2004, 2003 and
2002:
Year Ended December 31,
2004 2003 2002
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
(in thousands, except per share data)
Outstanding at beginning of yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,238 $ 19.04 14,936 $ 20.19 14,753 $ 20.57
GrantedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,875 $ 13.89 1,820 $ 12.73 2,458 $ 16.46
Exercised ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,132) $ 13.84 (1,174) $ 11.71 (1,077) $ 12.10
CanceledÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,312) $ 22.21 (2,344) $ 25.18 (1,198) $ 24.45
Outstanding at end of yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,669 $ 18.41 13,238 $ 19.04 14,936 $ 20.19
Options exercisable at end of yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,154 $ 19.57 9,922 $ 20.56 11,522 $ 21.11
Price range of outstanding optionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $5.25 - $40.00 $5.25 - $40.00 $5.00 - $40.00
The exercise price of all options granted during 2004, 2003 and 2002 was equal to the market value on the
date of grant. The following table summarizes additional information about outstanding stock options at
December 31, 2004:
Remaining
Range of Number Contractual Weighted-Average Number Weighted-Average
Exercise Price Outstanding Life-Years Exercise Price Exercisable Exercise Price
(in thousands) (in thousands)
$5.25 - $10 23 6.07 $ 8.87 13 $ 8.06
$10 - $15 3,724 5.61 $12.67 2,344 $13.03
$15 - $25 6,826 6.14 $17.75 4,701 $17.84
$25 - $40 2,096 0.43 $30.85 2,096 $30.85
$5.25 - $40 12,669 5.66 $18.41 9,154 $19.57
During 2002, the Company, at its discretion, extended the expiration terms in severance arrangements
and accelerated the vesting of 683,000 options, held by certain terminated employees and oÇcers. At the time
of the modiÑcations, the exercise prices of the options were in excess of the then-current market price and
accordingly these actions did not result in compensation expense for the Company.
Restricted Common Stock
During 2004, the Company granted 1,052,500 shares of Restricted Common Stock with fair values
ranging from $10.45 to $15.23 per share to certain employee and non-employee participants under the
Company's 2004 Equity Incentive Plan. The Company recorded $1,741,000 of compensation expense related
to these shares of Restricted Common Stock during 2004.
During 1998, the Company granted 130,000 shares of Restricted Common Stock with a fair value of
$31 per share to 26 oÇcers of the Company. Of these shares, 83,750 shares were canceled due to the service
requirement not being met. The remaining 26,250 shares, vested on January 1, 2003. The net compensation
expense of $814,000 related to the remaining shares was recognized ratably over the vesting period, based on
the diÅerence between the exercise price and market value of the stock on the measurement date. The
Company's Restricted common stock generally vest over periods ranging from one to Ñve years.
F-25