Callaway 2014 Annual Report Download - page 100

F-32
The Company uses the alternative transition method for calculating the tax effects of share-based compensation pursuant
to ASC Topic 718. The alternative transition method includes simplified methods to establish the beginning balance of the
additional paid-in capital pool (“APIC Pool”) related to the tax effects of employee share-based compensation, and to determine
the subsequent impact on the APIC Pool and consolidated statements of cash flows of the tax effects of employee and director
share-based awards that were outstanding upon adoption of ASC Topic 718.
Stock Plans
As of December 31, 2014, the Company had two shareholder approved stock plans under which shares were available
for equity-based awards: the Callaway Golf Company Amended and Restated 2004 Incentive Plan (the "2004 Incentive Plan")
and the 2013 Non-Employee Directors Stock Incentive Plan (the "2013 Directors Plan").
The 2004 Incentive Plan permits the granting of stock options, stock appreciation rights, restricted stock awards, restricted
stock units and other equity-based awards to the Company’s officers, employees, consultants and certain other non-employees
who provide services to the Company. All grants under the 2004 Incentive Plan are discretionary, although no participant may
receive awards in any one year in excess of 2,000,000 shares. The maximum number of shares issuable over the term of the
2004 Incentive Plan is 24,000,000.
The 2013 Directors Plan permits the granting of stock options, restricted stock awards and restricted stock units to eligible
directors serving on the Company's Board of Directors. The Directors may receive a one-time grant upon their initial
appointment to the Board and thereafter an annual grant upon being re-elected at each annual meeting of shareholders, not to
exceed 50,000 shares within any calendar year. The maximum number of shares issuable over the term of the 2013 Directors
Plan is 1,000,000.
The following table presents shares authorized, available for future grant and outstanding under each of the Company’s
plans as of December 31, 2014:
Authorized Available Outstanding(2)
(In thousands)
2001 Directors Plan(1).............................................................................................. 500 — 36
2004 Incentive Plan................................................................................................. 24,000 8,405 5,360
2013 Directors Plan................................................................................................. 1,000 898 95
Total......................................................................................................................... 25,500 9,303 5,491
(1) The Company’s 2001 Non-Employee Directors Stock Incentive Plan (the "2001 Directors Plan") expired on December 31,
2011.
(2) Includes accrued incremental dividend equivalent rights on outstanding shares underlying restricted stock units granted
under the 2004 Incentive Plan and 2013 Directors Plan.
Stock Options
All stock option grants made under the 2004 Incentive Plan are made at exercise prices no less than the Company’s
closing stock price on the date of grant. Outstanding stock options generally vest over a three-year period from the grant date
and generally expire up to 10 years after the grant date. The Company recorded $1,907,000, $1,839,000 and $1,586,000 of
compensation expense relating to outstanding stock options for the years ended December 31, 2014, 2013 and 2012,
respectively.
The Company records compensation expense for employee stock options based on the estimated fair value of the options
on the date of grant using the Black-Scholes option-pricing model. The model uses various assumptions, including a risk-free
interest rate, the expected term of the options, the expected stock price volatility, and the expected dividend yield. Compensation
expense for employee stock options is recognized over the vesting term and is reduced by an estimate for forfeitures, which
is based on the Company’s historical forfeitures of unvested options and awards. The Company did not grant stock options
during the year ended December 31, 2014. For the years ended December 31, 2013 and 2012, the weighted average estimated
forfeiture rate used was 6.6% and 5.7%, respectively.