Callaway 2005 Annual Report Download - page 90

CALLAWAY GOLF COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 9. Earnings Per Common Share
The schedule below summarizes the elements included in the calculation of basic and diluted earnings (loss)
per common share for the years ended December 31, 2005, 2004 and 2003.
Year Ended December 31,
2005 2004 2003
(In thousands, except per share data)
Net income (loss) ....................................... $13,284 $(10,103) $45,523
Weighted-average shares outstanding:
Weighted-average shares outstanding—Basic ............. 68,646 67,721 66,027
Dilutive securities ................................... 593 — 444
Weighted-average shares outstanding—Diluted ............... 69,239 67,721 66,471
Earnings (loss) per common share:
Basic ............................................. $ 0.19 $ (0.15) $ 0.69
Diluted ............................................ $ 0.19 $ (0.15) $ 0.68
Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. Options with an exercise price in excess of
the average market value of the Company’s Common Stock during the period have been excluded from the
calculation as their effect would be antidilutive. Additionally, potentially dilutive securities are excluded from the
computation of earnings per share in periods in which a net loss is reported as their effect would be antidilutive.
Thus, weighted-average shares outstanding—Diluted is the same as weighted-average shares outstanding—Basic
in periods when a net loss is reported. For the years ended December 31, 2005 and 2003, options outstanding
totaling approximately 7,816,000 shares and 10,606,000 shares, respectively, were excluded from the
calculations of earnings per common share, as their effect would have been antidilutive.
Note 10. Stock, Stock Options and Rights
Common Stock and Preferred Stock
The Company has an authorized capital of 243,000,000 shares, $0.01 par value, of which 240,000,000
shares are designated Common Stock, and 3,000,000 shares are designated Preferred Stock. Of the Preferred
Stock, 240,000 shares are designated Series A Junior Participating Preferred Stock. The remaining shares of
Preferred Stock are undesignated as to series, rights, preferences, privileges or restrictions.
The holders of Common Stock are entitled to one vote for each share of Common Stock on all matters
submitted to a vote of the Company’s shareholders. Although to date no shares of Series A Junior Participating
Preferred Stock have been issued, if such shares were issued, each share of Series A Junior Participating
Preferred Stock would entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the
shareholders of the Company. The holders of Series A Junior Participating Preferred Stock and the holders of
Common Stock shall generally vote together as one class on all matters submitted to a vote of the Company’s
shareholders. Shareholders entitled to vote for the election of directors are entitled to vote cumulatively for one
or more nominees.
Treasury Stock
In November 2005, the Company announced that its Board of Directors authorized it to repurchase shares of
its Common Stock in the open market or in private transactions, subject to the Company’s assessment of market
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