Callaway 2005 Annual Report Download - page 91

CALLAWAY GOLF COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
conditions and buying opportunities, up to a maximum cost to the Company of $50,000,000. The new stock
repurchase program supersedes the May 2002 repurchase program and all prior stock repurchase authorizations.
There were no repurchases under this authorization during the fourth quarter of 2005.
During 2005, the Company reacquired 3,000 shares of its Common Stock at an average cost per share of
$12.36 through the withholding of shares in satisfaction of employee tax obligations related to the vesting of
employee restricted stock awards. 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 nonqualified or
qualified employee benefit 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
benefits or compensation that will be paid under the Company’s employee benefit 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
specified 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 financial 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 reflected 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 benefit plans being settled. The GST shares do not
have any impact on the Company’s earnings per share until they are used in connection with the settlement of
employee stock option exercises, employee stock plan purchases or other awards.
The following table presents shares released from the GST for the settlement of employee stock option
exercises and employee stock plan purchases for the years ended December 31, 2005, 2004 and 2003:
Year Ended December 31,
2005 2004 2003
(In thousands)
Employee stock option exercises .................................. 853 1,109 1,041
Employee stock plan purchases ................................... 369 417 385
Total shares released from the GST ............................ 1,222 1,526 1,426
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