Callaway 2007 Annual Report Download - page 95

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Employee Share-Based Compensation Expense
The table below summarizes the amounts recognized in the financial statements for the years ended
December 31, 2007, 2006 and 2005 for share-based compensation related to employees and directors. Prior to the
adoption of SFAS 123R, the Company recorded share-based compensation expense related to Restricted Stock
awards. Amounts are in thousands, except for per share data.
2007 2006 2005
Cost of sales ......................................................... $ 490 $ 484 $ —
Operating expenses ................................................... 7,141 8,172 611
Total cost of employee share-based compensation included in income, before
income tax .................................................... 7,631 8,656 611
Amount of income tax recognized in earnings .............................. (2,320) (2,813) (232)
Amount charged against net income ...................................... $5,311 $ 5,843 $ 379
Impact on net income per common share:
Basic ............................................................... $ (0.08) $ (0.08) $(0.01)
Diluted ............................................................. $ (0.08) $ (0.08) $(0.01)
During 2006, the Company accelerated the vesting of certain share-based awards as a result of employee
terminations. In connection with the accelerations, the Company recognized additional expense in the amount of
$1,330,000 before income taxes. In addition, the Company recorded expense of $3,221,000, $3,261,000 and
$5,917,000 for Restricted Stock awards granted to certain non-employees for the years ended December 31,
2007, 2006 and 2005, respectively. There were no amounts relating to employee share-based compensation
capitalized in inventory during the years 2007, 2006 and 2005.
Note 12. Employee Benefit Plans
The Company has a voluntary deferred compensation plan under Section 401(k) of the Internal Revenue
Code (the “401(k) Plan”) for all employees who satisfy the age and service requirements under the 401(k) Plan.
Each participant may elect to contribute up to 25% of annual compensation, up to the maximum permitted under
federal law, and the Company is obligated to contribute annually an amount equal to 100% of the participant’s
contribution up to 6% of that participant’s annual compensation. The portion of the participant’s account
attributable to elective deferral contributions and rollover contributions are 100% vested and nonforfeitable.
Participants vest in employer matching and profit sharing contributions at a rate of 25% per year, becoming fully
vested after the completion of four years of service. Employees contributed $9,200,000, $9,235,000 and
$8,925,000 to the 401(k) Plan in 2007, 2006 and 2005, respectively. In accordance with the provisions of the
401(k) Plan, the Company matched employee contributions in the amount of $6,379,000, $6,307,000 and
$6,156,000 during 2007, 2006 and 2005, respectively. Additionally, the Company can make discretionary
contributions based on the profitability of the Company. For the years ended December 31, 2007, 2006 and 2005
there were no discretionary contributions.
The Company also has an unfunded, nonqualified deferred compensation plan. The plan allows officers,
certain other employees and directors of the Company to defer all or part of their compensation to be paid to the
participants or their designated beneficiaries upon retirement, death or separation from the Company. To support
the deferred compensation plan, the Company has elected to purchase Company-owned life insurance. The cash
surrender value of the Company-owned insurance related to deferred compensation is included in other assets
and was $9,103,000 and $8,607,000 at December 31, 2007 and 2006, respectively. The liability for the deferred
compensation is included in long-term liabilities and was $7,790,000 and $7,210,000 at December 31, 2007, and
2006, respectively. For the years ended December 31, 2007 and 2006, the total participant deferrals were
$1,609,000 and $1,974,000, respectively.
F-25