Callaway 2008 Annual Report Download - page 95

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, 2008, 2007 and 2006, options
outstanding totaling approximately 5,702,000, 2,856,000 and 6,447,000 shares, respectively, were excluded from
the calculations of earnings per common share, as their effect would have been antidilutive.
Note 11. Capital Stock
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 and Stock Repurchases
In November 2007, the Board of Directors authorized the retirement of all Common Stock held in treasury,
which resulted in the retirement of approximately 18,841,000 shares at a total cost of $309,090,000. The
retirement also reduced additional paid in capital and Common Stock by $308,902,000 and $188,000,
respectively. There was no Common Stock held in treasury as of December 31, 2007.
In November 2007, 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
conditions and buying opportunities, up to a maximum cost to the Company of $100,000,000, which would
remain in effect until completed or otherwise terminated by the Board of Directors (the “November 2007
repurchase program”). The November 2007 repurchase program supersedes all prior stock repurchase
authorizations and will remain in effect until completed or otherwise terminated by the Board of Directors.
During 2008, the Company repurchased 1,769,000 shares of its Common Stock under the November 2007
repurchase program at an average cost per share of $13.37 for a total cost of $23,650,000. The Company’s
repurchases of shares of Common Stock are recorded at the average cost of the Common Stock held in treasury
and result in a reduction of shareholders’ equity. As of December 31, 2008, the Company remained authorized to
repurchase up to an additional $76,350,000 of its Common Stock under this program.
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 equity-based
awards, including restricted stock unit awards, 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.
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