Callaway 2008 Annual Report Download - page 98

Treasury yield curve at the date of grant with maturity dates approximately equal to the expected term of the
options at the date of the grant. The expected life of the Company’s options is based on evaluations of historical
and expected future employee exercise behavior, forfeitures, cancellations and other factors. The valuation model
applied in this calculation utilizes highly subjective assumptions that could potentially change over time.
Changes in the subjective input assumptions can materially affect the fair value estimates of an option.
Furthermore, the estimated fair value of an option does not necessarily represent the value that will ultimately be
realized by the employee holding the option.
The following table summarizes the Company’s stock option activities for the year ended December 31,
2008 (in thousands, except price per share and contractual term):
Options
Number of
Shares
Weighted-
Average
Exercise Price
Per Share
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Outstanding at January 1, 2008 ......................... 6,186 $16.51
Granted ....................................... 1,125 $14.68
Exercised ...................................... (113) $12.96
Forfeited ...................................... (44) $14.52
Expired ....................................... (674) $21.47
Outstanding at December 31, 2008 ...................... 6,480 $15.75 5.56 $—
Vested and expected to vest in the future at December 31,
2008 ........................................... 6,401 $15.77 5.52 $—
Exercisable at December 31, 2008 ...................... 4,677 $16.18 4.35 $—
The weighted-average grant-date fair value of options granted during the years ended December 31, 2008,
2007 and 2006 was $3.95, $3.93 and $4.54 per share, respectively. The total intrinsic value for options exercised
during the years ended December 31, 2008, 2007 and 2006 was $372,000, $11,248,000 and $1,344,000,
respectively.
Cash received from the exercise of stock options for the years ended December 31, 2008, 2007 and 2006
was approximately $1,459,000, $45,234,000 and $6,081,000, respectively. The Company settles the exercise of
stock options through the Callaway Golf Company Grantor Stock Trust (see Note 11—Capital Stock). The tax
effect related to option exercises for the years ended December 31, 2008, 2007 and 2006 totaled approximately
$(610,000), $3,858,000 and $578,000, respectively.
Restricted Stock, Restricted Stock Units and Performance Units
All Restricted Stock, Restricted Stock Units and Performance Share Units awarded under the 2004 Plan and
the 2001 Directors Plan are recorded at the Company’s closing stock price on the date of grant. Restricted Stock
awards and Restricted Stock Units generally cliff-vest over a period of three years. Performance Share Units
generally cliff-vest at the end of a three-year performance period. Performance Share Units are a form of stock-
based award in which the number of shares ultimately received depends on the Company’s performance against
specified financial performance metrics over a three-year period. At the end of the performance period, the
number of shares of stock issued will be determined based upon the Company’s performance against those
metrics.
The Company recorded $1,346,000, $1,327,000, and $1,448,000 of compensation expense relating to
Restricted Stock awards for the years ended December 31, 2008, 2007 and 2006, respectively. The Company
recorded $2,350,000, $1,241,000, and $156,000 of compensation expense in connection with shares underlying
Restricted Stock Units for the years ended December 31, 2008, 2007 and 2006, respectively. In connection with
shares underlying Performance Share Units, the Company recorded $326,000 and $333,000, respectively, as of
December 31, 2007 and 2006. The Company continuously evaluates the specified financial performance metrics
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