Callaway 2009 Annual Report Download - page 100

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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 7.50% Series B Cumulative Perpetual Convertible Preferred Stock has no
maturity date or, except in limited circumstances, voting rights prior to conversion to common stock. 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.
During 2009, the Company repurchased 55,000 shares of its common stock under the November 2007
repurchase program at an average cost per share of $8.40 for a total cost of $459,000. These shares were
repurchased to settle shares withheld for taxes due by holders of restricted stock awards. The Company’s
repurchases of shares of common stock are recorded at cost and result in a reduction of shareholders’ equity. As
of December 31, 2009, the Company remained authorized to repurchase up to an additional $75,891,000 of its
common stock under the November 2007 repurchase 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 awards and units, 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 the shares are used. Each period, the shares
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