Callaway 2009 Annual Report Download - page 105

Employee Stock Purchase Plan
Pursuant to the amended and restated Callaway Golf Employee Stock Purchase Plan (the “Plan”),
participating employees authorize the Company to withhold compensation and to use the withheld amounts to
purchase shares of the Company’s common stock at 85% of the closing price on the last day of each six-month
offering period. During 2009, 2008 and 2007 approximately 421,000, 260,000 and 201,000 shares, respectively,
of the Company’s common stock were purchased under the Plan on behalf of participating employees. As of
December 31, 2009, there were 2,478,000 shares reserved for future issuance under the Plan. In connection with
the Plan, the Company recorded $452,000, $537,000 and $496,000 of compensation expense for the years ended
December 31, 2009, 2008 and 2007, respectively.
Share-Based Compensation Expense
The table below summarizes the amounts recognized in the financial statements for the years ended
December 31, 2009, 2008 and 2007 for share-based compensation related to employees and directors. Amounts
are in thousands, except for per share data.
2009 2008 2007
Cost of sales ........................................................ $ 457 $ 553 $ 490
Operating expenses .................................................. 8,356 7,059 7,141
Total cost of employee share-based compensation included in income, before
income tax ................................................... 8,813 7,612 7,631
Amount of income tax recognized in earnings ............................. (2,705) (2,014) (2,320)
Amount charged against net income ..................................... $6,108 $ 5,598 $ 5,311
Impact on net income per common share:
Basic .............................................................. $ (0.10) $ (0.09) $ (0.08)
Diluted ............................................................ $ (0.10) $ (0.09) $ (0.08)
From time to time, the Company accelerates the vesting of certain share-based awards as a result of
employee terminations. There were no material award accelerations during 2009, 2008 and 2007.
With respect to restricted stock awards granted to certain non-employees, the Company reversed expense of
$57,000 and $705,000 for the years ended December 31, 2009 and 2008, respectively, and recorded expense of
$3,221,000 for the year ended December 31, 2007 as a result of the remeasurement of shares of Restricted Stock
at market value.
Note 14. 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. During 2008 and 2007, the Company was obligated to contribute annually an amount equal to 100%
of the participant’s contribution up to 6% of that participant’s annual compensation. Effective February 1, 2009,
in light of the unfavorable economic conditions and the Company’s efforts to reduce costs, the 401(k) Plan was
amended to suspend the Company’s obligation to match employee contributions. As of January 1, 2010, the
Company amended the Plan to reinstate the Company’s obligation to match employee contributions.
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. In
accordance with the provisions of the 401(k) Plan, the Company matched employee contributions in the amount
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