Callaway 2012 Annual Report Download - page 111

accrued compensation expense of $1,919,000 of which $1,325,000 was included in accrued employee
compensation and benefits and $594,000 was included in long-term incentive compensation and other in the
accompanying consolidated balance sheet.
Stock Appreciation Rights
The Company records compensation expense for cash settled stock appreciation rights (“SARs”) based on
the estimated fair value on the date of grant using the Black Scholes option-pricing model. SARs are
subsequently remeasured at each interim reporting period based on a revised Black Scholes value until they are
exercised. SARs vest over a three year period. As of December 31, 2012 and 2011, the Company recognized
$2,285,000 and $321,000, respectively, in compensation expense related to these awards. At December 31, 2012,
the Company accrued compensation expense of $2,607,000, of which $1,819,000 and $788,000 was included in
accrued employee compensation and benefits and long-term incentive compensation and other, respectively, in
the accompanying consolidated balance sheet. At December 31, 2011, the Company accrued $321,000, which
was included in accrued employee compensation and benefits in the accompanying consolidated balance sheet.
The table below summarizes the total number of SARs granted to employees during the years ended
December 31, 2012 and 2011 (in thousands):
Stock Appreciation Rights Units
Weighted-
Average
Grant-Date
Fair Value
Nonvested at January 1, 2012 ................................................... 500 $5.50
Granted .................................................................... 3,377 6.57
Vested ..................................................................... — —
Forfeited ................................................................... (882) 6.52
Nonvested at December 31, 2012 ................................................ 2,995 $6.42
Employee Stock Purchase Plan
The Company offered an employee stock purchase program in which participating employees authorized the
Company to withhold compensation and 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. In 2011, the Company
terminated this program. In 2011 and 2010 the Company purchased approximately 376,000 and 409,000 shares,
respectively, of common stock under this program on behalf of participating employees and recorded
compensation expense of $234,000 and $404,000, respectively.
Share-Based Compensation Expense
The table below summarizes the amounts recognized in the financial statements for the years ended
December 31, 2012, 2011 and 2010 for share-based compensation related to employees and directors. Amounts
are in thousands, except for per share data.
2012 2011 2010
Cost of sales ......................................................... $ 276 $ 424 $ 938
Operating expenses ................................................... 6,874 10,882 12,451
Total cost of employee share-based compensation included in loss before income tax . . 7,150 11,306 13,389
Income tax benefit(1) ................................................... (96) (77) (4,406)
Amount included in net loss ............................................. $7,054 $11,229 $ 8,983
Impact on net loss per common share:
Basic and diluted ..................................................... $(0.11) $ (0.17) $ (0.14)
(1) Due to the effects the deferred tax asset valuation allowance, the Company’s effective tax rate for 2012 and
2011 is not comparable to the effective tax rate for 2010 as the Company’s income tax amount is not
directly correlated to the amount of its pre-tax loss in both periods (see Note 12).
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