Callaway 2013 Annual Report Download - page 101

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F-31
repurchases of shares of common stock are recorded at cost and result in a reduction of shareholders’ equity. In February
2014, the Board of Directors canceled this program and requested that management seek further Board approval prior to
engaging in further open market transactions. The Board continued to authorize the Company to reacquire shares in
satisfaction of the Company's tax withholding obligations in connection with the settlement of employee equity awards.
In November 2013, the Company redeemed 300 shares of it's Series B Cumulative Perpetual Convertible Preferred
Stock for cash (see Note 4).
Grantor Stock Trust
The Callaway Golf Company Grantor Stock Trust (the “GST”) was established 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 were used primarily for the settlement of employee equity-based awards, including restricted stock awards
and units, stock option exercises and employee stock plan purchases. In 2011, the GST was terminated upon the release
of the remaining shares held by the trust.
The following table presents shares released from the GST for the year ended December 31, 2011 (in thousands):
2011
Employee restricted stock units vested ................................................................................................................. 205
Employee stock plan purchases ............................................................................................................................ 86
Total shares released from the GST............................................................................................................... 291
Note 15. Share-Based Compensation
The Company accounts for its share-based compensation arrangements in accordance with ASC Topic 718, which
requires the measurement and recognition of compensation expense for all share-based payment awards to employees
and directors based on estimated fair values. ASC Topic 718 further requires a reduction in share-based compensation
expense by an estimated forfeiture rate. The forfeiture rate used by the Company is based on historical forfeiture trends.
If actual forfeiture rates are not consistent with the Company’s estimates, the Company may be required to increase or
decrease compensation expenses in future periods.
The Company uses the alternative transition method for calculating the tax effects of share-based compensation
pursuant to ASC Topic 718. The alternative transition method includes simplified methods to establish the beginning
balance of the additional paid-in capital pool (“APIC Pool”) related to the tax effects of employee share-based
compensation, and to determine the subsequent impact on the APIC Pool and consolidated statements of cash flows of
the tax effects of employee and director share-based awards that were outstanding upon adoption of ASC Topic 718.
Stock Plans
As of December 31, 2013, the Company had two shareholder approved stock plans under which shares were available
for equity-based awards: the Callaway Golf Company Amended and Restated 2004 Incentive Plan (the "2004 Plan") and
the 2013 Non-Employee Directors Stock Incentive Director Plan (the "2013 Directors Plan").
The 2004 Plan permits the granting of stock options, stock appreciation rights, restricted stock awards, restricted
stock units and other equity-based awards to the Company’s officers, employees, consultants and certain other non-
employees who provide services to the Company. All grants under the 2004 Plan are discretionary, although no participant
may receive awards in any one year in excess of 2,000,000 shares. The maximum number of shares issuable over the
term of the 2004 Plan is 24,000,000.
The 2013 Directors Plan permits the granting of stock options, restricted stock awards and restricted stock units to
eligible directors serving on the Company's Board of Directors. The Directors may receive a one-time grant upon their
initial appointment to the Board and thereafter an annual grant upon being re-elected at each annual meeting of
shareholders, not to exceed 50,000 shares within any calendar year. The maximum number of shares issuable over the
term of the 2013 Directors Plan is 1,000,000.