Callaway 2014 Annual Report Download - page 104

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F-36
In connection with the Cost Reduction Initiatives announced in July 2012 (see Note 3), the Company recognized $416,000
during the year ended December 31, 2012 in stock compensation expense as a result of the contractual acceleration of the
vesting of certain stock options, restricted stock units and phantom stock units.
Note 16. Employee Benefit Plan
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 75% of annual compensation, up to the maximum permitted under federal law, and the Company is obligated
to contribute annually an amount equal to 50% of the participant’s contributions up to 6% of their eligible annual compensation.
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 50% per year,
becoming fully vested after the completion of two years of service. In accordance with the provisions of the 401(k) Plan, the
Company matched employee contributions in the amount of $1,687,000, $1,589,000 and $2,156,000 during 2014, 2013 and
2012, respectively. Additionally, the Company can make discretionary contributions based on the profitability of the Company.
For the years ended December 31, 2014, 2013 and 2012 there were no discretionary contributions.
Note 17. Fair Value of Financial Instruments
Certain of the Company’s financial assets and liabilities are measured at fair value on a recurring and nonrecurring basis.
Fair value is defined as the price that would be received to sell an asset or the price paid to transfer a liability (the exit price)
in the principal and most advantageous market for the asset or liability in an orderly transaction between market participants.
Assets and liabilities carried at fair value are classified using the following three-tier hierarchy:
Level 1: Quoted market prices in active markets for identical assets or liabilities;
Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable
in active markets; and
Level 3: Fair value measurements derived from valuation techniques in which one or more significant inputs or significant
value drivers are unobservable.
The following table summarizes the valuation of the Company’s foreign currency exchange contracts (see Note 18) that
are measured at fair value on a recurring basis by the above pricing levels at December 31, 2014 and 2013 (in thousands):
Fair
Value Level 1 Level 2 Level 3
2014
Foreign currency derivative instruments—asset position ................................ $ 40 $ — $ 40 $ —
Foreign currency derivative instruments—liability position ........................... (246)—
(246)—
$(206)$ — $ (206)$ —
2013
Foreign currency derivative instruments—asset position ................................ $ 557 $ — $ 557 $ —
Foreign currency derivative instruments—liability position ........................... (823)—
(823)—
$(266)$ — $ (266)$ —
The fair value of the Company’s foreign currency exchange contracts is based on observable inputs that are corroborated
by market data. Foreign currency derivatives on the balance sheet are recorded at fair value with changes in fair value recorded
in the statement of operations.
Nonrecurring Fair Value Measurements
The Company measures certain assets at fair value on a nonrecurring basis at least annually or when certain indicators
are present. These assets include long-lived assets, goodwill and non-amortizing intangible assets that are written down to
fair value when they are held for sale or determined to be impaired. As the implied fair value for the items discussed below
was based on significant, unobservable inputs, the fair value measurements are classified as Level 3.