Callaway 2015 Annual Report Download - page 101

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F-31
stock are recorded at cost and result in a reduction of shareholders’ equity. As of December 31, 2015, the total amount remaining
under the repurchase authorization was $47,027,000.
In November 2013, the Company redeemed the final 300 shares of its Series B Cumulative Perpetual Convertible
Preferred Stock for cash (see Note 4).
Note 13. Share-Based Employee 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, 2015, 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 Incentive Plan")
and the 2013 Non-Employee Directors Stock Incentive Plan (the "2013 Directors Plan").
The 2004 Incentive 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 Incentive 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 Incentive 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.
The following table presents shares authorized, available for future grant and outstanding under each of the Company’s
plans as of December 31, 2015:
Authorized Available Outstanding(1)
(In thousands)
2004 Incentive Plan................................................................................................. 24,000 6,915 4,782
2013 Directors Plan................................................................................................. 1,000 852 99
Total......................................................................................................................... 25,000 7,767 4,881
(1) Includes accrued incremental dividend equivalent rights on outstanding shares underlying restricted stock units granted
under the 2004 Incentive Plan and 2013 Directors Plan.
Stock Options
All stock option grants made under the 2004 Incentive Plan are made at exercise prices no less than the Company’s
closing stock price on the date of grant. Outstanding stock options generally vest over a three-year period from the grant date
and generally expire up to 10 years after the grant date. The Company recorded $1,396,000, $1,907,000 and $1,839,000 of
compensation expense relating to outstanding stock options for the years ended December 31, 2015, 2014 and 2013,
respectively.