Callaway 2015 Annual Report Download - page 102

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F-32
The Company records compensation expense for employee stock options based on the estimated fair value of the options
on the date of grant using the Black-Scholes option-pricing model. The model uses various assumptions, including a risk-free
interest rate, the expected term of the options, the expected stock price volatility, and the expected dividend yield. Compensation
expense for employee stock options is recognized over the vesting term and is reduced by an estimate for forfeitures, which
is based on the Company’s historical forfeitures of unvested options and awards. The Company did not grant stock options
during the years ended December 31, 2015 and 2014. For the year ended December 31, 2015, 2014 and 2013, the weighted
average estimated forfeiture rate used was 6.2%, 6.5% and 6.6%, respectively.
The table below summarizes the average fair value assumptions used in the valuation of stock options granted during
the year ended December 31, 2013.
2013
Dividend yield ....................................................................................................................................................... 0.6%
Expected volatility................................................................................................................................................. 48.8%
Risk-free interest rate ............................................................................................................................................ 0.7%
Expected life.......................................................................................................................................................... 4.3 years
The Company uses forecasted dividends to estimate the expected dividend yield. The expected volatility is based on the
historical volatility of the Company’s stock. The risk-free interest rate is based on the U.S. Treasury yield curve at the date of
grant with maturity dates approximately equal to the expected term of the options at the date of the grant. The expected life
of the Company’s options is based on evaluations of historical employee exercise behavior, forfeitures, cancellations and other
factors. The valuation model applied in this calculation utilizes highly subjective assumptions that could potentially change
over time. Changes in the subjective input assumptions can materially affect the fair value estimates of an option. Furthermore,
the estimated fair value of an option does not necessarily represent the value that will ultimately be realized by the employee
holding the option.
The following table summarizes the Company’s stock option activities for the year ended December 31, 2015 (in
thousands, except price per share and contractual term):
Options
Number of
Shares
Weighted-
Average
Exercise Price
Per Share
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Outstanding at January 1, 2015 ...................................................... 3,659 $ 8.59
Granted.................................................................................... — $ —
Exercised................................................................................. (914) $ 7.18
Forfeited .................................................................................. — $ —
Expired .................................................................................... (320) $ 12.88
Outstanding at December 31, 2015 ................................................ 2,425 $ 8.55 4.93 $ 4,889
Vested and expected to vest in the future at December 31, 2015... 2,420 $ 8.55 4.92 $ 4,874
Exercisable at December 31, 2015................................................. 1,897 $ 9.11 4.92 $ 3,370
The weighted-average grant-date fair value of options granted during the year ended December 31, 2013 was $2.47.
There were no stock options granted during 2015 or 2014.
At December 31, 2015, there was $187,000 of total unrecognized compensation expense related to options granted to
employees under the Company’s share-based payment plans. That cost is expected to be recognized over a weighted-average
period of 0.2 years. The amount of unrecognized compensation expense noted above does not necessarily represent the amount
that will ultimately be realized by the Company in its consolidated statement of operations.
The total intrinsic value for options exercised during the years ended December 31, 2015, 2014 and 2013 was $2,151,000,
$569,000 and $243,000, respectively. Cash received from the exercise of stock options for the years ended December 31,
2015, 2014 and 2013 was $6,565,000, $2,291,000 and $1,652,000, respectively.