XML 65 R21.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Share-Based Employee Compensation | 12 Months Ended
--- | ---
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Share-Based Employee Compensation | Note 14. 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. On January 1, 2017 the Company adopted ASU 2016-09. As a result, all tax effects related to employee share based compensation are reflected as a component of continuing operations. The previous “APIC Pool” method under ASC Topic 718 is no longer applicable to the Company. For further discussion see Note 2. Stock Plans As of December 31, 2018, 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, performance share 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 33,000,000. 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, 2018:
| Authorized |  | Available |  | Outstanding(1)
| (In thousands)
2004 Incentive Plan | 33,000 |  |  | 9,706 |  |  | 3,004 |
2013 Directors Plan | 1,000 |  |  | 696 |  |  | 51 |
Total | 34,000 |  |  | 10,402 |  |  | 3,055 |
(1) | Includes 6,000 shares of 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 $14,000, $34,000 and $146,000 of compensation expense relating to outstanding stock options for the years ended December 31, 2018, 2017 and 2016, respectively. 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, 2018, 2017 and 2016. For the years ended December 31, 2018 and 2017, the weighted average estimated forfeiture rate used was 1.7% and 3.7% at December 31, 2016. 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, 2018 (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, 2018 | 980 |  |  | $ | 7.15 |  |  |  |  |
Granted | — |  |  | $ | — |  |  |  |  |
Exercised | (232 | ) |  | $ | 7.05 |  |  |  |  |
Forfeited | — |  |  | $ | — |  |  |  |  |
Expired | (57 | ) |  | $ | 14.92 |  |  |  |  |
Outstanding at December 31, 2018 | 691 |  |  | $ | 6.54 |  |  | 4.05 |  | $ | 6,053 |
Vested and expected to vest in the future at December 31, 2018 | 691 |  |  | $ | 6.54 |  |  | 4.05 |  | $ | 6,053 |
Exercisable at December 31, 2018 | 691 |  |  | $ | 6.54 |  |  | 4.05 |  | $ | 6,053 |
At December 31, 2018, there was no unrecognized compensation expense related to options granted to employees under the Company’s share-based payment plans. The total intrinsic value for options exercised during the years ended December 31, 2018, 2017 and 2016 was $2,621,000, $3,546,000 and $1,005,000, respectively. Cash received from the exercise of stock options for the years ended December 31, 2018, 2017 and 2016 was $1,636,000, $5,362,000 and $2,637,000, respectively. Restricted Stock Units Restricted stock units awarded under the 2004 Incentive Plan and the 2013 Directors Plan are recorded at the Company’s closing stock price on the date of grant. Restricted stock units generally vest over a one- to three-year period. At December 31, 2018, 2017 and 2016, the weighted average grant-date fair value of restricted stock units granted was $15.30, $10.94 and $9.36, respectively. The Company recorded $5,949,000, $5,537,000 and $4,283,000 of compensation expense related to restricted stock units in 2018, 2017 and 2016, respectively. The table below is a roll-forward of the activity for restricted stock units during the 12 months ended December 31, 2018 (in thousands, except fair value amounts):
Restricted Stock Units | Units |  | Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 2018 | 1,276 |  |  | $ | 10.09 |
Granted | 424 |  |  | 15.30 |
Vested | (451 | ) |  | 9.28 |
Forfeited | (10 | ) |  | 11.32 |
Nonvested at December 31, 20181 | 1,239 |  |  | $ | 12.16 |
(1) | Excludes 6,000 shares of accrued incremental dividend equivalent rights on outstanding shares underlying restricted stock units granted under the 2004 Incentive Plan and 2013 Directors Plan.
At December 31, 2018, there was $8,918,000 of total unrecognized compensation expense related to nonvested restricted stock units granted to employees under the Company’s share-based payment plans. That cost is expected to be recognized over a weighted-average period of 2.2 years. Performance Share Units Performance share units granted under the 2004 Incentive Plan are stock-based awards in which the number of shares ultimately received depends on the Company's performance against specified metrics which are generally over a one- to three-year performance period from the date of grant. These performance metrics are established by the Company at the beginning of the performance period. At the end of the performance period, the number of shares of stock that could be issued is fixed based upon the degree of achievement of the performance goals. The number of shares that could be issued can range from 0% to 200% of the participant's target award. Performance share units are initially valued at the Company's closing stock price on the date of grant. Stock compensation expense, net of estimated forfeitures, is recognized on a straight-line basis over the vesting period. The expense recognized over the vesting period is adjusted up or down based on the anticipated performance level during the performance period. If the performance metrics are not probable of achievement during the performance period, compensation expense would be reversed. The awards are forfeited if the threshold performance metrics are not achieved as of the end of the performance period. The performance share units generally cliff-vest in full three years from the date of grant. The Company granted 307,000, 462,000 and 420,000 performance share units during the years ended December 31, 2018, 2017 and 2016, respectively, at a weighted average grant-date fair value of $14.80, $10.68 and $8.61 per share, respectively. These awards are subject to a three-year performance period provided that (i) if certain first year performance goals are achieved, the participant could earn up to 50% of the three-year target award shares, subject to continued service through the vesting date, and (ii) if certain cumulative first and second year performance goals are achieved, the participant could earn up to an aggregate of 80% of the three-year target award shares (which includes any shares earned during the first year), subject to continued service through the vesting date. Based on the Company’s performance, participants earned a minimum of 50% of the target award shares granted in 2017, and 80% of the target award shares granted in 2016, subject to continued service through the vesting dates. During the years ended December 31, 2018, 2017 and 2016, the Company recognized total compensation expense, net of estimated forfeitures, of $7,567,000, $7,075,000 and $4,536,000, respectively, for performance share units. At December 31, 2018, the unamortized compensation expense related to these awards was $10,066,000, which is expected to be recognized over a weighted-average period of 1.1 years. The table below is a roll-forward of the activity for performance share units during the 12 months ended December 31, 2018 (in thousands, except fair value amounts):
Performance Share Units | Units |  | Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 20181 | 1,433 |  |  | $ | 9.05 |
Granted | 307 |  |  | 14.80 |
Vested | (606 | ) |  | 7.87 |
Forfeited | (15 | ) |  | 10.68 |
Nonvested at December 31, 2018 | 1,119 |  |  | $ | 11.10 |
(1) | Nonvested performance share units as of January 1, 2018, are comprised of 1,292,000 shares at the target award rate adjusted for shares earned by participants at 130.2% for awards granted in 2015.
Stock Appreciation Rights Cash settled stock appreciation rights ("SARs") granted under the 2004 Incentive Plan are valued using the Black-Scholes option-pricing model on the date of grant. 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, 2016, the outstanding SARs were fully vested. There were no awards outstanding as of December 31, 2018 and 2017. The Company reversed $32,000 and recognized $320,000 during the years ended December 31, 2017 and 2016, respectively, in compensation expense related to previously granted awards.
Share-Based Compensation Expense The table below summarizes the amounts recognized in the financial statements for the years ended December 31, 2018, 2017 and 2016 for share-based compensation, including expense for stock options, restricted stock units, performance share units and cash settled stock appreciation rights (in thousands):
| 2018 |  | 2017 |  | 2016
Cost of sales | $ | 976 |  |  | $ | 907 |  |  | $ | 704 |
Operating expenses | 12,554 |  |  | 11,708 |  |  | 8,581 |
Total cost of employee share-based compensation included in income before income tax | $ | 13,530 |  |  | $ | 12,615 |  |  | $ | 9,285 |

X
- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsSharebasedPaymentsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration