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Stock Plans and Share-Based Compensation | 12 Months Ended
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Dec. 31, 2022
Share-Based Payment Arrangement [Abstract] |
Stock Plans and Share-Based Compensation | Stock Plans and Share-Based Compensation Equity Compensation Plans and Replacement Awards As of December 31, 2022, the Company had three shareholder approved stock plans under which shares were available for equity-based awards; the 2004 Incentive Plan, the 2013 Non-Employee Directors Stock Incentive Plan (the “2013 Directors Plan”) and the Callaway Golf Company 2022 Incentive Plan (the “2022 Incentive Plan”). The Company also had one non-shareholder approved stock plan, the 2021 Employment Inducement Plan (the “2021 Inducement Plan”), which was adopted in connection with the Company’s merger with Topgolf on March 8, 2021. The 2021 Inducement Plan has substantially the same terms as the Company’s 2004 Incentive Plan, with the exception that awards can only be made to new employees in connection with their commencement of employment and incentive stock options cannot be granted under the 2021 Inducement Plan. Upon the effective date of the 2022 Incentive Plan, the Company ceased granting awards under the 2004 Incentive Plan, the 2013 Directors Plan and the 2021 Inducement Plan and, except for shares subject to awards under those plans on the effective date of the 2022 Incentive Plan, any shares remaining for future issuance under such Plans were canceled. The 2004 Incentive Plan permitted 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 were discretionary, although no participant may receive awards in any one year in excess of 2.0 million shares. No new awards may be granted under the 2004 Incentive Plan. The 2013 Directors Plan permitted the granting of stock options, restricted stock awards and restricted stock units to eligible directors serving on the Company’s Board of Directors. Directors generally received a one-time grant upon their initial appointment to the Company’s Board of Directors and an annual grant thereafter upon being re-elected at each annual meeting of shareholders, not to exceed 50 thousand shares within any calendar year. No new awards may be granted under the 2013 Directors Plan. The 2021 Inducement Plan was adopted in connection with the Company’s merger with Topgolf on March 8, 2021. The plan permitted 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. No new awards may be granted under the 2021 Inducement Plan. The 2022 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, eligible directors serving on the Company’s Board of Directors and certain other non-employees who provide services to the Company. All grants under the 2022 Incentive Plan are discretionary. Directors may receive a one-time grant upon their initial appointment to the Company’s Board of Directors and may receive an annual grant thereafter upon being re-elected at each annual meeting of shareholders. The maximum number of shares issuable over the term of the 2022 Incentive Plan is 16.0 million shares, plus any shares underlying awards made under the 2004 Incentive Plan to the extent such awards lapse, expire, terminate or are canceled. In connection with the merger with Topgolf which was completed on March 8, 2021, the Company converted stock options previously held by former equity holders of Topgolf immediately prior to the merger into 3.2 million options to purchase shares of the Company’s common stock, and certain outstanding restricted stock awards of Topgolf into 0.2 million shares of the Company’s common stock (collectively, the “replacement awards”). The Company also assumed two equity compensation plans and a stock option agreement between Topgolf and a third party (collectively, the “Topgolf Equity Compensation Plans and Option Agreement”) in connection with the merger. The total purchase consideration transferred in the merger by the Company included $33.1 million in consideration related to the replacement awards issued in connection with the merger, which represents the fair value of the vested portion of the replacement awards. No additional awards may be granted by the Company under the assumed Topgolf Equity Compensation Plans and Option Agreement. The following table presents shares authorized, available for future grant and outstanding under each of the Company’s plans as of December 31, 2022 (in millions):
| Authorized |  | Available(1) |  | Outstanding(2)
2004 Incentive Plan | 33.0 |  |  | — |  |  | 2.9 |
2013 Directors Plan | 1.0 |  |  | — |  |  | — |
2021 Inducement Plan | 1.3 |  |  | — |  |  | 0.5 |
2022 Incentive Plan | 16.0 |  |  | 16.1 |  |  | 0.1 |
Topgolf Equity Compensation Plans and Option Agreement | 3.4 |  |  | — |  |  | 1.9 |
Total | 54.7 |  |  | 16.1 |  |  | 5.4 |
(1) Includes shares subject to a full award value under the 2022 Incentive Plan’s fungible share ratio.
(2) Excludes 0.1 million of issued restricted stock awards which are not outstanding.
Stock Options There were no stock options granted in 2022 or 2020. In 2021 the Company granted 3.2 million stock options related to the replacement awards that were issued in connection with the Company’s merger with Topgolf on March 8, 2021, which had a weighted average grant-date fair value of $25.93 per share and a total acquisition date fair value of $5.3 million. As of December 31, 2022, 1.9 million of these stock options were outstanding, of which 1.7 million were fully vested. During the years ended December 31, 2022 and 2021, the Company recognized $1.4 million and $2.6 million in compensation expense related to its stock option grants, respectively. The Company did not recognize any compensation expense related to stock option grants during the year ended December 31, 2020. The following table summarizes the Company’s stock option activities for the year ended December 31, 2022 (in millions, except per share amounts 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, 2022 |  | 2.0 |  |  | $ | 26.60 |  |  |  |  |
Granted |  | — |  |  | $ | — |  |  |  |  |
Exercised |  | (0.1) |  |  | $ | 11.87 |  |  |  |  |
Forfeited |  | — |  |  | $ | — |  |  |  |  |
Expired |  | — |  |  | $ | — |  |  |  |  |
Outstanding at December 31, 2022 |  | 1.9 |  |  | $ | 26.97 |  |  | 3.72 |  | $ | 1.9 |
Vested and expected to vest in the future at December 31, 2022 |  | 1.9 |  |  | $ | 26.96 |  |  | 3.72 |  | $ | 1.9 |
Exercisable at December 31, 2022 |  | 1.7 |  |  | $ | 26.30 |  |  | 3.44 |  | $ | 1.9 |
The following table summarizes information related to outstanding stock options as of December 31, 2022 (in millions, except option price and remaining life amounts):
|  |  |  | Weighted Average
Range of Option Prices |  | Options Outstanding |  | Remaining Life (Years) |  | Exercise Price
$6.52 to $35.14 |  | 1.9 |  | 3.72 |  | $26.97
As of December 31, 2022, there was $0.5 million of unamortized compensation expense related to stock 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, 2022, 2021 and 2020 was $0.6 million, $26.3 million and $0.6 million, respectively. Cash received from the exercise of stock options for the years ended December 31, 2022, 2021 and 2020 was $0.7 million, $22.3 million and $0.2 million, respectively. The fair value of the stock options granted in connection with the merger was based on the Black-Scholes option-pricing model. The model uses various assumptions including an expected term, stock price volatility, risk-free interest rate, and dividend yield. Assumptions related to the expected term and stock price volatility were based on historical exercise patterns and historical fluctuations in volatility relative to the Company’s stock price, respectively. Assumptions related to the risk-free interest rate and dividend yield were based on the yield-curve of a zero-coupon U.S. treasury bond on the date the grants were made with a maturity equal to the expected term of the grant, and an assumed dividend yield based on the Company’s expectation to not pay dividends for the foreseeable future, respectively. The table below summarizes the range and the weighted averages of the fair value assumptions used in the Black-Scholes valuation as of March 8, 2021.
Assumptions: |  | Range |  | Weighted Averages
Expected term (in years) |  | 0.3 - 7.1 |  | 3.7
Volatility |  | 43.0% - 85.4% |  | 55.1%
Risk-free interest rate |  | 0.1% -1.3% |  | 0.6%
Dividend yield |  | — |  | —
Restricted Stock Units and Restricted Stock Awards The following table represents activity for restricted stock units for the year ended December 31, 2022 (in millions, except fair value amounts):
Restricted Stock Units |  | Units |  | Weighted- Average Grant-Date Fair Value
Unvested at January 1, 2022 |  | 1.6 |  |  | $ | 25.79 |
Granted |  | 0.6 |  |  | $ | 22.81 |
Vested |  | (0.7) |  |  | $ | 23.97 |
Forfeited |  | (0.1) |  |  | $ | 23.40 |
Expired |  | — |  |  | — |
Unvested at December 31, 2022 |  | 1.4 |  |  | $ | 25.47 |
For the years ended December 31, 2022, 2021 and 2020, the weighted average grant-date fair value per share of restricted stock units granted was $22.81, $29.60 and $17.84, respectively. The total fair value of restricted stock units vested during the years ended December 31, 2022, 2021 and 2020 was $17.2 million, $6.5 million and $6.0 million, respectively. During the years ended December 31, 2022, 2021 and 2020, the Company recognized $17.6 million, $14.0 million and $6.4 million of compensation expense related to restricted stock units, respectively. The following table represents activity related to restricted stock awards granted as part of the replacement awards for the year ended December 31, 2022 (in millions, except fair value amounts):
Restricted Stock Awards |  | Units |  | Weighted- Average Grant-Date Fair Value
Unvested at January 1, 2022 |  | 0.2 |  |  | $ | 29.52 |
Granted |  | — |  |  | — |
Vested |  | (0.1) |  |  | $ | 29.52 |
Forfeited |  | — |  |  | — |
Expired |  | — |  |  | — |
Unvested at December 31, 2022 |  | 0.1 |  |  | $ | 29.52 |
There were no restricted stock awards granted during the years ended December 31, 2022 and 2020. The weighted average grant-date fair value of the restricted stock awards granted as part of the replacement awards was $28.74, with an acquisition date fair value of $4.8 million. During the years ended December 31, 2022 and 2021, the Company recognized $1.3 million and $2.4 million of compensation expense related to the restricted stock awards granted as part of the replacement awards, respectively. The Company did not recognize any compensation expense related to restricted stock awards during the year ended December 31, 2020. The total fair value of the restricted stock awards granted as part of the replacement awards that vested during the year ended December 31, 2022 was $2.1 million. As of December 31, 2022, there was $20.9 million of total unamortized compensation expense related to unvested restricted stock units and restricted stock awards granted to employees under the Company’s share-based payment plans, which includes $0.6 million of unrecognized compensation expense related restricted awards granted as part of the replacement awards. The unamortized compensation expense related to restricted stock units and restricted stock awards is expected to be recognized over a weighted-average period of 1.5 years and 0.7 years, respectively. Performance Based Awards During the years ended December 31, 2022, 2021 and 2020, the Company granted 0.5 million shares, 1.4 million shares and 0.3 million shares, respectively of PRSU awards which had various underlying performance metrics, including APTI, EBITDA, and rTSR, at a weighted average grant-date fair value per share of $34.68, $30.35 and $19.66, respectively. PRSUs granted by the Company cliff-vest after three years, except for certain one-time grants to the Company’s Chief Executive Officer and Chief Financial Officer in connection with the Topgolf merger, of which 50% will vest three years after the grant date and the remaining 50% will vest four years after the grant date. The number of shares that may ultimately be issued upon vesting of PRSU awards is based on the achievement of the respective metrics for each award, which may range from 0% to 200%. As of December 31, 2022, all performance-based restricted stock units were within the probable range of achievement. The following table represents the activity for performance based awards during the year ended December 31, 2022 (in millions, except fair value amounts):
Performance Share Units |  | Units |  | Weighted- Average Grant-Date Fair Value
Unvested at January 1, 2022 |  | 2.0 |  |  | $ | 27.00 |
Granted |  | 0.5 |  |  | $ | 34.68 |
Target Award Adjustment(1) |  | 0.1 |  |  | $ | 16.60 |
Vested |  | (0.4) |  |  | $ | 16.28 |
Forfeited |  | (0.1) |  |  | $ | 28.42 |
Unvested at December 31, 2022 |  | 2.1 |  |  | $ | 30.24 |
(1) Represents incremental shares earned by participants at a performance achievement in excess of 100% for awards previously granted.
The total fair value of all performance based awards vested during the years ended December 31, 2022, 2021 and 2020 was $6.9 million, $8.2 million and $7.2 million, respectively. During the years ended December 31, 2022, 2021 and 2020, the Company recognized $26.7 million, $19.7 million and $4.5 million of compensation expense related to performance based awards, respectively. At December 31, 2022, the combined unamortized compensation expense related to all performance-based awards was $35.3 million, which is expected to be recognized over a weighted-average period of 1.42 years. Share-Based Compensation Expense The table below summarizes amounts recognized for share-based compensation related to grants of RSUs, PRSUs and stock options in the Company’s consolidated statement of operations for the periods presented (in millions):
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
Cost of products | $ | 1.6 |  |  | $ | 1.2 |  |  | $ | 0.8 |
Selling, general and administrative expenses | 44.0 |  |  | 36.5 |  |  | 9.3 |
Research and development expenses | 1.1 |  |  | 1.0 |  |  | 0.8 |
Other venue expenses | 0.3 |  |  | — |  |  | — |
Total cost of share-based compensation included in income, before income tax | 47.0 |  |  | 38.7 |  |  | 10.9 |
Income tax benefit | 11.3 |  |  | 8.9 |  |  | 2.5 |
Total cost of employee share-based compensation, after tax | $ | 35.7 |  |  | $ | 29.8 |  |  | $ | 8.4 |

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