Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2011

Note 9. Goodwill and Intangible Assets

In accordance with ASC Topic 350, “Intangibles—Goodwill and Other,” the Company’s goodwill and certain intangible assets are not amortized, but are subject to an annual impairment test. The following sets forth the intangible assets by major asset class:


	Useful Life (Years)		December 31, 2011						December 31, 2010
	Useful Life (Years)		Gross		Accumulated Amortization		Net Book Value		Gross		Accumulated Amortization		Net Book Value
					(In thousands)						(In thousands)
Indefinite-lived:
Trade name, trademark and trade dress and other		NA	$	108,834	$	—	$	108,834	$	114,247	$	—	$	114,247
Amortizing:
Patents		2-16		36,459		28,908		7,551		36,459		26,405		10,054
Developed technology and other		1-9		12,387		6,837		5,550		12,387		5,361		7,026

Total intangible assets			$	157,680	$	35,745	$	121,935	$	163,093	$	31,766	$	131,327

Aggregate amortization expense on intangible assets was approximately $3,979,000, $4,181,000 and $4,261,000 for the years ended December 31, 2011, 2010 and 2009, respectively. Amortization expense related to intangible assets at December 31, 2011 in each of the next five fiscal years and beyond is expected to be incurred as follows (in thousands):


2012	$	3,449
2013		2,560
2014		1,882
2015		1,844
2016		1,834
Thereafter		1,532

	$	13,101

Goodwill at December 31, 2011 and December 31, 2010 was $29,203,000 and $30,630,000. This decrease was due to the write-off of $1,120,000 of goodwill related to the Company’s reporting unit in Australia as a result of an impairment (see below), as well as $307,000 due to foreign currency fluctuations. Gross goodwill before impairments at December 31, 2011 and 2011 was $30,323,000 and $30,630,000, respectively.

During the second quarter of 2011, the Company conducted an impairment test on its goodwill and intangible assets, including the trade names, trademarks and other intangible assets the Company acquired in 2003 as part of the Top-Flite acquisition. The fair value of the Company’s intangible assets was calculated by taking the expected future cash flows of those assets over their estimated useful lives and discounting the cash flows based upon an appropriate discount rate. The discounted cash flow analysis was based upon management’s best estimates relating to the Company’s intangible assets such as (i) forecasted sales, (ii) estimated royalty rates, (iii) estimated long-term growth rates, and (iv) the discount rate. In calculating the expected future cash flows from the trade names and trademarks acquired as part of the Top-Flite acquisition, the Company considered the continued negative impact of a trend in the golf industry where premium branded competitor golf balls are being sold through the mass market channel as well as a recent increase of in-house brands being sold in the sporting goods and mass market channels. This increase in premium branded and in-house balls in these retail channels over the past two years as well as the fact that the Company’s business in the United States has not recovered and returned to profitability as management had previously projected has negatively impacted sales of Top-Flite branded golf balls more than previously estimated. Although management believed this competitive pressure in these retail channels would abate over time as the economy began to improve, the Company has concluded that this practice appears more permanent in nature, and accordingly has reduced its estimates of the amount of future cash flows that will be generated from these intangible assets.

In completing the impairment analysis, the Company determined that the discounted expected cash flows from the trade names and trademarks associated with the Top-Flite acquisition was $5,413,000 less than the carrying value of those assets. As a result, during the second quarter of 2011, the Company recorded an impairment charge of $5,413,000 in order to write-down these assets to fair value. During the fourth quarter of 2010, the Company also recorded an impairment charge of $7,547,000 related to the trade names and trademarks of the Top-Flite acquisition. Both charges were reflected in general and administrative expenses in the accompanying statement of operations for the years ended December 31, 2011 and 2010.

In addition, in the fourth quarter of 2011, the Company conducted an impairment test on goodwill related to its reporting unit in Australia. Due to the negative impact of significant flooding and inclimate weather as well as a decline in economic conditions in that region during 2011, the Company determined that the estimated fair value for this unit was $1,120,000 less than the unit’s net book value including goodwill. As a result, the Company recorded an impairment charge of $1,120,000 to write-off the goodwill balance related to this reporting unit.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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