Sale of Buildings

9 Months Ended

Sep. 30, 2012

Sale of Buildings

7. Sale of Buildings

In March 2011, the Company completed the sale of three of its buildings located in Carlsbad, California, and entered into lease-back agreements for each building over a period of one to five years. The sale of these buildings was in connection with the Company’s consolidation of its campus into a more efficient layout, and the relocation of the Company’s golf club manufacturing facilities from Carlsbad, California to Monterrey, Mexico (see Note 2). The sale resulted in net proceeds of $18,079,000 and a net gain of $12,668,000, of which $6,170,000 was recognized in general and administrative expenses during the first quarter of 2011. Due to the lease-back arrangement, the Company deferred a portion of this gain in the amount of $6,498,000, which represents the sum of the net present value of the minimum future lease payments through the end of each respective lease term. The Company recognized in general and administrative expenses $399,000 and $511,000 of this deferred gain during the three months ended September 30, 2012 and 2011, respectively, and $1,308,000 and $1,021,000 during the nine months ended September 30, 2012 and 2011, respectively.. The amortization of the deferred gain will offset future rent expense over the term of the leases which range from 1 to 5 years.

In connection with the Company’s Cost Reduction Initiatives, during the third quarter of 2012, the Company reached an agreement in principle to sell its golf ball manufacturing facility in Chicopee, Massachusetts and lease back a reduced portion of the square footage to eliminate unused space at the facility. In connection with this agreement, the Company designated this building as assets available for sale, and recorded a pre-tax charge of $7,939,000 in cost of sales during the three months ended September 30, 2012 to mark the building down to its estimated selling price, net of estimated commissions and fees.