Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2012

8. 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 Company performs an impairment analysis on its goodwill and intangible assets at least annually and whenever events or changes in circumstances indicate that the carrying value of such assets may not be fully recoverable. The following sets forth the intangible assets by major asset class (dollars in thousands):


	Useful Life (Years)		September 30, 2012						December 31, 2011
	Useful Life (Years)		Gross		Accumulated Amortization		Net Book Value		Gross		Accumulated Amortization		Net Book Value
Non-Amortizing:
Trade name, trademark and trade dress and other		NA	$	88,590	$	—	$	88,590	$	108,834	$	—	$	108,834
Amortizing:
Patents		2-16		36,459		30,502		5,957		36,459		28,908		7,551
Developed technology and other		1-9		7,960		7,888		72		12,387		6,837		5,550

Total intangible assets			$	133,009	$	38,390	$	94,619	$	157,680	$	35,745	$	121,935

Aggregate amortization expense on intangible assets was approximately $2,645,000 and $1,793,000 for the nine months ended September 30, 2012 and 2011. Amortization expense related to intangible assets at September 30, 2012 in each of the next five fiscal years and beyond is expected to be incurred as follows (in thousands):


Remainder of 2012	$	552
2013		1,389
2014		863
2015		846
2016		846
2017		846
Thereafter		687

	$	6,029

In September 2012, in connection with the Company’s Cost Reduction Initiatives that were announced in July 2012 (Note 2), the Company committed to a plan to transition its integrated device business to a third party based model. As a result, the Company performed an impairment analysis and determined that the discounted expected cash flows from the sales of uPro GPS devices were less than the carrying values of the intangible assets and goodwill associated with the uPlay, LLC acquisition. This analysis resulted in the recognition of impairment charges of $4,527,000 and $629,000 in cost of sales to write-off amortizing intangible assets and goodwill, respectively, in addition to charges of $9,892,000 in cost of sales and $1,425,000 in operating expenses to write-off inventory and property, plant and equipment for the three and nine months ended September 30, 2012.

In March 2012, in an effort to simplify the Company’s operations and increase focus on the Company’s core Callaway and Odyssey business, the Company sold certain assets related to the Top-Flite brand, including world-wide trademarks and service marks for net cash proceeds of $19,900,000. In addition, in February 2012, the Company completed the sale of the Ben Hogan brand including all trademarks, service marks and certain other intellectual property for net cash proceeds of $6,961,000. At the time of sale, the net book value of the Top-Flite and Ben Hogan assets totaled $20,244,000 and was included with the net identifiable assets of the Company’s golf ball operating segment. During the nine months ended September 30, 2012, the Company recognized a pre-tax net gain of $6,602,000 in general and administrative expenses in the accompanying consolidated condensed statement of operations related to the sale of these two brands.

In June 2011, the Company recorded an impairment charge of $5,413,000 related to the trade names and trademarks included in non-amortizing intangibles that were associated with the Top-Flite acquisition. This charge was recorded in general and administrative expenses in the accompanying statement of operations for the nine months ended September 30, 2011.

Goodwill at September 30, 2012 and December 31, 2011 was $28,853,000 and $29,203,000, respectively. The decrease in goodwill was due to the write-off of $629,000 of goodwill related to the Company’s uPlay acquisition (as mentioned above), partially offset by $279,000 in foreign currency fluctuations. Gross goodwill before impairments at September 30, 2012 and December 31, 2011 was $30,602,000 and $30,323,000, respectively

- 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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