Callaway 2014 Annual Report Download - page 90

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F-22
Aggregate amortization expense on intangible assets was approximately $68,000, $288,000 and $3,198,000 for the years
ended December 31, 2014, 2013 and 2012, respectively. Amortization expense related to intangible assets at December 31,
2014 in each of the next five fiscal years and beyond is expected to be incurred as follows (in thousands):
2015 ............................................................................................................................................................................... $ 51
2016 ............................................................................................................................................................................... 51
2017 ............................................................................................................................................................................... 51
2018 ............................................................................................................................................................................... 51
2019 ............................................................................................................................................................................... 39
$ 243
In 2012, in connection with the Company’s Cost Reduction Initiatives (see Note 3), the Company transitioned 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, which was completed in December 2008. This
analysis resulted in the recognition of impairment charges of $4,527,000 and $629,000 to write-off amortizing intangible
assets and goodwill, respectively, of which $4,324,000 was recognized in cost of sales and $832,000 was recognized in
operating expenses in the accompanying consolidated statement of operations for the year ended December 31, 2012.
In 2012, the Company recorded impairment charges of $4,572,000 related to the trade names and trademarks included
in non-amortizing intangibles that were associated with the Top-Flite and Ben Hogan brands. These charges were recorded
in general and administrative expenses in the accompanying consolidated statements of operations for the year ended
December 31, 2012.
During 2012, 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 to the Ben Hogan brand including trademarks, service marks
and certain other intellectual property for net cash proceeds of $6,961,000. The net book value of the Top-Flite and Ben Hogan
assets totaled $20,244,000, which resulted in the recognition of a pre-tax net gain of $6,602,000 in general and administrative
expenses in the accompanying consolidated statement of operations in 2012.
Goodwill at December 31, 2014 decreased to $27,821,000 from $29,212,000 at December 31, 2013 due to a decrease
of $1,391,000 in foreign currency fluctuations. Gross goodwill before impairments at December 31, 2014 and 2013 was
$29,570,000 and $30,961,000, respectively.
Note 9. Investments
The Company owns preferred shares of TopGolf International, Inc. (“TopGolf”), the owner and operator of TopGolf
entertainment centers. In connection with this investment, the Company has a preferred partner agreement with TopGolf in
which the Company has preferred signage rights, rights as the preferred supplier of golf products used or offered for use at
TopGolf facilities at prices no less than those paid by the Company’s customers, preferred retail positioning in the TopGolf
retail stores, access to consumer information obtained by TopGolf, and other rights incidental to those listed.
During 2014, the Company invested an additional $13,072,000 in preferred shares of TopGolf, thereby increasing the
Company's total investment as of December 31, 2014 to $50,677,000. The Company’s total ownership interest in TopGolf,
including the incremental investments completed in 2014, as well as the Company's voting rights in the preferred shares of
TopGolf, remains at less than 20% of the outstanding equity securities of TopGolf. In addition, as of December 31, 2014, the
Company did not have the ability to significantly influence the operating and financing activities and policies of TopGolf.
Accordingly, the Company’s investment in TopGolf is accounted for at cost in accordance with ASC Topic 325, “Investments
—Other,” and is included in other assets in the accompanying consolidated balance sheets as of December 31, 2014 and 2013.
In addition, in December 2014, the Company remitted funds to subscribe for an additional $1,699,000 in preferred shares
of TopGolf. In January 2015, the subscription was accepted and the Company acquired the $1,699,000 in preferred shares.
The Company's ownership interest and voting rights in TopGolf remains at less than 20% after this incremental investment.