Callaway 2005 Annual Report Download - page 87

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CALLAWAY GOLF COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 6. Goodwill and Intangible Assets
In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” 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, 2005 December 31, 2004
Accumulated
Amortization
Net Book
Value
Accumulated
Amortization
Net Book
ValueGross Gross
(In thousands) (In thousands)
Non-Amortizing:
Trade name, trademark and
trade dress ........... NA $121,794 $ — $121,794 $121,794 $ — $121,794
Amortizing:
Patents ................ 3-16 34,045 11,212 22,833 35,307 9,787 25,520
Other ................. 1-9 2,335 839 1,496 3,080 1,226 1,854
Total intangible assets ........ $158,174 $12,051 $146,123 $160,181 $11,013 $149,168
Aggregate amortization expense on intangible assets was approximately $3,045,000, $3,380,000 and
$2,008,000 for the years ended December 31, 2005, 2004 and 2003, respectively. Amortization expense related
to intangible assets at December 31, 2005 in each of the next five fiscal years and beyond is expected to be
incurred as follows (in thousands):
2006 ..................................................................... $ 2,994
2007 ..................................................................... 2,990
2008 ..................................................................... 2,955
2009 ..................................................................... 2,766
2010 ..................................................................... 2,687
Thereafter ................................................................. 9,937
$24,329
In accordance with SFAS No. 142, the Company has completed the annual impairment tests and fair value
analysis for goodwill and other non-amortizing intangible assets, respectively, held throughout the year. There
were no impairments or impairment indicators present and no loss was recorded during the year ended
December 31, 2005. Changes in goodwill during the years ended December 31, 2005 and 2004 consisted of
approximately $24,000 and $9,097,000, respectively, of goodwill added in connection with the FrogTrader
acquisition, as well as $1,425,000 and $1,155,000, respectively, related to the effect of fluctuations in exchange
rates on goodwill balances held in foreign currencies.
Note 7. Financing Arrangements
The Company’s principal sources of liquidity are cash flows provided by operations and the Company’s
credit facilities in effect from time to time. The Company currently expects this to continue. Effective
January 23, 2006, the Company, Bank of America, N.A. and certain other lenders entered into an agreement (the
“Second Amendment”) to amend the Company’s November 5, 2004 Amended and Restated Credit Agreement
(as amended, the “Line of Credit”) to provide for modification of the financial covenants, pricing and certain
other terms. The amendment also extends the term of the Line of Credit to expire on February 5, 2011.
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