Callaway 2009 Annual Report Download - page 95

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Note 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 following sets forth
the intangible assets by major asset class:
Useful
Life
(Years)
December 31, 2009 December 31, 2008
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 $121,794 $ — $121,794 $121,794 $ — $121,794
Amortizing:
Patents ................... 2-16 36,459 23,827 12,632 36,459 21,106 15,353
Developed technology and
other ................... 1-9 12,236 3,758 8,478 12,016 2,218 9,798
Total intangible assets ........... $170,489 $27,585 $142,904 $170,269 $23,324 $146,945
The increase in other amortizing intangibles is related to the acquisition of amortizing trademarks in
addition to amortizing intangibles related to the uPlay asset acquisition (see Note 5). Aggregate amortization
expense on intangible assets was approximately $4,261,000, $3,203,000 and $3,341,000 for the years ended
December 31, 2009, 2008 and 2007, respectively. Amortization expense related to intangible assets at
December 31, 2009 in each of the next five fiscal years and beyond is expected to be incurred as follows (in
thousands):
2010 ..................................................................... $ 4,143
2011 ..................................................................... 3,892
2012 ..................................................................... 3,462
2013 ..................................................................... 2,536
2014 ..................................................................... 1,885
Thereafter ................................................................. 5,192
$21,110
The Company performs an impairment analysis at least annually and whenever events or changes in
circumstances indicate that the carrying value of such assets may not be recoverable. The Company bases this
analysis on internal cash flow estimates discounted at an appropriate rate. During the second half of 2008 and
into 2009, general economic and stock market conditions worsened considerably and the Company’s stock price
declined significantly during this period. During the second quarter of 2009, the Company’s market capitalization
fell below its recorded book value. As a result, during the second quarter of 2009, the Company performed an
impairment analysis of goodwill and other indefinite-lived intangible assets. Based on the results of the
impairment analysis, no impairment was identified as of June 30, 2009. In addition, during the fourth quarter of
2009, the Company performed its annual impairment analysis of goodwill and other indefinite-lived intangible
assets held throughout the year. Based on this testing, there was no impairment as of December 31, 2009.
Goodwill additions during the years ended December 31, 2009 and 2008 consisted of approximately
$268,000 and $361,000, respectively, as a result of adjustments in connection with the uPlay asset acquisition. In
addition, the goodwill balances held in foreign currencies are subject to foreign currency translation adjustments.
As a result, the goodwill balance at December 31, 2009 included a favorable adjustment of $1,101,000, and an
unfavorable adjustment of $2,677,000 at December 31, 2008.
F-19