Investments

9 Months Ended

Sep. 30, 2020

Investments, All Other Investments [Abstract]

Investments

Note 11. Investments

Investment in Topgolf International, Inc.

The Company owns a minority interest of approximately 14.3% in Topgolf, the owner and operator of Topgolf entertainment centers, which ownership consists of common stock and various classes of preferred stock. 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 Topgolf retail stores, and other rights incidental to those listed above.

Topgolf is a privately held company, and as such, the common and preferred shares comprising the Company’s investment are illiquid and their fair value is not readily determinable. The Company accounts for changes in fair value in accordance with ASU No. 2016-01, which requires equity securities without a readily determinable fair value to be measured at cost, less impairments if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer.

In May 2020, due to the business disruptions caused by the COVID-19 pandemic, which resulted in the temporary closure of Topgolf facilities worldwide, the Company, in combination with other shareholders of Topgolf, issued Topgolf a note receivable to assist with working capital requirements. The Company's pro rata share of the note receivable was $6,542,000, which was issued net of an original issue discount of 20%. In connection with the Series H financing completed in September 2020, as discussed below, the note receivable was converted into additional shares of Topgolf. While outstanding, the note receivable accrued interest in the range of 5.75% and 5.87%. The note receivable would have matured in February 2026.

In September 2020, the Company invested $14,638,000 in Series H preferred shares of Topgolf as part of a new financing round. In connection with this financing round, the Company also converted the outstanding note receivable and accrued interest of $6,670,000, into additional Series H preferred shares of Topgolf. The series H preferred shares have preference, liquidation, conversion and other rights which differ from the other series of Topgolf preferred and common shares.

The Company's total investment in Topgolf as of September 30, 2020 and December 31, 2019 was $111,442,000 and $90,134,000, respectively. The Company accounts for this investment at cost less impairments in accordance with ASC 2016-01. As of September 30, 2020, the Company has not recorded any impairments with respect to this investment.

On October 27, 2020, the Company entered into the Merger Agreement to acquire Topgolf in an all-stock transaction (see Note 5). At the effective time of the Merger, all preferred shares and common stock of Topgolf held by the Company will be canceled for no consideration. The Merger is expected to close in the first quarter of 2021, subject to shareholder and regulatory approval as well as other customary conditions.