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10-K
ICONIX BRAND GROUP, INC. filed this Form 10-K on 03/28/2019
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Overall, the impairment charges were primarily as a result of management’s revisions to the Company’s forecasts to reflect lower revenue and operating margin expectations for the Company. The decrease in financial projections is primarily due to continued declines and strategic repositioning of proprietary brands in the retail industry, accompanied by the closing of traditional brick and mortar stores and continued online disruption and competition in the target market. Several of our key DTR partners (e.g. Kohl’s, Kmart/Sears) have been affected by this decline which has resulted in the non-renewal of license agreements or increased pressures to reduce the economics (e.g. royalty rates, guaranteed minimum royalties) of new and existing license agreements.

On an individual brand level, the impairment charges noted above arose out of lower forecasted revenue. The primary factors for the lower forecasts for each of the brands noted above are set forth below:

 

Mossimo – As discussed below, the Mossimo license agreement at Target was not renewed and while market and demographic research indicate significant brand awareness and viability outside of exclusive Target distribution, the Company has yet to find a replacement core licensee. The Company continues to pursue multiple partners with broad distributions and varying degrees of economics.

 

Mudd – Given the decline in the retail industry, Kohl’s was unable to achieve revenue expectations above guaranteed minimums. Kohl’s has indicated the willingness to renew beyond the current term but at a level below the current guaranteed minimums.

 

Joe Boxer – Kmart/Sears’ bankruptcy filing in the fourth quarter of FY 2018 allowed Kmart/Sears to reject the existing Joe Boxer license agreement, and the Company’s ongoing renegotiations of the license agreement with Kmart/Sears resulted in a reduction to forecasted revenues for the Company.

 

Cannon – Kmart/Sears’ bankruptcy filing in the fourth quarter of FY 2018 allowed Kmart/Sears to reject the existing Cannon license agreement, and the Company’s renegotiations of the license agreement with Kmart/Sears resulted in a reduction to forecasted revenues for the Company.

For the year ended December 31, 2017:

During the third quarter of FY 2017, the Company recognized an impairment charge of $521.7 million for indefinite-lived intangibles comprised of $227.6 million in Women’s, $135.9 million in Men’s, $69.5 million in Home, and $88.8 million in International as well as an impairment charge of $103.9 million for goodwill comprised of $73.9 million in Women’s, $1.5 million in Men’s, and $28.4 million in Home. During the fourth quarter of FY 2017, the Company recognized an impairment charge of $4.1 million for the indefinite-lived intangible for Royal Velvet.  The following is a breakdown of the trademark impairment charges:

 

Operating Segment

 

Brand / Trademark

 

Territory

 

Amount

 

Women’s

 

Mossimo

 

US

 

$

21,800

 

Women’s

 

Joe Boxer

 

US

 

 

45,584

 

Women’s

 

Danksin

 

US

 

 

52,572

 

Women’s

 

Mudd

 

US

 

 

37,015

 

Women’s

 

Rampage

 

US

 

 

24,712

 

Women’s

 

Ocean Pacific

 

US

 

 

29,523

 

Men's

 

Buffalo

 

US

 

 

43,429

 

Men's

 

Zoo York

 

US

 

 

17,258

 

Men's

 

Rocawear

 

US

 

 

34,559

 

Men's

 

Ed Hardy

 

US

 

 

18,666

 

Home

 

Cannon

 

US

 

 

17,995

 

Home

 

Royal Velvet

 

US

 

 

33,657

 

Home

 

Fieldcrest

 

US

 

 

12,930

 

International

 

Umbro

 

China

 

 

31,137

 

International

 

Umbro

 

Europe

 

 

26,739

 

Other

 

various

 

various

 

 

78,150

 

Total

 

 

 

 

 

$

525,726

 

 

Overall, the impairment charges were primarily as a result of management’s significant revisions to the Company’s forecasts to reflect lower revenue and operating margin expectations for the Company. The decrease in financial projections is primarily due to continued declines and strategic repositioning of proprietary brands in the retail industry, accompanied by the closing of traditional brick and mortar stores and continued online disruption and competition in the target market. Several of our key DTR partners (e.g. Walmart, Target, Macy’s, Kmart/Sears) have been affected by this decline which has resulted in the non-renewal of license agreements or increased pressures to reduce the economics (e.g. royalty rates, guaranteed minimum royalties) of new and existing license agreements.

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