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10-K
ICONIX BRAND GROUP, INC. filed this Form 10-K on 03/28/2019
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(2)

In June 2018, the Company formed the Lee Cooper China Limited as a wholly-owned subsidiary to hold the Lee Cooper trademarks and related assets in respect of the Greater China territory.  The Company entered into an agreement with POS Lee Cooper HK Co. Ltd. (“PLC”) who will purchase no less than a 50% interest and up to a total of 60% interest in Lee Cooper China Limited.  The purchase of the equity interest is expected to occur over a two-year period commencing on January 15, 2024.  Refer to Note 5 for further details.  As of December 31, 2018, the Company’s ownership interest in Lee Cooper China Limited was 100%.

 

For further information on the Company’s accounting for joint ventures and investments, see Note 5.

Use of Estimates

The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company reviews all significant estimates affecting the financial statements on a recurring basis and records the effect of any adjustments when necessary.

Cash and Cash Equivalents

Cash and cash equivalents consist of actual cash as well as cash equivalents, defined as short-term, highly liquid financial instruments with insignificant interest rate risk that are readily convertible to cash and have maturities of three months or less from the date of purchase.  In addition, as of December 31, 2018, approximately $12.2 million, or 15%, of our total cash (including restricted cash) was held in foreign subsidiaries. During the second fiscal quarter of 2018, the Company elected to treat its Luxembourg top tier subsidiary (“Luxco”) as a disregarded entity for US tax purposes.  All the operations under Luxco were previously treated as disregarded for US tax purposes.  As of the election date, all the foreign operations under Luxco will be treated as a branch for US tax purposes and subject to US taxation.  As such, the Company will no longer have any earnings in foreign subsidiaries that are not currently subject to taxation for US purposes.  Before the election, the Company indefinitely reinvested all earnings of its foreign subsidiaries.

Restricted Cash

Restricted cash consists of actual cash deposits held in accounts primarily for debt service, as well as cash equivalents, defined as short-term, highly liquid financial instruments with insignificant interest rate risk that are readily convertible to cash and have maturities of three months or less from the date of purchase, the restrictions on all of which lapse every three months or less.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentration of credit risk consist principally of short-term cash investments and accounts receivable. The Company places its cash in investment-grade, short-term instruments with high quality financial institutions. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers. The allowance for non-collection of accounts receivable is based upon the expected collectability of all accounts receivable.

Two customers each accounted for 10% of the Company’s total revenue for FY 2018 as compared to one customer accounted for 16% of the Company’s total revenue for FY 2017.

Accounts Receivable

Accounts receivable are reported at amounts the Company expects to be collected, net of provision for doubtful accounts, based on the Company’s ongoing discussions with its licensees, and its evaluation of each licensee’s payment history and account aging. As of December 31, 2018 and 2017, the Company’s provision for doubtful accounts was $20.1 million and $7.9 million, respectively.

No customers accounted for more than 10% of the Company’s accounts receivable (which includes both short-term and long-term accounts receivables included in prepaid and other current assets and other assets on the Company’s consolidated balance sheets) as of December 31, 2018 as compared to two customers who accounted for approximately 12% and 14% of the Company’s accounts receivable, (which includes both short-term and long-term accounts receivables included in prepaid and other current assets and other assets on the Company’s consolidated balance sheets) as of December 31, 2017.

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