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10-K
ICONIX BRAND GROUP, INC. filed this Form 10-K on 03/28/2019
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Deferred Revenue

We record deferred revenue when cash payment is received or due in advance of our performance, including amounts which are refundable.  Advanced royalty payments are recognized ratably over the period indicated by the terms of the license and are reflected in the Company’s consolidated balance sheet in deferred revenue at the time the payment is received.  The decrease in deferred revenues for FY 2018 is primarily driven by $3.9 million of revenues recognized that were included in the deferred revenue balance at the beginning of the period offset by cash payments received or due in advance of satisfying our performance obligations.

 

 

4. Goodwill and Trademarks and Other Intangibles, net

Goodwill

Goodwill by reportable operating segment and in total, and changes in the carrying amounts, as of the dates indicated are as follows:

 

 

 

Women's

 

 

Men's

 

 

Home

 

 

International

 

 

Consolidated

 

Net goodwill at January 1, 2017

 

$

111,751

 

 

$

1,524

 

 

$

28,414

 

 

$

29,561

 

 

$

171,250

 

Deconsolidation of joint venture

 

 

 

 

 

 

 

 

 

 

 

(3,491

)

 

 

(3,491

)

Impairment

 

 

(73,939

)

 

 

(1,524

)

 

 

(28,414

)

 

 

 

 

 

(103,877

)

Net goodwill at December 31, 2017

 

$

37,812

 

 

$

 

 

$

 

 

$

26,070

 

 

$

63,882

 

Impairment

 

 

(37,812

)

 

 

 

 

 

 

 

 

 

 

 

(37,812

)

Acquisition of 5% interest in Iconix Australia

 

 

 

 

 

 

 

 

 

 

 

29

 

 

 

29

 

Net goodwill at December 31, 2018

 

$

 

 

$

 

 

$

 

 

$

26,099

 

 

$

26,099

 

 

In July 2018, the Company purchased an additional 5% ownership interest in Iconix Australia from its joint venture partner.  As a result of this transaction, the Company recorded goodwill of less than $0.1 million.  Refer to Note 5 for further details.

The Company identifies its operating segments according to how business activities are managed and evaluated. The Company has four distinct reportable operating segments: men’s, women’s, home, and international.  Additionally, the Company previously owned and operated an Entertainment segment which is included in the Company’s consolidated statement of operations as a discontinued operation for FY 2017.  The sale of the businesses underlying the Entertainment segment was completed on June 30, 2017 (see Note 2 of Notes to Consolidated Financial Statements).  These operating segments represent individual reporting units for purposes of evaluating goodwill for impairment. The fair value of the reporting unit is determined using discounted cash flow analysis and estimates of sales proceeds with consideration of market participant data. As a corroborative source of information, the Company evaluates the estimated aggregate fair values of its reporting units to within a reasonable range of its market capitalization, which includes an assumed control premium (an adjustment reflecting an estimated fair value on a control basis) to verify the reasonableness of the fair value of its reporting units. The control premium is estimated based upon control premiums observed in comparable market transactions. As none of the Company’s reporting units are publicly-traded, individual reporting unit fair value determinations do not directly correlate to the Company’s stock price. The Company monitors changes in the share price to ensure that the market capitalization continues to exceed or is not significantly below the carrying value of our total net assets. In the event that our market capitalization is below the book value of the Company’s aggregate fair value of its reporting units, we consider the length and severity of the decline and the reason for the decline when evaluating whether potential goodwill impairment exists. Additionally, if a reporting unit does not appear to be achieving the projected growth plan used in determining its fair value, we will reevaluate the reporting unit for potential goodwill impairment based on revised projections, as deemed appropriate.  The annual evaluation of goodwill is typically performed as of October 1, the beginning of the Company’s fourth fiscal quarter.  Utilizing the Income Approach, the Company performed a two-step goodwill impairment test and an intangible asset impairment test using a discounted cash flow analysis to evaluate whether the carrying value of each of its segments exceeded its fair value.

During the fourth quarter of FY 2018, the Company evaluated its goodwill for potential impairment incremental to the amount recorded as of September 30, 2018.  Based upon the results of step 1 of the goodwill impairment test in accordance with ASC 350, the Company noted that the fair value of the international segment exceeded the carrying value after first reflecting the impairment of trademarks.  As a result, no additional goodwill impairment was recorded during the fourth quarter of FY 2018.

During the second quarter of 2018, based upon the results of step 1 of the goodwill impairment test in accordance with ASC 350 for the women’s segment, the Company noted that the carrying value of the women’s segment exceeded its fair value after first reflecting the impairment of the Mossimo trademark as discussed below.  In accordance with step 2 of the goodwill impairment test, the Company recorded a non-cash impairment charge of $37.8 million in the second quarter of 2018, which is due to the projected decline in royalties associated with the license agreements for the Mossimo brand.

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