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10-K
ICONIX BRAND GROUP, INC. filed this Form 10-K on 03/28/2019
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As of September 30, 2017, based upon the results of step 1 of the goodwill impairment test in accordance with ASC 350, the Company noted that the carrying value of the women’s men’s, home and international segments exceeded their fair values after first reflecting the impairment of trademarks.  In accordance with step 2 of the goodwill impairment test, the Company recorded a non-cash impairment charge of $103.9 million in FY 2017 which is comprised of $73.9 million, $1.5 million and $28.4 million in the women’s, men’s and home segment, respectively, primarily due to the decline in net sales associated with the recent developments in which various DTR license agreements would not be renewed subsequent to their expiration dates.

During the fourth quarter of FY 2017, the Company evaluated its goodwill for potential impairment incremental to the amount recorded as of September 30, 2017.  Based on the Company’s goodwill impairment analysis in accordance with ASC 350, no additional impairment was recognized as of December 31, 2017.

Trademarks and Other Intangibles, net

Trademarks and other intangibles, net consist of the following:

 

 

 

 

 

 

December 31, 2018

 

 

December 31, 2017

 

 

 

Estimated

Lives in

Years

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

Indefinite-lived trademarks and copyrights

 

Indefinite

 

$

337,631

 

 

$

 

 

$

465,391

 

 

$

 

Definite-lived trademarks

 

10-15

 

 

8,958

 

 

 

8,958

 

 

 

8,958

 

 

 

8,917

 

Non-compete agreements

 

2-15

 

 

 

 

 

 

 

 

940

 

 

 

940

 

Licensing contracts

 

1-9

 

 

978

 

 

 

909

 

 

 

3,412

 

 

 

3,122

 

 

 

 

 

$

347,567

 

 

$

9,867

 

 

$

478,701

 

 

$

12,979

 

Trademarks and other intangibles, net

 

 

 

 

 

 

 

$

337,700

 

 

 

 

 

 

$

465,722

 

 

The trademarks of Candie’s, Bongo, Joe Boxer, Rampage, Mudd, London Fog, Mossimo, Ocean Pacific, Danskin, Rocawear, Cannon, Royal Velvet, Fieldcrest, Charisma, Starter, Waverly, Ecko, Zoo York, Ed Hardy, Umbro, Modern Amusement, Buffalo, Lee Cooper, Hydraulic, and Pony have been determined to have an indefinite useful life and accordingly, consistent with ASC Topic 350, no amortization has been recorded in the Company’s consolidated statements of operations. Instead, each of these intangible assets are tested for impairment annually and as needed on an individual brand and territorial basis as separate single units of accounting, with any related impairment charge recorded to the statement of operations at the time of determining such impairment. The annual evaluation of the Company’s indefinite-lived trademarks is typically performed as of October 1, the beginning of the Company’s fourth fiscal quarter, or as deemed necessary due to the identification of a triggering event.

 

As it relates to the Company’s impairment testing of goodwill and intangible assets, assumptions and inputs used in our fair value estimates include the following: (i) discount rates; (ii) royalty rates; (iii) projected average revenue growth rates; and (iv) projected long-term growth rates.  Additionally, for those instances where core licenses have not been or will not be renewed and replacement licenses have not yet been identified, the Company’s estimate of fair value may incorporate a probability weighted average of projected cash flows based on several scenarios (e.g. DTR license, wholesale license, or direct-to-consumer model).  Key inputs to these scenarios, which were selected based on the perspective of a market participant and include estimated future retail and wholesale sales and related royalties, are assessed a probability of occurrence to compensate for the uncertainty of success and timing of completion.  The Company will continue to reassess these probabilities and inputs, as well as economic conditions and expectations of management, and may record additional impairment charges as these estimates are updated, all of which are subject to change in the future based on period-specific facts and circumstances.

 

The Company recorded impairment charges for indefinite-lived intangible assets consisting of trademarks in the fourth quarter of FY 2018.  In connection with the preparation of the Company’s financial statements for the fourth quarter of FY 2018, the Company concluded that the primary driver of the impairment charges was a decline in the net sales as well as a decline in future guaranteed minimum royalties from license agreements for certain brands.  As a result, in the fourth quarter of FY 2018, the Company recorded a total non-cash asset impairment charge of $58.7 million which is comprised of $55.1 million in the women’s segment, $0.1 million in the men’s segment, $2.7 million in the home segment, and $0.8 million in the international segment to reduce various trademarks in those segments to fair value.  

 

79


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