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10-K
ICONIX BRAND GROUP, INC. filed this Form 10-K on 03/28/2019
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Given Kmart/Sears bankruptcy filing on October 15, 2018, the Company conducted an indefinite-lived intangible asset impairment test in accordance with ASC 350 for the Joe Boxer, Cannon and Bongo trademarks whose future revenues and earnings were either exclusively or heavily dependent on the existing license agreements with Sears.  As part of its indefinite-lived intangible asset impairment test for the Joe Boxer, Cannon and Bongo trademarks, the Company recorded a non-cash impairment charge of $4.4 million in the third quarter of FY 2018 to reduce the Joe Boxer trademark to fair value.  At that time, the fair value of the Bongo and Cannon trademarks remained above their current book value and thus no impairment charge was recorded.  The Company is currently in negotiations with new and/or existing licensees for the licensing of these brands.  During the fourth quarter of 2018, the Company recognized an additional non-cash impairment charges of $6.8 million related to the Joe Boxer trademark (in the women’s segment) and $2.7 million related to the Cannon trademark (in the home segment), which are included in the total $58.7 million non-cash impairment charge discussed above.

 

As of June 30, 2018, the Company revised its forecasted future earnings for the Mossimo brand given the Company was unsuccessful in finding a replacement core licensee. As a result, the Company conducted an indefinite-lived intangible asset impairment test in accordance with ASC 350.  Consequently, the Company recorded a non-cash impairment charge of $73.3 million in the second quarter of FY 2018 in the women segment to reduce the Mossimo trademark to fair value.  During the fourth quarter of 2018, the Company recognized an additional non-cash impairment charge of $32.7 million (in the women’s segment), which is included in the total $58.7 million non-cash impairment charge discussed above.

 

As of December 31, 2017, given the recent decision of JCPenney not to renew the existing Royal Velvet license agreement following its expiration in January 2019, the Company revised its forecasted future earnings for the Royal Velvet brand and accordingly, conducted an indefinite-lived intangible asset impairment test in accordance with ASC 350.  Consequently, the Company recorded a non-cash asset impairment charge of $4.1 million in the fourth quarter of December 31, 2017 in the home segment to reduce the Royal Velvet trademark to fair value.

 

As of September 30, 2017, as a result of a combination of factors, including the recent decisions by Target not to renew the existing Mossimo license agreement following its expiration in October 2018 and by Walmart, Inc. not to renew the existing Danskin Now license agreement following its expiration in January 2019 and the Company’s revised forecasted future earnings, the Company conducted an interim indefinite-lived intangible asset impairment test in accordance with ASC 350.  As discussed above, as a result of the recent decline in the Company’s stock price and related market capitalization, the Company determined that there existed a further indication of potential impairment across all of the Company’s intangible assets.  Consequently, the Company accelerated the timing of annual impairment testing of goodwill and intangible assets that is customarily performed in connection with the preparation of its year-end financial statements and completed such testing in connection with the preparation of its financial statements for the quarter ended September 30, 2017.  Accordingly, for FY 2017, the Company recorded a total non-cash asset impairment charge of $521.8 million which is comprised of $135.9 million in the men’s segment, $227.6 million in the women’s segment $69.5 million in the home segment, and $88.8 million in the international segment to reduce various trademarks in those segments to fair value.

The Company measured its indefinite-lived intangible assets for impairment in accordance with ASC-820-10-55-3F which states, “The income approach converts future amounts (for example cash flows) in income and expenses in a single current (that is, discounted) amount.  When the income approach is used, fair value measurement reflects current market expectations about those future amounts.  The Income Approach is based on the present value of future earnings expected to be generated by a business or asset.  Income projections for a future period are discounted at a rate commensurate with the degree of risk associated with future proceeds.  A residual or terminal value is also added to the present value of the income to quantify the value of the business beyond the projection period.”

Changes in estimates and assumptions used to determine whether impairment exists or changes in actual results compared to expected results could result in additional impairment charges in future periods.

 

In accordance with ASC 360, there were no impairment charges to the Company’s definite-lived trademarks during FY 2018 or FY 2017.

 

During FY 2018, the Company completed the sale of the Badgley Mischka and Sharper Image intellectual property and related assets from the Iconix Southeast Asia, Iconix MENA, Iconix Europe and Iconix Australia joint ventures.  Refer to Note 6 for further details.

 

During the third quarter of FY 2018, the Company purchased an additional 5% ownership interest in Iconix Australia which resulted in the Company consolidating the entity on its consolidated balance sheet and the statement of operations for the Current Quarter.  As a result of this transaction, the Company recorded $12.3 million of trademarks on its consolidated balance sheet.  Refer to Note 5 for further details.

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