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10-K
ICONIX BRAND GROUP, INC. filed this Form 10-K on 03/28/2019
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Lee Cooper China

In June 2018, the Company entered into an agreement with POS Lee Cooper HK Co. Ltd. (“PLC”) to sell up to no less than a 50% interest and up to a total of 60% interest in its wholly-owned indirect subsidiary, Lee Cooper China Limited, a newly registered Hong Kong subsidiary of Iconix China (“Lee Cooper China”), and which will hold the Lee Cooper trademarks and related assets in respect of the Greater China territory.  PLC’s purchase of the initial 50% equity interest in Lee Cooper China is expected to occur over a four-year period commencing on October 15, 2020 for cash consideration of approximately $8.2 million.  The additional 10% equity interest (for a total equity interest of 60% interest) purchase right of PLC is expected to occur over a two-year period commencing January 15, 2024 for cash consideration equal to the greater of $2.5 million or 2.5 times the royalty received under the respective license agreement in the previous twelve months based on other terms and conditions specified in the share purchase agreement.

Iconix Australia Joint Venture

In September 2013, the Company formed Iconix Australia, LLC (“Iconix Australia”), a Delaware limited liability company and a wholly-owned subsidiary of the Company, and contributed substantially all rights to its wholly-owned and controlled brands in Australia and New Zealand (the “Australia territory”) through an agreement with Iconix Australia. Shortly thereafter Pac Brands USA, Inc. (“Pac Brands”) purchased a 50% interest in Iconix Australia for $7.2 million in cash, all of which was received upon closing of this transaction in September 2013. As a result of this transaction, the Company recorded a gain of $4.1 million in FY 2013 for the difference between the cash consideration received by the Company and the book value of the brands contributed to the joint venture.

 

In July 2018, the Company purchased an additional 5% ownership interest in Iconix Australia from Brand Collective (USA), Inc. (“BrandCo”) for $0.7 million in cash.  As a result of this transaction, the Company’s ownership interest in Iconix Australia effectively increased to 55% and reduced BrandCo’s ownership interest in Iconix Australia to 45%.  This purchase resulted in a change in rights, duties and obligations of the Company and BrandCo in their capacity as joint venture partners in respects of the Iconix Australia joint venture. Additionally, as a result of this transaction and in accordance with ASC 810, based on the corporate structure, voting rights and contributions of the Company and BrandCo, Iconix Australia has been determined to be a VIE, and thus is subject to consolidation and included in the Company’s consolidated financial statements on and after July 2018.  

 

The estimated fair value of the assets acquired, less liabilities assumed, were allocated in July 2018 as follows:

 

Fair value of 50% interest in Iconix Australia

 

$

6,507

 

Book value of Company equity investment prior to purchase of additional 5% interest

 

 

(1,904

)

Gain on re-measurement of initial equity investment

 

 

8,410

 

 

 

$

13,013

 

Trademarks

 

 

12,349

 

Cash

 

 

44

 

Accounts receivable

 

 

360

 

Intercompany receivables, net

 

 

368

 

Accounts payable and accrued expenses

 

 

(85

)

Deferred revenue

 

 

(52

)

Goodwill

 

 

29

 

 

 

$

13,013

 

 

The Iconix Australia trademarks have been determined by management to have an indefinite useful life and accordingly, no amortization is being recorded in the Company’s consolidated statement of operations.  The goodwill and trademarks are subject to a test for impairment on an annual basis.  Additionally, as a result of the acquisition, the Company recognized a $5.9 million non-controlling interest associated with BrandCo’s 45% ownership interest in the Iconix Australia joint venture on the date of consolidation.  Given the put option associated with the joint venture, the Company has recorded the non-controlling interest of $5.9 million in Redeemable Non-controlling interest on the Company’s consolidated balance sheet as mezzanine equity.  

For the second half of FY 2018, post-acquisition, the Company recognized approximately $0.8 million, in revenue from such assets.  In addition, the Company’s selling, general and administrative expenses increased by $0.2 million for the second half of FY 2018, and net income attributable to non-controlling interest increased by $0.3 million for the second half of FY 2018 as a result of consolidating Iconix Australia on the Company’s consolidated statement of operations.

Additionally, pursuant to the Amended Agreement, the specified put and call rights held by BrandCo and the Company, respectively, relating to BrandCo’s owernship interest in the joint venture, were amended and restated as follows:

89


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