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EX-32.2 - EX-32.2 - ICONIX BRAND GROUP, INC.icon-ex322_7.htm
EX-32.1 - EX-32.1 - ICONIX BRAND GROUP, INC.icon-ex321_9.htm
EX-31.2 - EX-31.2 - ICONIX BRAND GROUP, INC.icon-ex312_10.htm
EX-31.1 - EX-31.1 - ICONIX BRAND GROUP, INC.icon-ex311_6.htm

 

 

United States

Securities and Exchange Commission

Washington, D.C. 20549

 

FORM 10-Q

 

x

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2016

OR

o

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period From                      to                     .

Commission file number 1-10593

 

ICONIX BRAND GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

11-2481903

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1450 Broadway, New York, NY

 

10018

(Address of principal executive offices)

 

(Zip Code)

 

(212) 730-0030

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

x

  

Accelerated filer

 

o

 

 

 

 

 

 

 

Non-accelerated filer

 

o  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes  o    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

Common Stock, $.001 Par Value- 56,126,593 shares as of August 4, 2016.

 

 


Part I. Financial Information

Item 1. Financial Statements

Iconix Brand Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except par value)

 

 

 

June 30,

2016

 

 

December 31,

2015

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

129,998

 

 

$

169,971

 

Restricted cash

 

 

84,807

 

 

 

49,544

 

Accounts receivable, net

 

 

95,842

 

 

 

103,792

 

Other assets – current

 

 

41,854

 

 

 

44,116

 

Total Current Assets

 

 

352,501

 

 

 

367,423

 

Property and equipment:

 

 

 

 

 

 

 

 

Furniture, fixtures and equipment

 

 

24,837

 

 

 

24,138

 

Less: Accumulated depreciation

 

 

(17,434

)

 

 

(16,639

)

 

 

 

7,403

 

 

 

7,499

 

Other Assets:

 

 

 

 

 

 

 

 

Other assets

 

 

23,258

 

 

 

28,748

 

Trademarks and other intangibles, net

 

 

1,698,190

 

 

 

1,696,524

 

Investments and joint ventures

 

 

128,034

 

 

 

147,312

 

Goodwill

 

 

257,095

 

 

 

257,095

 

 

 

 

2,106,577

 

 

 

2,129,679

 

Total Assets

 

$

2,466,481

 

 

$

2,504,601

 

Liabilities, Redeemable Non-Controlling Interest and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

50,098

 

 

$

52,062

 

Deferred revenue

 

 

22,106

 

 

 

29,161

 

Current portion of long-term debt

 

 

76,123

 

 

 

61,123

 

Other liabilities – current

 

 

1,641

 

 

 

3,571

 

Total Current Liabilities

 

 

149,968

 

 

 

145,917

 

Deferred income tax liability

 

 

193,324

 

 

 

181,193

 

Other tax liabilities

 

 

5,055

 

 

 

4,865

 

Long-term debt, less current maturities

 

 

1,275,139

 

 

 

1,388,269

 

Other liabilities

 

 

18,604

 

 

 

19,550

 

Total Liabilities

 

 

1,642,090

 

 

 

1,739,794

 

Redeemable Non-Controlling Interest, net of installment payments due from

   non-controlling interest holders, redemption value of $88,692

   and $86,191, respectively

 

 

76,621

 

 

 

69,902

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Common stock, $.001 par value shares authorized 150,000; shares issued 84,323 and

   80,609, respectively

 

 

84

 

 

 

80

 

Additional paid-in capital

 

 

1,000,552

 

 

 

974,264

 

Retained earnings

 

 

542,456

 

 

 

514,761

 

Accumulated other comprehensive loss

 

 

(58,164

)

 

 

(60,893

)

Less: Treasury stock – 32,093 and 32,028 shares at cost, respectively

 

 

(837,719

)

 

 

(837,179

)

Total Iconix Brand Group, Inc. Stockholders’ Equity

 

 

647,209

 

 

 

591,033

 

Non-Controlling Interest, net of installment payments due from non-controlling

   interest holders

 

 

100,561

 

 

 

103,872

 

Total Stockholders’ Equity

 

 

747,770

 

 

 

694,905

 

Total Liabilities, Redeemable Non-Controlling Interest and Stockholders’ Equity

 

$

2,466,481

 

 

$

2,504,601

 

 

See Notes to Unaudited Condensed Consolidated Financial Statements.

2


Iconix Brand Group, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Income

(in thousands, except earnings per share data)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Licensing revenue

 

$

95,743

 

 

$

97,398

 

 

$

190,375

 

 

$

193,212

 

Selling, general and administrative expenses

 

 

47,138

 

 

 

45,841

 

 

 

98,627

 

 

 

85,529

 

Depreciation and amortization

 

 

1,032

 

 

 

1,196

 

 

 

2,129

 

 

 

2,533

 

Equity earnings on joint ventures

 

 

(1,363

)

 

 

(1,463

)

 

 

(2,556

)

 

 

(2,650

)

(Gains) / losses on sale of trademarks

 

 

1,125

 

 

 

 

 

 

(9,844

)

 

 

 

Operating income

 

 

47,811

 

 

 

51,824

 

 

 

102,019

 

 

 

107,800

 

Other expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

28,382

 

 

 

21,401

 

 

 

49,600

 

 

 

42,697

 

Interest income

 

 

(369

)

 

 

(1,189

)

 

 

(906

)

 

 

(2,155

)

Other income

 

 

(9

)

 

 

(790

)

 

 

(16

)

 

 

(50,780

)

Gain on extinguishment of debt, net

 

 

(4,288

)

 

 

 

 

 

(4,288

)

 

 

 

Foreign currency translation loss (gain)

 

 

(671

)

 

 

1,913

 

 

 

(864

)

 

 

(8,769

)

Other expenses (income) – net

 

 

23,045

 

 

 

21,335

 

 

 

43,526

 

 

 

(19,007

)

Income before income taxes

 

 

24,766

 

 

 

30,489

 

 

 

58,493

 

 

 

126,807

 

Provision for income taxes

 

 

7,692

 

 

 

11,536

 

 

 

18,301

 

 

 

38,807

 

Net income

 

 

17,074

 

 

 

18,953

 

 

 

40,192

 

 

 

88,000

 

Less: Net income attributable to non-controlling interest

 

 

5,492

 

 

 

5,215

 

 

 

9,997

 

 

 

8,902

 

Net income attributable to Iconix Brand Group, Inc.

 

$

11,582

 

 

$

13,738

 

 

$

30,195

 

 

$

79,098

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.24

 

 

$

0.28

 

 

$

0.62

 

 

$

1.64

 

Diluted

 

$

0.23

 

 

$

0.28

 

 

$

0.60

 

 

$

1.56

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

49,035

 

 

 

48,243

 

 

 

48,772

 

 

 

48,201

 

Diluted

 

 

50,675

 

 

 

49,595

 

 

 

50,501

 

 

 

50,752

 

 

See Notes to Unaudited Condensed Consolidated Financial Statements.

 

3


Iconix Brand Group, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Income

(in thousands)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Net income

 

$

17,074

 

 

$

18,953

 

 

$

40,192

 

 

$

88,000

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gain (loss)

 

 

(7,526

)

 

 

7,116

 

 

 

4,956

 

 

 

(30,610

)

Change in fair value of available for sale securities

 

 

(249

)

 

 

299

 

 

 

(2,227

)

 

 

299

 

Total other comprehensive income (loss)

 

 

(7,775

)

 

 

7,415

 

 

 

2,729

 

 

 

(30,311

)

Comprehensive income

 

$

9,299

 

 

$

26,368

 

 

$

42,921

 

 

$

57,689

 

Less: comprehensive income attributable to non-controlling interest

 

 

5,492

 

 

 

5,215

 

 

 

9,997

 

 

 

8,902

 

Comprehensive income attributable to Iconix Brand Group, Inc.

 

$

3,807

 

 

$

21,153

 

 

$

32,924

 

 

$

48,787

 

 

See Notes to Unaudited Condensed Consolidated Financial Statements.

 

4


Iconix Brand Group, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statement of Stockholders’ Equity

Six Months Ended June 30, 2016

(in thousands)

 

 

 

Common Stock

 

 

Additional

Paid-

 

 

Retained

 

 

Accumulated Other Comprehensive

 

 

Treasury

 

 

Non-Controlling

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

In Capital

 

 

Earnings

 

 

Loss

 

 

Stock

 

 

Interest

 

 

Total

 

Balance at January 1, 2016

 

 

80,609

 

 

$

80

 

 

$

974,264

 

 

$

514,761

 

 

$

(60,893

)

 

$

(837,179

)

 

$

103,872

 

 

$

694,905

 

Shares issued on vesting of

   restricted stock

 

 

247

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Shares repurchased on vesting of

   restricted stock and exercise of

   stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(540

)

 

 

 

 

 

(540

)

Tax deficiency of stock option

   exercises and restricted stock

   vestings

 

 

 

 

 

 

 

 

(1,596

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,596

)

Compensation expense in

   connection with restricted stock

   and stock options

 

 

 

 

 

 

 

 

3,489

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,489

 

Payments from non-controlling

   interest holders, net of imputed

   interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

336

 

 

 

336

 

Change in redemption value of

   redeemable non-controlling

   interest

 

 

 

 

 

 

 

 

 

 

 

(2,500

)

 

 

 

 

 

 

 

 

 

 

 

(2,500

)

Change in fair value of available for

  sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,227

)

 

 

 

 

 

 

 

 

(2,227

)

Shares issued on repurchase

   of convertible notes

 

 

3,467

 

 

 

3

 

 

 

24,320

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,323

 

Repurchase of equity portion of

   convertible notes

 

 

 

 

 

 

 

 

(147

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(147

)

Net income

 

 

 

 

 

 

 

 

 

 

 

30,195

 

 

 

 

 

 

 

 

 

9,997

 

 

 

40,192

 

Tax effect of repurchase of

   convertible notes

 

 

 

 

 

 

 

 

52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52

 

Tax benefit related to amortization

   of convertible notes' discount

 

 

 

 

 

 

 

 

170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

170

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,956

 

 

 

 

 

 

 

 

 

4,956

 

Distributions to joint ventures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,644

)

 

 

(13,644

)

Balance at June 30, 2016

 

 

84,323

 

 

$

84

 

 

$

1,000,552

 

 

$

542,456

 

 

$

(58,164

)

 

$

(837,719

)

 

$

100,561

 

 

$

747,770

 

 

See Notes to Unaudited Condensed Consolidated Financial Statements.

 

 

5


Iconix Brand Group, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

40,192

 

 

$

88,000

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation of property and equipment

 

 

834

 

 

 

809

 

Amortization of trademarks and other intangibles

 

 

1,295

 

 

 

1,724

 

Amortization of deferred financing costs and debt discount

 

 

2,881

 

 

 

2,459

 

Amortization of convertible note discount

 

 

15,498

 

 

 

15,069

 

Stock-based compensation expense

 

 

3,489

 

 

 

5,888

 

Non-cash gain on re-measurement of equity investment

 

 

 

 

 

(49,990

)

Provision for doubtful accounts

 

 

8,770

 

 

 

3,918

 

Earnings on equity investments in joint ventures

 

 

(2,556

)

 

 

(2,650

)

Distributions from equity investments

 

 

1,680

 

 

 

1,333

 

Gain on sale of trademarks, net

 

 

(9,844

)

 

 

 

Gain on extinguishment of debt

 

 

(4,288

)

 

 

 

Deferred income tax provision

 

 

11,122

 

 

 

21,403

 

Gain on foreign currency translation

 

 

(864

)

 

 

(8,769

)

Changes in operating assets and liabilities, net of business acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(362

)

 

 

(14,713

)

Other assets – current

 

 

(10,635

)

 

 

16,746

 

Other assets

 

 

5,712

 

 

 

1,569

 

Deferred revenue

 

 

(7,109

)

 

 

4,741

 

Accounts payable and accrued expenses

 

 

2,870

 

 

 

7,727

 

Net cash provided by operating activities

 

 

58,685

 

 

 

95,264

 

Cash flows (used in) provided by investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(750

)

 

 

(802

)

Acquisition of interest in Iconix China, net of cash acquired

 

 

 

 

 

(20,400

)

Acquisition of interest in Pony

 

 

 

 

 

(37,000

)

Acquisition of interest in Strawberry Shortcake

 

 

 

 

 

(95,000

)

Acquisition of interest in Galore Media

 

 

(500

)

 

 

 

Issuance of note to American Greetings

 

 

 

 

 

(10,000

)

Proceeds received from note due from American Greetings

 

 

2,500

 

 

 

1,250

 

Proceeds received from note due from Buffalo International

 

 

4,100

 

 

 

4,986

 

Proceeds from sale of BBC Ice Cream

 

 

3,500

 

 

 

 

Proceeds from sale of Badgley Mischka

 

 

14,000

 

 

 

 

Proceeds from sale of interest in TangLi International Holding Ltd.

 

 

11,352

 

 

 

 

Proceeds from sale of interest in Mecox Lane Limited

 

 

363

 

 

 

 

Proceeds from sale of trademarks and related notes receivable

 

 

1,172

 

 

 

3,030

 

Proceeds from sale of fixed assets

 

 

 

 

 

225

 

Additions to trademarks

 

 

(199

)

 

 

(108

)

Net cash (used in) provided by investing activities

 

 

35,538

 

 

 

(153,819

)

Cash flows (used in) provided by financing activities:

 

 

 

 

 

 

 

 

Shares repurchased on the open market

 

 

 

 

 

(12,391

)

Proceeds from Variable Funding Notes

 

 

 

 

 

100,000

 

Prepaid financing costs

 

 

(35,754

)

 

 

 

Proceeds from long term debt

 

 

300,000

 

 

 

 

Payment of long-term debt

 

 

(190,397

)

 

 

(30,562

)

Repurchase of convertible notes

 

 

(161,132

)

 

 

 

Payment to Purim

 

 

(2,000

)

 

 

(2,000

)

Proceeds from sale of trademarks and related notes receivable from consolidated JVs

 

 

4,770

 

 

 

10,317

 

Distributions to non-controlling interests

 

 

(13,644

)

 

 

(9,016

)

Tax deficiency from share-based payment arrangements

 

 

(1,596

)

 

 

 

Tax benefit related to amortization of convertible notes' discount

 

 

170

 

 

 

54

 

Cost of shares repurchased on vesting of restricted stock and exercise of stock options

 

 

(540

)

 

 

(3,156

)

Restricted cash

 

 

(35,263

)

 

 

(5,363

)

Net cash provided by (used in) financing activities

 

 

(135,386

)

 

 

47,883

 

Effect of exchange rate changes on cash

 

 

1,190

 

 

 

576

 

Net increase (decrease) in cash and cash equivalents

 

 

(39,973

)

 

 

(10,096

)

Cash and cash equivalents, beginning of period

 

 

169,971

 

 

 

128,039

 

Cash and cash equivalents, end of period

 

$

129,998

 

 

$

117,943

 

 

6


Supplemental disclosure of cash flow information:

 

 

 

Six Months Ended June 30,

 

 

 

2016

 

 

2015

 

Cash paid during the period:

 

 

 

 

 

 

 

 

Income taxes (net of refunds received)

 

$

5,479

 

 

$

(6,284

)

Interest

 

$

31,911

 

 

$

23,736

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Issuance of shares in connection with repurchase of convertible notes

 

$

24,324

 

 

$

 

Issuance of shares in connection with purchase of Iconix China

 

$

 

 

$

15,703

 

Note receivable in connection with Strawberry Shortcake acquisition

 

$

 

 

$

8,370

 

Shares repurchased on vesting of restricted stock included in accrued expenses

 

$

 

 

$

11,436

 

 

See Notes to Unaudited Condensed Consolidated Financial Statements.

 

7


Iconix Brand Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2016

(dollars in thousands (unless otherwise noted) except per share data)

 

 

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management of Iconix Brand Group, Inc. (the “Company,” “we,” “us,” or “our”), all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months (“Current Quarter”) and the six months (“Current Six Months”) ended June 30, 2016 are not necessarily indicative of the results that may be expected for a full fiscal year.  The interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2015, as amended.

During the Current Six Months, the Company adopted five new accounting pronouncements.  Refer to Note 16 for further details.

Certain reclassifications, which were immaterial, have been made to conform prior year data to the current presentation.

Summary of Significant Accounting Policies

Non-controlling Interests / Redeemable Non-controlling Interests

Certain of the Company’s consolidated joint ventures have put options which, if exercised by the Company’s joint venture partner, would require the Company to purchase all or a portion of the joint venture partner’s equity interest in the joint venture.  The Company has determined that these put options are not derivatives under the guidelines prescribed in Accounting Standards Codification (“ASC”) 815. As such, and in accordance with ASC 480-10-S99, as the potential exercise of the put options is outside the control of the Company, the Company has recorded the portion of the non-controlling interest’s equity that may be put to the Company in mezzanine equity in the Company’s consolidated balance sheets as “redeemable non-controlling interest”.  The initial value of the redeemable non-controlling interest represents the fair value of the put option at inception.  This amount recorded at inception is accreted, over a period determined by when the put option becomes exercisable, to what the Company would be obligated to pay to the non-controlling interest holder if the put option was exercised. This accretion is recorded as a credit to redeemable non-controlling interest and a debit to retained earnings resulting in an impact to the consolidated balance sheet only.  For each reporting period, the Company revisits the estimates used to determine the redemption value of the put option when it becomes exercisable and may adjust the remaining put option value and associated accretion accordingly through redeemable non-controlling interest and retained earnings, as necessary.  The terms of each of the outstanding put options are included in the individual discussions of each joint venture, as applicable. For the Company’s consolidated joint ventures that do not have put options, the non-controlling interest is recorded within equity on the Company’s consolidated balance sheet.

The Company may enter into joint venture agreements with joint venture partners in which the Company allows the joint venture partner to pay a portion of the purchase price in cash at the time of the formation of the joint venture with the remaining cash consideration paid over a specified period of time following the closing of such transaction.  The Company records the amounts due from such joint venture partners as (a) a reduction of Non-controlling Interests, net of installment payments, or (b) if installment payments result from the issuance of shares classified as mezzanine equity, as a reduction in Redeemable Non-controlling Interests, net of installment payments (i.e. mezzanine equity), as applicable, in the Company’s consolidated balance sheet accordance with ASC 505-10-45, “Classification of a Receivable from a Shareholder.” The Company accretes the present value discount on these installment payments through interest income on its consolidated statements of operations.  

Refer to the Company’s 2015 Annual Report on Form 10-K filed with the SEC on March 30, 2016, as amended, for the Company’s other significant accounting policies.

SEC Comment Letter Process

As disclosed in our Form 10-K for the year ended December 31, 2015, the Company has been engaged in a comment letter process with the Staff of the U.S. Securities and Exchange Commission relating to an ongoing review of the Company’s Form 10-K for the year ended December 31, 2014.  The Company has responded to the Staff with a Confirming Letter on the questions the Staff

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raised, and remains in a dialogue with the SEC Staff relating to those and certain other comments related to the Company’s future disclosures.  

 

2. Goodwill and Trademarks and Other Intangibles, net

Goodwill

There were no changes in goodwill during the Current Quarter.  The annual evaluation of the Company’s goodwill, by segment, is performed as of October 1, the beginning of the Company’s fourth fiscal quarter.  In connection with the preparation of the Company’s consolidated financial statements for the fourth quarter of fiscal year 2015, the Company recorded a non-cash goodwill impairment charge of $35.1 million in its men’s segment.  No goodwill impairment was recognized for the other segments of the Company during the fourth quarter of fiscal 2015.  There was no impairment of the Company’s goodwill during the Current Quarter, Current Six Months or for the three months (the “Prior Year Quarter”) or six months (the “Prior Year Six Months”) ended June 30, 2015.

Trademarks and Other Intangibles, net

Trademarks and other intangibles, net, consist of the following:

 

 

 

 

 

June 30, 2016

 

 

December 31, 2015

 

 

 

Estimated

Lives in

Years

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

Indefinite-lived trademarks and copyrights

 

Indefinite

 

$

1,695,746

 

 

$

 

 

$

1,691,411

 

 

$

 

Definite-lived trademarks

 

10-15

 

 

9,843

 

 

 

9,226

 

 

 

14,626

 

 

 

12,082

 

Non-compete agreements

 

2-15

 

 

940

 

 

 

803

 

 

 

940

 

 

 

686

 

Licensing contracts

 

1-9

 

 

4,856

 

 

 

3,166

 

 

 

4,844

 

 

 

2,529

 

 

 

 

 

$

1,711,385

 

 

$

13,195

 

 

$

1,711,821

 

 

$

15,297

 

Trademarks and other intangibles, net

 

 

 

 

 

 

 

$

1,698,190

 

 

 

 

 

 

$

1,696,524

 

 

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, Peanuts, Ed Hardy, Sharper Image, Umbro, Modern Amusement, Buffalo, Lee Cooper, Hydraulic, Nick Graham, Strawberry Shortcake and Pony have been determined to have an indefinite useful life.  Each of these intangible assets are tested for impairment annually and as needed on an individual 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 performed as of October 1, the beginning of the Company’s fourth fiscal quarter.

In connection with the preparation of the Company’s financial statements for the fourth quarter of fiscal year 2015 and in accordance with ASC 350, the Company recorded non-cash impairment charges for indefinite-lived intangible assets (consisting of trademarks) of $362 million and $40 million in the men’s segment and home segment, respectively.  There was no impairment of the indefinite-lived trademarks during the Current Quarter, Prior Year Quarter, Current Six Months or Prior Year Six Months.  Further, in accordance with ASC 360, there were no impairment charges to the Company’s definite-lived trademarks during the Current Quarter, Current Six Months, Prior Year Quarter or Prior Year Six Months.

In June 2016, the Company sold the rights to the London Fog intellectual property in the South Korea territory.  As a result of this transaction, the Company’s indefinite-lived trademarks decreased by $0.4 million.  Refer to Note 4 for further details.

In February 2016, the Company sold its rights to the Badgley Mischka intellectual property and related assets.  At the time of this transaction, the definite-lived trademarks for Badgley Mischka were fully amortized in the Company’s consolidated balance sheet.  Refer to Note 4 for further details.

Other amortizable intangibles primarily include non-compete agreements and contracts and are amortized on a straight-line basis over their estimated useful lives of 1 to 15 years. Certain trademarks are amortized using estimated useful lives of 10 to 15 years with no residual values.

Amortization expense for intangible assets for the Current Quarter and the Prior Year Quarter was $0.6 million and $0.8 million, respectively.  Amortization expense for intangible assets for the Current Six Months and Prior Year Six Months was $1.3 million and $1.7 million, respectively.

 

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3. Acquisitions, Joint Ventures and Investments

Acquisitions

The following recent acquisitions are wholly owned subsidiaries of the Company:

 

Entity Name

 

Date of Original

Formation / Investment

 

Iconix China Holdings Limited(1)(2)

 

September 2008

 

Shortcake IP Holdings, LLC

 

March 2015

 

Scion, LLC(2)

 

March 2009

 

 

 

(1)

Through our ownership of Iconix China Holdings Limited, we have equity interests in the following private companies which are accounted for as equity method investments:

 

Brands Placed

 

Partner

 

Ownership by

Iconix China

 

 

Value of Investment

As of June 30, 2016

 

Candie’s

 

Candies Shanghai Fashion Co. Ltd.

 

 

20%

 

 

$

10,855

 

Marc Ecko

 

Shanghai MuXiang Apparel & Accessory Co. Limited

 

 

15%

 

 

 

2,284

 

Royal Velvet

 

Bai Shi Kou International (Qingdao) Home Products Co. Ltd.

 

 

20%

 

 

 

383

 

Material Girl

 

Ningo Material Girl Fashion Co. Ltd.

 

 

20%

 

 

 

3,398

 

Ecko Unltd

 

Ai Xi Enterprise (Shanghai) Co. Limited

 

 

20%

 

 

 

11,080