Intangible Assets and Goodwill

9 Months Ended

Jul. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

The Company performs its annual goodwill impairment test during the fourth fiscal quarter. As of October 31, 2014, the fair value of each of its reporting units substantially exceeded their respective carrying values. However, certain factors may result in the need to perform an impairment test prior to the fourth fiscal quarter, including significant under-performance of the Company’s business relative to expected operating results, significant adverse economic and industry trends, a significant decline in the Company’s market capitalization for an extended period of time relative to net book value, or a decision to divest an individual business within a reporting unit. In connection with the preparation of the Company’s financial statements for the third quarter of fiscal 2015, the Company concluded that the significant decline in the Company’s stock price, lowered market prices on its 7.875% Senior Secured Notes due 2018, 10.000% Senior Notes due 2020 and 8.875% Notes due 2017, and the decline in net sales, especially within the wholesale channel, were indicators of impairment. Consequently, the Company performed a two-step interim 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 reporting units exceeded its fair value. Based upon the results of step 1, which indicated that the carrying value of the reporting units exceeded their fair value, the Company completed step 2 of the goodwill impairment test, which measures the amount of the goodwill impaired. Based upon its evaluation of the results of the interim goodwill impairment test, the Company recorded non-cash goodwill impairment charges in the third quarter of fiscal 2015 of $74 million and $6 million to fully impair goodwill in its Americas and APAC reporting units, respectively.

The Company utilized the income approach and the market approach to estimate the fair value of its indefinite-lived intangible assets. During the third quarter of fiscal 2015, based upon the results of its interim impairment evaluation of long-lived assets other than goodwill, the Company recorded a non-cash asset impairment charge of $16 million in the EMEA reporting unit to reduce the Quiksilver trademark to fair value. The fair value of the Quiksilver trademark in the APAC region exceeded the carrying value by 4%. The fair value of the trademarks in the Americas reporting unit exceeded their carrying value by a substantial amount. 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.

During the third quarter of fiscal 2014, the Company performed an interim impairment test for the EMEA reporting unit due to the significant decline in the Company's stock price and further net revenue deterioration in the EMEA wholesale channel. The results of this impairment evaluation resulted in a non-cash charge of $178 million to fully impair goodwill associated with the EMEA reporting unit.

Intangible Assets

Intangible assets consisted of the following as of the dates indicated:



	July 31, 2015							October 31, 2014
In thousands	Gross Amount		Accumulated Amortization			Net Book Value		Gross Amount		Accumulated Amortization			Net Book Value
Non-amortizable trademarks	$	108,124	$	—		$	108,124	$	124,121	$	—		$	124,121
Amortizable trademarks	24,803		(12,898		)	11,905		21,858		(12,508		)	9,350
Amortizable licenses	9,799		(9,799		)	—		11,817		(11,817		)	—
Other amortizable intangibles	8,420		(6,608		)	1,812		8,406		(6,367		)	2,039
Total	$	151,146	$	(29,305	)	$	121,841	$	166,202	$	(30,692	)	$	135,510

The decrease in non-amortizable trademarks is due primarily to the impairment of EMEA's Quiksilver trademark. Other amortizable intangibles primarily include non-compete agreements, patents and customer relationships, and are amortized on a straight-line basis over their estimated useful lives of 5 to 18 years. Certain trademarks and licenses will continue to be amortized using estimated useful lives of 10 to 25 years with no residual values. Intangible amortization expense for each of the nine-month periods ended July 31, 2015 and 2014 was approximately $2 million. Annual amortization expense is estimated to be approximately $3 million in fiscal 2016, $2 million in fiscal years 2017 through 2019, and $1 million in fiscal years 2020 and 2021.

Goodwill

A summary of goodwill by reporting unit, and in total, and changes in the carrying amounts, as of the dates indicated is as follows:



In thousands	Americas			EMEA			APAC			Consolidated
Gross goodwill	$	74,943		$	180,475		$	135,752		$	391,170
Foreign currency translation	(528		)	(2,278		)	—			(2,806		)
Impairments	—			(178,197		)	—			(178,197		)
Accumulated impairment losses	—			—			(129,545		)	(129,545		)
Net goodwill at October 31, 2014	$	74,415		$	—		$	6,207		$	80,622

Gross goodwill	$	74,415		$	178,197		$	135,752		$	388,364
Foreign currency translation	(1,039		)	—			—			(1,039		)
Impairments	(73,376		)	—			(6,207		)	(79,583		)
Accumulated impairment losses	—			(178,197		)	(129,545		)	(307,742		)
Net goodwill at July 31, 2015	$	—		$	—		$	—		$	—

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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