Intangible Assets and Goodwill

12 Months Ended

Oct. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

The Company recorded impairment charges for indefinite-lived intangible assets consisting of trademarks in both the third and fourth quarters of fiscal 2015. In connection with the preparation of the Company's financial statements for the fourth quarter of fiscal 2015, the Company concluded the lowered market prices on its 8.875% Notes due 2017, 7.875% Senior Secured Notes due 2018, 10.000% Senior Notes due 2020, lowered share price and the decline in net sales were indicators of impairment. The Company utilized the relief from royalty method to estimate the fair value of its trademarks. The Company recorded non-cash asset impairment charges of $5 million and $2 million in the EMEA and APAC reporting units, respectively, to reduce the Quiksilver trademark to fair value in the fourth quarter of fiscal 2015. 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.

In connection with the preparation of the Company’s consolidated 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 8.875% Notes due 2017, 7.875% Senior Secured Notes due 2018 and 10.000% Senior Notes due 2020, 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 relief from royalty method to estimate the fair value of its indefinite-lived intangible assets in 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 in the third quarter of fiscal 2015.

The Company recorded impairment charges for indefinite-lived intangible assets, consisting of trademarks, in both the second the third quarters of fiscal 2014. In connection with the preparation of the Company’s consolidated financial statements for 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.

In connection with the preparation of the Company’s consolidated financial statements for the second quarter of fiscal 2014, given the sales decline in the Company’s EMEA reporting unit for the six months ended April 30, 2014, the Company performed an interim impairment test for the EMEA reporting unit using a discounted cash flow analysis and evaluated whether any adverse economic or industry trends would negatively affect the conclusions drawn from the prior period annual impairment test. The results of the Company’s interim impairment evaluation indicated that the fair value of the EMEA reporting unit exceeded its carrying value by 9%. As a result, the Company concluded that the EMEA reporting unit’s goodwill was not impaired based on the interim impairment evaluation.

Intangible Assets

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



	October 31,
	2015							2014
In thousands	Gross Amount		Amortization			Net Book Value		Gross Amount		Amortization			Net Book Value
Non-amortizable trademarks	$	100,955	$	—		$	100,955	$	124,121	$	—		$	124,121
Amortizable trademarks	24,875		(13,205		)	11,670		21,858		(12,508		)	9,350
Amortizable licenses	9,531		(9,531		)	—		11,817		(11,817		)	—
Other amortizable intangibles	8,427		(6,689		)	1,738		8,406		(6,367		)	2,039
Total	$	143,788	$	(29,425	)	$	114,363	$	166,202	$	(30,692	)	$	135,510

The decrease in non-amortizable trademarks is due primarily to the impairments of the Quiksilver trademark within the EMEA and APAC reporting units. 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 4 to 18 years. Certain trademarks and licenses are amortized using estimated useful lives of 10 years with no residual values. Intangible amortization expense was approximately $3 million in fiscal 2015, $2 million for fiscal 2014 and $2 million for fiscal 2013. Based on the Company’s amortizable intangible assets as of October 31, 2015, annual amortization expense is estimated to be approximately $3 million in fiscal 2016, $2 million in fiscal 2017 through fiscal 2019, and $1 million in fiscal 2020 through fiscal 2021.

Goodwill

Goodwill by segment and in total, and changes in the carrying amounts, as of the dates indicated are as follows:



In thousands	Americas			EMEA			APAC			Consolidated
Gross goodwill	$	75,974		$	174,869		$	135,752		$	386,595
Accumulated impairment losses	—			—			(129,545		)	(129,545		)
Net goodwill at October 31, 2012	$	75,974		$	174,869		$	6,207		$	257,050
Gross goodwill	75,974			174,869			135,752			386,595
Foreign currency translation and other	(1,031		)	5,606			—			4,575
Accumulated impairment losses	—			—			(129,545		)	(129,545		)
Net goodwill at October 31, 2013	$	74,943		$	180,475		$	6,207		$	261,625
Gross goodwill	74,943			180,475			135,752			391,170
Foreign currency translation and other	(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 and other	(1,039		)	—			—			(1,039		)
Impairments	(73,376		)	—			(6,207		)	(79,583		)
Accumulated impairment losses	—			(178,197		)	(129,545		)	(307,742		)
Net goodwill at October 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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