3. Goodwill and Trademarks and Other Intangibles, net

Goodwill

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

	Women's			Men's			Home			International			Consolidated
Net goodwill at December 31, 2015	$	111,749		$	19,855		$	42,899		$	29,563		$	204,066
Dispositions		—			—			(14,485	)		—			(14,485	)
Impairment		—			(18,331	)		—			—			(18,331	)
Net goodwill at December 31, 2016	$	111,749		$	1,524		$	28,414		$	29,563		$	171,250
Deconsolidation of joint venture		—			—			—			(3,491	)		(3,491	)
Impairment		(73,939	)		(1,524	)		(28,414	)		—			(103,877	)
Net goodwill at December 31, 2017	$	37,810		$	—		$	—		$	26,072		$	63,882

In June 2017, the Company sold the businesses underlying its Entertainment segment. As a result, goodwill decreased by $53.0 million which was recorded within current assets held for sale as of December 31, 2016. Refer to Note 2 for further details.

In June 2017, the Company received its final purchase price installment payment from its joint venture partner in respect of such partner’s interest in the Iconix SE Asia, Ltd. joint venture. In accordance with ASC 810, the Company deconsolidated the joint venture from its consolidated balance sheet as of June 30, 2017. As a result, goodwill decreased by $3.5 million. Refer to Note 4 for further details.

In December 2016, the Company completed the sale of the Sharper Image brand and related assets. As a result of this transaction, the Company allocated $14.5 million of goodwill in the home segment to the sale.

See Note 4 for details of these transactions.

The Company identifies its operating segments according to how business activities are managed and evaluated. Beginning in October 2016, based on a review of the Company’s business activities and how they are managed and evaluated, the Company determined that it would reflect four distinct reportable operating segments: men’s, women’s, home, and international. Additionally, the Company previously owned and operated an Entertainment segment which is included in the Company’s consolidated statement of operations as a discontinued operation for FY 2017. As of December 31, 2016, the Company’s Entertainment segment was classified as assets held for sale in the Company’s consolidated balance sheet pursuant to a definitive agreement dated May 9, 2017 to sell the businesses underlying the Entertainment segment of which the sale was completed on June 30, 2017 (see Note 2 of Notes to Consolidated Financial Statements). These operating segments represent individual reporting units for purposes of evaluating goodwill for impairment. The fair value of the reporting unit is determined using discounted cash flow analysis and estimates of sales proceeds with consideration of market participant data. As a corroborative source of information, the Company evaluates the estimated aggregate fair values of its reporting units to within a reasonable range of its market capitalization, which includes an assumed control premium (an adjustment reflecting an estimated fair value on a control basis) to verify the reasonableness of the fair value of its reporting units. The control premium is estimated based upon control premiums observed in comparable market transactions. As none of the Company’s reporting units are publicly-traded, individual reporting unit fair value determinations do not directly correlate to the Company’s stock price. The Company monitors changes in the share price to ensure that the market capitalization continues to exceed or is not significantly below the carrying value of our total net assets. In the event that our market capitalization is below the book value of the Company’s aggregate fair value of its reporting units, we consider the length and severity of the decline and the reason for the decline when evaluating whether potential goodwill impairment exists. Additionally, if a reporting unit does not appear to be achieving the projected growth plan used in determining its fair value, we will reevaluate the reporting unit for potential goodwill impairment based on revised projections, as deemed appropriate. The annual evaluation of goodwill is typically performed as of October 1, the beginning of the Company’s fourth fiscal quarter. Utilizing the Income Approach, the Company performed a two-step 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 segments exceeded its fair value.

As of September 30, 2017, based upon the results of step 1 of the goodwill impairment test in accordance with ASC 350, the Company noted that the carrying value of the women’s men’s, home and international segments exceeded their fair values after first reflecting the impairment of trademarks. In accordance with step 2 of the goodwill impairment test, the Company recorded a non-cash impairment charge of $103.9 million in FY 2017 which is comprised of $73.9 million, $1.5 million and $28.4 million in the women’s, men’s and home segment, respectively, primarily due to the decline in net sales associated with the recent developments in which various DTR license agreements would not be renewed subsequent to their expiration dates.

During the fourth quarter of FY 2017, the Company evaluated its goodwill for potential impairment incremental to the amount recorded as of September 30, 2017. Based on the Company’s goodwill impairment analysis in accordance with ASC 350, no additional impairment was recognized as of December 31, 2017.

For FY 2016, based upon the results of step 1, the Company noted that the carrying value of the men’s segment exceeded its fair value after first reflecting the impairment to trademarks. In accordance with step 2 of the goodwill impairment test, the Company recorded a non-cash impairment charge of $18.3 million in the fourth quarter of FY 2016 in its men’s segment. The fair value of each of the other segments of the Company exceeded their respective book value and accordingly, no goodwill impairment was recognized for these segments during the fourth quarter of fiscal 2016.

For FY 2015, based upon the results of step 1, and after taking into consideration the Company’s new operating segments identified during the fourth quarter of FY 2016, the Company allocated the goodwill impairment recorded to the men’s and international segment. In accordance with step 2 of the goodwill impairment test and based on the Company’s evaluation of the results of the goodwill impairment test, the Company recorded a non-cash impairment charge of $35.1 million in the fourth quarter of FY 2015 in its men’s and international segment primarily due to the decline in net sales and to a lesser extent changes to certain inputs and assumptions in the valuation model. The fair value of the goodwill in the other segments of the Company exceeded the book value of the goodwill and accordingly, no goodwill impairment was recognized for these segments during the fourth quarter of fiscal 2015.

Trademarks and Other Intangibles, net

Trademarks and other intangibles, net consist of the following:

		December 31, 2017				December 31, 2016
	Estimated Lives in Years	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Indefinite-lived trademarks and copyrights	Indefinite	$	465,391	$	—	$	1,002,850	$	—
Definite-lived trademarks	10-15		8,958		8,917		8,958		8,870
Non-compete agreements	2-15		940		940		940		920
Licensing contracts	1-9		3,412		3,122		4,019		3,082
		$	478,701	$	12,979	$	1,016,767	$	12,872
Trademarks and other intangibles, net				$	465,722			$	1,003,895

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, Ed Hardy, Umbro, Modern Amusement, Buffalo, Lee Cooper, Hydraulic, and Pony have been determined to have an indefinite useful life and accordingly, consistent with ASC Topic 350, no amortization has been recorded in the Company’s consolidated statements of operations. Instead, each of these intangible assets are tested for impairment annually and as needed on an individual brand and territorial 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 typically performed as of October 1, the beginning of the Company’s fourth fiscal quarter, or as deemed necessary due to the identification of a triggering event.

As it relates to the Company’s impairment testing of goodwill and intangible assets, assumptions and inputs used in our fair value estimates include the following: (i) discount rates; (ii) royalty rates; (iii) projected average revenue growth rates; and (iv) projected long-term growth rates. Additionally, for those instances where core licenses have not been or will not be renewed and replacement licenses have not yet been identified, the Company’s estimate of fair value may incorporate a probability weighted average of projected cash flows based on several scenarios (e.g. DTR license, wholesale license, or direct-to-consumer model). Key inputs to these scenarios, which were selected based on the perspective of a market participant and include estimated future retail and wholesale sales and related royalties, are assessed a probability of occurrence to compensate for the uncertainty of success and timing of completion. The Company will continue to reassess these probabilities and inputs, as well as economic conditions and expectations of management, and may record additional impairment charges as these estimates are updated, all of which are subject to change in the future based on period-specific facts and circumstances.

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 recorded impairment charges for indefinite-lived intangible assets consisting of trademarks in the fourth quarter of fiscal 2016. In connection with the preparation of the Company's financial statements for the fourth quarter of fiscal 2016, the Company concluded that the primary drivers of the impairment charges were a revision to the Company’s operating segments (i.e., disaggregation of our brands in to the International segment as the individual brands are no longer aggregated in to a single unit of account for impairment testing purposes) and weakness in each of our men’s and home segments.

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.”

In the fourth quarter of FY 2016, the Company recorded a total non-cash asset impairment charge of $424.9 million which is comprised of $144.6 million in the men’s segment, $31.5 million in the women’s segment, $50.0 million in the home segment, $5.1 million in the entertainment segment (which was allocated to discontinued operations in the Company’s consolidated statement of operations) and $193.7 million in the international segment to reduce various trademarks in those segments to fair value.

The Company recorded impairment charges for indefinite-lived intangible assets consisting of trademarks in the fourth quarter of fiscal 2015. In connection with the preparation of the Company's financial statements for the fourth quarter of fiscal 2015, which after taking consideration of the new operating segments identified in the fourth quarter of FY 2016, the Company concluded that the decline in net sales of certain brands within the Men’s segment, Home segment and International segment as well as a decline in future guaranteed minimum royalties from license agreements for these brands were indicators of impairment.

In the fourth quarter of FY 2015, and after taking in to consideration the new operating segments identified in the fourth quarter of FY 2016, the Company recorded a total non-cash asset impairment charge of $402.4 million which was allocated as follows: $327.8 million in the men’s segment, $37.8 million in the home segment, $34.6 million in the international segment, and $2.2 million in the women’s segment which reduced various trademarks in those segments to fair value.

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.

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.

In July 2017, the Company sold its ownership interest in NGX, LLC. As a result of this transaction, the Company’s indefinite-lived trademarks decreased by $5.0 million. Refer to Note 4 for further details.

In June 2017, the Company deconsolidated Iconix SE Asia, Ltd. which resulted in a decrease in indefinite-lived trademarks of $22.7 million. Refer to Note 4 for further details.

In June 2017, the Company sold the businesses underlying its Entertainment segment, representing the intellectual property of both the Peanuts and Strawberry Shortcake brands. As a result of this transaction, the Company’s indefinite-lived trademarks decreased by $204.3 million (which represents $153.6 million and $50.7 million for the Peanuts and Strawberry Shortcake brand, respectively). These indefinite-lived trademarks were classified as assets held for sale as of December 31, 2016. Refer to Note 2 for further details.

In December 2016, the Company sold the rights to the Sharper Image intellectual property and related assets. As a result of this transaction, the Company’s indefinite-lived trademarks decreased by $55.6 million. Refer to Note 4 for further details.

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.

In March 2015, the Company acquired the 50% interest in Iconix China held by its joint venture partner, thereby increasing its ownership interest in Iconix China to 100%. As a result of this transaction, Iconix China is now consolidated with the Company, which increased the Company’s indefinite-lived trademarks by $40.5 million. See Note 4 for further details on this transaction.

In March 2015, the Company acquired the Strawberry Shortcake brand. As a result of this transaction the Company’s indefinite-lived trademarks and licensing contracts increased by an aggregate $56.2 million. See Note 4 for further details on this transaction.

In February 2015, the Company acquired through its wholly-owned subsidiary, US Pony Holdings, LLC, the rights to the Pony brand in respect of the United States, Canada and Mexico. Immediately following such acquisition, a third party contributed specified assets to US Pony Holdings, LLC in exchange for a 25% non-controlling interest in the entity. As a result of these transactions, US Pony Holdings, LLC is consolidated with the Company, which increased the Company’s indefinite-lived trademarks and licensing contracts by $32.6 million. See Note 4 for further details on this transaction.

Amortization expense for intangible assets for FY 2017, FY 2016 and FY 2015 was $0.7 million, $1.3 million, and $2.8 million, respectively. The Company projects amortization expenses to be $0.3 million, $0.1 million, $0.0 million, $0.0 million and $0.0 million for FY 2018, FY 2019, FY 2020, FY 2021 and FY 2022, respectively.