Revenue Recognition

12 Months Ended

Dec. 31, 2020

Revenue From Contract With Customer [Abstract]

Revenue Recognition

2. Revenue Recognition

 Licensing Revenue

The Company licenses its brands across a broad range of product categories, including fashion apparel, footwear, accessories, sportswear, home furnishings and décor, and beauty and fragrance.  The Company seeks licensees with the ability to produce and sell quality products in their licensed categories and to meet and exceed minimum sales and royalty payment thresholds.

The Company maintains direct-to-retail and traditional wholesale licenses.  Typically, in a direct-to-retail license, the Company grants exclusive rights to one of its brands to a national retailer for a broad range of product categories.  Direct-to-retail licenses provide retailers with proprietary rights to national brands at favorable economics.  In a traditional wholesale license, the Company grants the right to a specific brand to a single or small group of related product categories to a wholesale supplier, who is permitted to sell licensed products to multiple retailers within an approved distribution channel.

The Company’s license agreements typically require the licensee to pay the Company royalties based upon net sales with guaranteed minimum royalties.  The Company’s licenses also typically require the licensees to pay to the Company certain minimum amounts for the advertising and marketing of the respective licensed brands.  

Licensing revenue is comprised of revenue related to the Company’s entry into various trade name license agreements that provide revenues based on minimum royalties and advertising/marketing fees and additional revenues based on a percentage of defined sales.  Minimum royalty amounts are recognized as revenue on a straight-line basis over the full contract term.  Minimum royalties that escalate on an annual basis over the contract term are recognized on a straight-line basis over the full contract term.  Royalties exceeding the defined minimum amounts in a specific contract year (sales-based royalties), as defined in each license agreement, are recognized only in the subsequent periods to when the minimum guarantee for the contract year has been achieved and when the later of the following events occur: (i) the subsequent sale occurs, or (ii) the performance obligation to which some or all of the sales-based royalty has been allocated has been satisfied (or partially satisfied).  

Within the Company’s International segment, the Umbro business purchases of certain products and samples for resale to certain licensees. The Company generally does this as an accommodation to its licensees to consolidate ordering from the manufacturers. The revenue associated with such activity is included in licensing revenue and was approximately $0.9 million for FY 2020 and the associated cost of goods sold is included in selling general and administrative expenses and was approximately $0.8 million. There was approximately $0.9 million and $0.9 million, respectively, of such sales and corresponding cost of goods sold in FY 2019.  Revenue for these sales are recognized upon the transfer of control of the promised product to the customer or licensee in an amount that reflects the consideration that we expect to receive in exchange for these products.

The following table presents our revenues disaggregated by license type:

	For the Year Ended December 31,
	2020		2019
Licensing revenue by license type:
Direct-to-retail license	$	31,066	$	42,818
Wholesale licenses		76,470		105,059
Other licenses (1)		1,040		1,107
	$	108,576	$	148,984

⁽¹⁾ Included in Other licenses for FY 2020 is $0.9 million of revenue associated with the Umbro business purchases discussed above as compared to $0.9 million for FY 2019.

The following table represents our revenues disaggregated by geography:

	For the Year Ended December 31,
	2020		2019
Total licensing revenue by geographic region:
United States	$	65,000	$	88,444
Other (1)		43,576		60,540
	$	108,576	$	148,984

⁽¹⁾ No single country represented 10% of the Company’s revenues in the periods presented.

Remaining Performance Obligation

We enter into long-term license agreements with our licensees across all operating segments.  Revenues are recognized on a straight-line basis consistent with the nature, timing and extent of our services, which primarily relate to the ongoing brand management and maintenance of the intellectual property.  As of January 1, 2021, the Company and its joint ventures had a contractual right to receive approximately $380.9 million of aggregate minimum licensing revenue through the balance of their current licenses, excluding any renewals. Pursuant to these agreements, the Company expects to recognized revenue as follows: $63.4 million, $61.7 million, $58.2 million, $46.9 million, $39.5 million and $111.2 million for FY 2021, FY 2022, FY 2023, FY 2024, FY 2025 and thereafter, respectively.

Contract Balances

Timing of revenue recognition may differ from the timing of invoicing to licensees.  We record a receivable when amounts are contractually due or when revenue is recognized prior to invoicing.  Deferred revenue is recorded when amounts are contractually due prior to satisfying the performance obligations of the contracts.  For multi-year license agreements, as the performance obligation is providing the licensee with the right of access to the Company’s intellectual property for the contractual term, the Company uses a time-lapse measure of progress and straight lines the guaranteed minimum royalties over the contract term.

Contract Asset

We record contract assets when revenue is recognized in advance of cash payment being due from our licensees.  Contract assets due within one year of the most recent balance sheet date are recorded within Other assets – current and long-term contract assets are recorded within Other assets on the Company’s consolidated balance sheet.  As of December 31, 2020 and December 31, 2019, our contract assets – current and long-term contract assets were $13.8 million and $11.4 million, and $9.4 million and $11.8 million respectively.  For the years ended December 31, 2020 and December 31, 2019, the Company incurred an impairment loss of its contract assets of $4.5 million and $5.1 million, respectively, as a result of impairments or certain contract modifications.

Deferred Revenue

We record deferred revenue when cash payment is received or due in advance of our performance, including amounts which are refundable.  Advanced royalty payments are recognized ratably over the period indicated by the terms of the license and are reflected in the Company’s consolidated balance sheet in deferred revenue at the time the payment is received.  The decrease in deferred revenues for FY 2020 is inclusive of $4.1 million of revenues recognized that were included in the deferred revenue balance at the beginning of the period offset by cash payments received or due in advance of satisfying our performance obligations.