NOTE 8 – INTANGIBLE ASSETS

Intangible assets are summarized as follows:


		Gross
	Useful Lives	Carrying		Accumulated		Net Carrying
December 31, 2018	(Years)	Amount		Amortization		Amount
		(in thousands)
Finite-lived intangible assets:
Trademarks	5 - 15	$	12,438	$	(2,689)	$	9,749
Customer agreements	4		2,832		(2,639)		193
Patents	10		361		(321)		40
		$	15,631	$	(5,649)		9,982
Indefinite-lived intangible assets:
Trademarks							954,929
Intangible assets, net						$	964,911


		Gross
	Useful Lives	Carrying		Accumulated		Net Carrying
December 31, 2017	(Years)	Amount		Amortization		Amount
		(in thousands)
Finite-lived intangible assets:
Trademarks	5 - 15	$	5,462	$	(1,913)	$	3,549
Customer agreements	4		2,832		(2,257)		575
Patents	10		665		(296)		369
		$	8,959	$	(4,466)		4,493
Indefinite-lived intangible assets:
Trademarks							990,677
Intangible assets, net						$	995,170

Future annual estimated amortization expense is summarized as follows:


Years Ended December 31,	(in thousands)
2019	$	2,018
2020		1,831
2021		1,828
2022		1,806
2023		1,381
Thereafter		1,118
	$	9,982

Amortization expense amounted to $1.2 million, $0.9 million and $1.3 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Finite-lived intangible assets represent trademarks, customer agreements and patents related to the Company’s brands. Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. The carrying value of finite-lived intangible assets and other long-lived assets is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Indefinite-lived intangible assets are not amortized, but instead are subject to impairment evaluation. As of December 31, 2018, the trademarks of Martha Stewart, Jessica Simpson, Avia, AND1, Joe’s, GAIAM, Emeril, Caribbean Joe, and Ellen Tracy 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 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. Based on the Company’s annual evaluation, the Company determined that a certain trademark should no longer be classified as an indefinite-lived intangible asset and was reclassified in the fourth quarter of 2018 as a finite-lived intangible asset and amortized on a straight-line basis over the remaining estimated useful life of the trademark.

When conducting its impairment assessment of indefinite-lived intangible assets, the Company initially performs a qualitative evaluation of whether it is more likely than not that the asset is impaired. If it is determined by a qualitative evaluation that it is more likely than not that the asset is impaired, the Company then tests the asset for recoverability. The Company tests its indefinite-lived intangible assets for recovery in accordance with ASC‑820‑10‑55‑3D. 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. As such, recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to its expected future discounted net cash flows. If the carrying amount of such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the recoverability of the assets. Assumptions used in our estimates are as follows: (i) discount rates; (ii) projected annual revenue growth rates; and (iii) projected long-term growth rates. Our estimates also factor in economic conditions and expectations of management which may change in the future based on period-specific facts and circumstances. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

During the year ended December 31, 2018, the Company recorded non-cash impairment charges of $17.9 million for indefinite-lived intangible assets related to the trademarks of two of the Company’s brands: Caribbean Joe and Ellen Tracy. The impairments arose due to reduced growth expectations and the impact of licensee transitions for these brands identified during the annual budget process which began at the end of the third quarter 2018. Fair value for each trademark was determined based on the income approach using estimates of future discounted cash flows. These charges are included in impairment charges in the consolidated statements of operations.

Due to the identification of impairment indicators during the quarter ended September 30, 2017, the Company performed impairment testing of its goodwill and indefinite-lived assets at September 30, 2017, which replaced its October 1st annual test. As a result of its testing, during the quarter ended September 30, 2017, the Company recorded a non-cash impairment charge of $36.5 million relating to its indefinite-lived intangible assets related to the trademarks of Caribbean Joe, Revo, Franklin Mint, Nevados, and FUL. The impairments arose due to reduced contractual minimums or reduced sales forecasts in key distribution channels for these brands. In addition, in connection with its goodwill impairment testing performed at December 31, 2017, the Company performed impairment testing of its indefinite-lived assets at December 31, 2017, noting no additional impairment of its indefinite-lived intangible assets. See Note 9 – Goodwill for further details. When an intangible asset’s useful life is no longer considered to be indefinite, it must be amortized over the remaining period that it is expected to contribute to cash flows. The Company determined that certain trademarks which had been impaired during the year ended December 31, 2017 should no longer be classified as indefinite-lived intangible assets. The Company recorded less than $0.1 million in amortization during the year ended December 31, 2017 related to these trademarks. There was no impairment of intangible assets or other long-lived assets recognized during the year ended December 31, 2016.

During the year ended December 31, 2018, the Company sold both the Revo and FUL trademarks and incurred a loss on the sale of the assets of $7.1 million. The following table shows the change in indefinite-lived intangible assets for the year ended December 31, 2018 (in thousands):


Balance at January 1, 2018	$	995,170
Impairment of trademarks		(17,899)
Sale of trademarks		(11,473)
Amortization		(1,182)
Additions		295
Balance at December 31, 2018	$	964,911