NEW YORK, Aug. 8, 2018 /PRNewswire/ --
- Second quarter results in line with Company's
expectations
- Projecting stable cash position and debt covenant
compliance
- Progress continues on repositioning of iconic
brands
Iconix Brand Group, Inc. (Nasdaq: ICON) ("Iconix" or the
"Company") today reported financial results for the second quarter
ended June 30, 2018.
Peter Cuneo, Interim CEO and
Chairman of the Board commented, "Iconix delivered financial
results in line with our expectations for the second quarter and we
do not anticipate any major changes to our full year projections.
The highlight of the quarter was the announcement that our Iconic
Brand, Starter, is returning to the Football Field through a
collaboration with the Alliance of American Football Association,
which is set to commence play in February
2019. Starter will become the official on-field outfitter of
all uniforms and sideline apparel
for all Alliance teams. We are also exploring additional
opportunities to expand marketing and merchandising beyond the
field. In other news, we announced that a Cooperation Agreement
has been reached with Sports Direct
International pursuant to which Iconix has appointed Justin Barnes to our Board of Directors. We are
pleased to move into the future with a stable Board and look
forward to Justin's unique business
perspective."
David Jones, Chief Financial
Officer of Iconix commented, "With a stable balance sheet, we continue to focus on the business
and have seen our licensing activity pick up year-over-year. We
were pleased to register organic growth in both our Men's and
International segments for both the second quarter of 2018 and the
first half of 2018. Our brands in transition continue to draw
a lot of interest and we are working through several promising
opportunities. Globally, during the first six months of 2018, we
have signed 43 new and replacement license agreements, a 30%
increase over the prior year. We have also renewed 51 license
agreements, a 60% increase over the first half of 2017. We
enter the second half of 2018 with a continued focus on generating
new business, while supporting our existing partners to drive
future growth."
2018 Guidance:
- Anticipating lower end of full year revenue guidance of
$190 million to $220 million.
- GAAP net income guidance now a
loss of approximately $94.4 million
to $104.4 million, principally due to
a Q2 trademark and goodwill impairment
- Anticipating low end of full year non-GAAP net income guidance
of $20 million to $30 million
- Reiterating full year free cash flow guidance of $50 million to $70
million
It should be noted that GAAP net income will be affected by
non-cash adjustments to fair value from the Company's 5.75%
Convertible Notes as discussed below. Such periodic
adjustments to fair value cannot be estimated in advance and
thus are not taken into account in guidance.
Non-GAAP net income and free cash flow are non-GAAP metrics, and
reconciliation tables for each are included in this press
release.
Unless otherwise noted, the following represents financial
results for continuing operations only.
Second Quarter 2018 Financial Results
Adjusted Non-GAAP
Revenue by Segment
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
($, 000's)
|
2018
|
2017*
|
%
Change
|
2018
|
2017*
|
%
Change
|
|
|
|
|
|
|
|
|
Womens
|
16,871
|
27,634
|
-39%
|
|
33,469
|
55,777
|
-40%
|
Mens
|
10,526
|
9,982
|
5%
|
|
20,470
|
20,175
|
1%
|
Home
|
6,961
|
7,824
|
-11%
|
|
13,473
|
15,161
|
-11%
|
International
|
15,854
|
15,249
|
4%
|
|
31,349
|
27,281
|
15%
|
Total Adjusted
Revenue
|
50,212
|
60,689
|
-17%
|
|
98,761
|
118,394
|
-17%
|
*Revenue is adjusted
for revenue from the SE Asia joint venture which was deconsolidated
in 2017 by approximately $1.0 million in the second quarter of 2017
and $2.0 million in the six months ended June 30, 2017.
|
In the first quarter of 2018, the Company adopted a new revenue
recognition accounting standard (ASU No. 2014-09 Revenue from
Contracts with Customers – Topic 606). Adoption of the standard
increased Q2 2018 revenue by approximately $0.1 million and decreased revenue by
$1.8 million for the six months ended
June 30, 2018, but is expected to
increase full-year 2018 revenue by approximately $2.5 to $3.0
million.
For the second quarter of 2018, total adjusted revenue was
$50.2 million, a 17% decline as
compared to $60.7 million in the
prior year quarter. For the six months ended June 30, 2018, total adjusted revenue was
$98.8 million, a 17% decrease as
compared to $118.4 million in the six
months ended June 30, 2017.
Such decline was expected principally as a result of the transition
of our Danskin, OP and Mossimo DTR's in our Women's segment, as
previously announced.
Our Men's segment provided organic growth in the second quarter
of 2018 and through the six months ended June 30, 2018 primarily from the Umbro and
Buffalo brands. Our International segment also provided
organic growth primarily from the Umbro and Lee Cooper brands.
The Home segment declined 11% for the second quarter of 2018 and
six months ended June 30, 2018.
However, as previously discussed, a portion of this decrease
was due to a shift in Charisma timing which we still anticipate
recovering during the balance of the year. In addition, also as
previously discussed, revenue in the home segment year-over-year is
partially down due to the terms of a renewal of the Waverly inspirations contract with Walmart.
Finally, the new revenue recognition standard has a negative effect
on the Royal Velvet license
agreement as we will record
less revenue in 2018 than the current guaranteed minimum
royalty.
SG&A Expenses:
Total SG&A expenses in the second quarter of 2018 were
$28.6 million, a 7% increase compared
to $26.8 million in the second
quarter of 2017. However, 2018 includes $2.7
million of special charges primarily consisting of severance
charges for our previous chief executive officer and $2.9 million of costs associated with recent debt
financings. Adjusting for these items in 2018 and special charges
of $2.5 million in 2017, SG&A
decreased approximately $1.2 million
or 5%. Stock based compensation was $0.5
million in the second quarter of 2018 as compared to
$3.1 million in the second quarter of
2017.
Total SG&A expenses in the six months ended June 30, 2018 were $62.2
million, a 19% increase compared to $52.2 million in the six months ended
June 30, 2017. However, 2018
includes $5.4 million of special
charges, $8.3 million of costs
associated with recent debt financings, $2.6
million of restructuring costs and a $1.1 million non-cash purchase accounting
adjustment. Adjusting for these items in 2018 and special
charges of $4.7 million in 2017,
SG&A decreased $2.7 million or
6%. Stock based compensation was $1.5
million in the six months ended June
30, 2018 as compared to $4.7
million in the six months ended June
30, 2017.
Loss on termination of licenses:
Loss on termination of licenses in the second quarter of 2018
was $5.7 million versus $23.2 million in the second quarter of
2017. The charge in the second quarter of 2018 was related to
a litigation settlement with a previous licensee for the Rocawear
brand while the charge in the second quarter of 2017 was related to
the transition of a license for the Umbro brand.
Gain on sale of trademarks and gain on deconsolidation of
joint venture:
Gain on sale of trademarks in the second quarter of 2018 were
$0.1 million. The gain on sale
of trademarks for the current quarter was related to the completion
of the sale of the Sharper Image trademarks from the Company's
Iconix Australia joint venture.
Gain on deconsolidation of joint venture was $3.8 million in the second quarter of 2017 for
which there was no comparable amount in the second quarter of
2018. The gain on deconsolidation of joint venture was
related to our deconsolidation of our Iconix Southeast Asia joint
venture.
Trademark and Goodwill Impairment:
In the second quarter of 2018, the Company recorded a non-cash
trademark charge of $73.3 million in
the women's segment related to a write-down in the Mossimo
trademark. The Company also recorded a non-cash goodwill
impairment charge of $37.8 million in
the women's segment as a result of the impairment of the Mossimo
trademark.
Operating Income:
Adjusted Operating
Income by Segment (1)
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
($, 000's)
|
2018
|
2017
|
%
Change
|
2018
|
2017
|
%
Change
|
|
|
|
|
|
|
|
|
Womens
|
15,453
|
25,949
|
-40%
|
|
30,081
|
52,230
|
-42%
|
Mens
|
6,314
|
5,428
|
16%
|
|
12,188
|
11,371
|
7%
|
Home
|
6,589
|
6,861
|
-4%
|
|
12,332
|
13,486
|
-9%
|
International
|
8,082
|
9,964
|
-19%
|
|
14,569
|
15,484
|
-6%
|
Corporate
|
(8,770)
|
(10,319)
|
15%
|
|
(18,964)
|
(18,912)
|
0%
|
Adjusted Operating
Income
|
27,668
|
37,883
|
-27%
|
|
50,206
|
73,659
|
-32%
|
|
|
|
|
|
|
|
|
Adjusted Operating
Margin by Segment
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2018
|
2017
|
Var
|
|
2018
|
2017
|
%
Change
|
|
|
|
|
|
|
|
|
Womens
|
92%
|
94%
|
-2%
|
|
90%
|
94%
|
-4%
|
Mens
|
60%
|
54%
|
6%
|
|
60%
|
56%
|
3%
|
Home
|
95%
|
88%
|
7%
|
|
92%
|
89%
|
3%
|
International
|
51%
|
65%
|
-14%
|
|
46%
|
57%
|
-10%
|
Adjusted Operating
Margin
|
55%
|
62%
|
-7%
|
|
51%
|
62%
|
-11%
|
Operating loss for the second quarter of 2018 was $94.6 million, as compared to operating income of
$15.9 million in the second quarter
of 2017. Operating loss in the second quarter of 2018
included goodwill and trademark impairments of $111.1 million, special charges of $2.7 million, costs associated with recent debt
financings of $2.9 million, a loss on
termination of licenses of $5.7
million and gain on sale of trademarks of $0.1 million. Operating income in the
second quarter of 2017 included special charges of $2.5 million, loss on termination of licenses of
$23.2 million and a gain on
deconsolidation of joint venture of $3.8
million. When excluding these items, adjusted
operating income was $27.7 million
and $37.9 million in the second
quarter of 2018 and the second quarter of 2017, respectively, and
adjusted operating margin was 55% and 62% in the second quarter of
2018 and the second quarter of 2017, respectively. The
decline in adjusted operating income and adjusted operating margin
is primarily due to the decline in licensing revenue from the
transition of our Danskin, OP and Mossimo DTR's.
Operating loss for the six months ended June 30, 2018 was $79.1
million, as compared to operating income of $49.5 million in the six months ended
June 30, 2017. Operating loss
in the six months ended June 30, 2018
included goodwill and trademark impairments of $111.1 million, special charges of $5.4 million, costs associated with recent debt
financings of $8.3 million,
restructuring costs of $2.6 million,
a $1.1 million non-cash purchase
accounting adjustment, a loss on termination of licenses of
$5.7 million and gain on sale of
trademarks of $1.3 million.
Operating income in the six months ended June 30, 2017 included special charges of
$4.7 million, loss on termination of
licenses of $23.2 million and a gain
on deconsolidation of joint venture of $3.8
million. When excluding these items, adjusted
operating income was $50.2 million
and $73.7 million in the six months
ended June 30, 2018 and the six
months ended June 30, 2017, respectively, and adjusted operating margin was 51%
and 62% respectively. The decline in adjusted
operating income and adjusted operating margin is primarily due to
the decline in licensing revenue from the transition of our
Danskin, OP and Mossimo DTR's.
Interest Expense, Other Income and Loss on extinguishment of
debt:
Interest expense in the second quarter of 2018 was $14.8 million, as compared to interest expense of
$14.1 million in the second quarter
of 2017.
In the second quarter of 2018, the Company recognized a
$32.1 million gain resulting from the
Company's accounting for the 5.75% Convertible Notes which requires
recording the fair value of this debt at the end of each period
with any change from the prior period accounted for as other income
or loss in the current period's income statement. There is no
comparable amount in the second quarter of 2017. The Company
has excluded these amounts from its non-GAAP results.
In the second quarter of 2017, the Company recognized a
$13.9 million expense related to the
early extinguishment of a portion of the Company's 2016 Senior
Secured Term Loan of which there was no comparable amount for the
second quarter of 2018.
Provision for Income Taxes:
The effective income tax rate for the second quarter of 2018 is
approximately 3.6% which resulted in a $2.8 million income tax benefit, as compared
to an effective income tax rate of 35.6% in the prior year quarter
which resulted in a $5.5 million
income tax benefit. The decrease in the effective tax rate
for the second quarter is primarily as a result of the benefit
associated with the impairment charge of trademark and goodwill
which was significantly reduced due to a valuation allowance
against the asset. This valuation allowance charge had the effect
of reducing the benefit on the loss which reduces the effective tax
rate in the current quarter. Excluding any mark-to-market
adjustments from the Company's 5.75% Convertible Notes, we expect
the full year 2018 tax rate to be approximately (8)% and
approximately 28% on a GAAP basis and non-GAAP basis,
respectively.
GAAP Net Income and GAAP Diluted EPS:
GAAP net loss from continuing operations attributable to
Iconix for the second quarter of
2018 reflects a loss of $79.4 million
as compared to a loss of $13.9
million for the second quarter of 2017. GAAP diluted EPS
from continuing operations for the second quarter of 2018 reflects
loss of $1.26 as compared to loss of
$0.26 for the second quarter of
2017.
GAAP net loss from continuing operations attributable to
Iconix for the six months ended
June 30, 2018 reflects loss of
$51.7 million as compared to loss of
$9.1 million in the six months ended
June 30, 2017. GAAP diluted EPS
from continuing operations for the six months ended June 30, 2018 reflects loss of $0.91 as compared to loss of $0.19 for the six months ended June 30, 2017.
Non-GAAP Net Income and Non-GAAP Diluted EPS:
Non-GAAP net income from continuing operations for the second
quarter of 2018 was $7.7 million as
compared to $15.2 million for the
second quarter of 2017. Non-GAAP diluted EPS from continuing
operations for the second quarter of 2018 was $0.12 as compared to $0.26 for the second quarter of 2017.
Non-GAAP net income from continuing operations for the six
months ended June 30, 2018 was
$13.8 million as compared to
$27.9 million for the six months
ended June 30, 2017. Non-GAAP
net income from continuing operations for the six months ended
June 30, 2018 was $0.22 as compared to $0.48 for the six months ended June 30, 2017.
Non-GAAP Net
Income (Loss) & Diluted EPS Reconciliation: (2)
|
($, 000's, except per
share data)
|
|
NET
INCOME
|
|
EPS
|
|
Three Months Ended
June 30,
|
|
Three Months Ended
June 30,
|
|
2018
|
2017
|
%
Change
|
|
2018
|
2017
|
%
Change
|
|
|
|
|
|
|
|
|
GAAP net income
(loss) & EPS from continuing operations
attributable to Iconix (2)
|
(79,429)
|
(13,852)
|
473%
|
|
($1.26)
|
($0.26)
|
383%
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
non-cash interest
related to ASC 470
|
-
|
4,282
|
|
|
$
|
-
|
$
|
0.07
|
|
(gain) / loss on
extinguishment of debt
|
-
|
13,919
|
|
|
$
|
-
|
$
|
0.24
|
|
loss on termination
of licenses
|
5,650
|
23,230
|
|
|
$
|
0.09
|
$
|
0.40
|
|
trademark and
goodwill impairment
|
111,147
|
-
|
|
|
$
|
1.68
|
$
|
-
|
|
mark to market gain
on convertible debt
|
(32,379)
|
-
|
|
|
$
|
(0.49)
|
$
|
-
|
|
special
charges
|
2,677
|
2,550
|
|
|
$
|
0.04
|
$
|
0.04
|
|
costs associated with
recent debt financings
|
2,905
|
-
|
|
|
$
|
0.04
|
$
|
-
|
|
gain on
deconsolidation of JV
|
-
|
(3,772)
|
|
|
$
|
-
|
$
|
(0.07)
|
|
foreign currency
translation gain/(loss)
|
704
|
3,416
|
|
|
$
|
0.01
|
$
|
0.06
|
|
Income taxes related
to above
|
(7,168)
|
(14,620)
|
|
|
$
|
(0.11)
|
$
|
(0.25)
|
|
Valuation Allowance
& Foreign Tax Credit
|
3,519
|
-
|
|
|
$
|
0.05
|
$
|
-
|
|
non-controlling
interest
|
29
|
17
|
|
|
$
|
0.00
|
$
|
0.00
|
|
Accretion of
redeemable non-controlling interest
|
-
|
-
|
|
|
$
|
0.05
|
$
|
0.02
|
|
Net
Adjustments
|
87,084
|
29,022
|
|
|
$
|
1.37
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
& EPS from continuing operations
attributable to Iconix
|
7,655
|
15,170
|
-50%
|
|
$0.12
|
$0.26
|
-56%
|
|
NET
INCOME
|
|
EPS
|
|
Six Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
2017
|
%
Change
|
|
2018
|
2017
|
%
Change
|
|
|
|
|
|
|
|
|
GAAP net income
(loss) & EPS from continuing operations
attributable to Iconix (2)
|
(51,670)
|
(9,136)
|
466%
|
|
($0.91)
|
($0.19)
|
379%
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
non-cash interest
related to ASC 470
|
2,998
|
8,328
|
|
|
$
|
0.05
|
$
|
0.14
|
|
(gain) / loss on
extinguishment of debt
|
(4,473)
|
19,400
|
|
|
$
|
(0.07)
|
$
|
0.34
|
|
loss on termination
of licenses
|
5,650
|
23,230
|
|
|
$
|
0.09
|
$
|
0.40
|
|
trademark and
goodwill impairment
|
111,147
|
-
|
|
|
$
|
1.78
|
$
|
-
|
|
gain on sale of
Complex Media
|
(958)
|
-
|
|
|
$
|
(0.02)
|
$
|
-
|
|
mark to market gain
on convertible debt
|
(57,553)
|
-
|
|
|
$
|
(0.92)
|
$
|
-
|
|
special
charges
|
5,383
|
4,712
|
|
|
$
|
0.09
|
$
|
0.08
|
|
costs associated with
recent debt financings
|
8,344
|
-
|
|
|
$
|
0.13
|
$
|
-
|
|
gain on
deconsolidation of JV
|
-
|
(3,772)
|
|
|
$
|
-
|
$
|
(0.07)
|
|
foreign currency
translation gain/(loss)
|
152
|
3,845
|
|
|
$
|
0.00
|
$
|
0.07
|
|
Income taxes related
to above
|
(5,913)
|
(18,835)
|
|
|
$
|
(0.09)
|
$
|
(0.33)
|
|
Valuation Allowance
& Foreign Tax Credit
|
726
|
-
|
|
|
$
|
0.01
|
$
|
-
|
|
non-controlling
interest
|
(9)
|
107
|
|
|
$
|
-
|
$
|
0.00
|
|
Accretion of
redeemable non-controlling interest
|
-
|
-
|
|
|
$
|
0.08
|
$
|
0.03
|
|
Net
Adjustments
|
65,494
|
37,015
|
|
|
$1.13
|
$0.68
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
& EPS from continuing operations
attributable to Iconix
|
13,824
|
27,879
|
-50%
|
|
$0.22
|
$0.48
|
-54%
|
Non-GAAP weighted
average diluted shares reconciliation (2)
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2018
|
2017
|
%
Change
|
|
2018
|
2017
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
GAAP weighted average
diluted shares
|
65,976
|
57,568
|
15%
|
|
62,566
|
57,568
|
9%
|
|
Add: antidilutive
shares resulting from net loss
|
44
|
-
|
NA
|
|
22
|
-
|
NA
|
|
Non-GAAP weighted
average diluted shares
|
66,020
|
57,568
|
15%
|
|
62,588
|
57,568
|
9%
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet and Liquidity:
($, 000's)
|
June 30,
2018
|
|
December 31,
2017
|
Cash
Summary:
|
|
|
|
Unrestricted Domestic
Cash (wholly owned)
|
55,844
|
|
38,236
|
Unrestricted Domestic
Cash (in consolidated JV's)
|
10,372
|
|
14,943
|
Unrestricted
International Cash*
|
5,168
|
|
12,748
|
Restricted
Cash
|
24,177
|
|
48,766
|
|
|
|
|
Total Cash
|
$95,561
|
|
$114,693
|
|
|
|
|
Debt
Summary:
|
|
|
|
Senior Secured Notes
due January 2020**
|
386,827
|
|
408,174
|
1.50% Convertible
Notes
|
-
|
|
236,183
|
5.75% Convertible
Notes due August 2023
|
111,015
|
|
-
|
Variable Funding Note
due January 2020
|
100,000
|
|
100,000
|
2017 Senior Secured
Term Loan due August 2022
|
191,349
|
|
82,837
|
|
|
|
|
Total Debt (Face
Value)
|
$789,191
|
|
$827,194
|
|
|
|
|
*- During the second
quarter of 2018, the Company elected to treat its Luxembourg top
tier subsidiary ("Luxco") as a disregarded entity for US tax
purposes. As of the election date, all the foreign operations under
LuxCo will be treated as a branch for US tax purposes and subject
to US taxation. As such, the Company will no longer have any
earnings in foreign subsidiaries that are not currently subject to
taxation for US purposes. Before the election, the Company was
indefinitely reinvested in all earnings in its foreign
subsidiaries.
|
|
**- The Company's
Senior Secured Notes include a test that measures the amount of
principal and interest required to be paid on the debt to the
approximate cash flow available to pay such principal and interest;
the test is referred to as the debt service coverage ratio
("DSCR"). As a result of a decline in royalty collections
during the twelve months ended June 30, 2018, the DSCR fell below
1.45x as of June 30, 2018. Beginning July 1, 2018, we are
required to allocate 25% of residual royalty collections (i.e.
collections less debt service, management, servicing,
administrative and other fees) to a restricted reserve account
administered by the securitization program's trustee, which will
result in cash remaining inside the securitization program.
The cash required to be maintained inside the securitization
program may be released if the DSCR is at least 1.45x for two
consecutive quarters.
|
Free Cash Flow:
The Company generated $14.5
million of free cash flow in the second quarter of 2018, a
37% increase as compared to $10.6
million in the second quarter of 2017.
The Company generated $31.4
million of free cash flow in the six months ended
June 30, 2018, a 33% increase as
compared to $23.6 million in the six
months ended June 30, 2017.
Free Cash Flow
Reconciliation: (3)
|
|
|
|
|
|
|
|
|
($, 000's)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2018
|
2017
|
%
Change
|
|
2018
|
2017
|
%
Change
|
|
Net cash provided by
operating activities
|
$17,274
|
$8,114
|
113%
|
|
$39,348
|
$20,015
|
97%
|
|
Plus:
Cash from sale of trademarks and related notes
receivable
|
-
|
3,980
|
|
|
195
|
6,927
|
|
|
Plus:
Cash from notes receivable from licensees
|
-
|
-
|
|
|
1,409
|
1,250
|
|
|
Plus:
Net cash from sale of Badgley Mischka & Sharper Image in
JVs
|
1,125
|
-
|
|
|
1,211
|
-
|
|
|
Less:
Capital Expenditures
|
(284)
|
(576)
|
|
|
(571)
|
(755)
|
|
|
Less:
Distributions to non-controlling interests
|
(3,581)
|
(926)
|
|
|
(10,168)
|
(3,843)
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow from
operations
|
$14,534
|
$10,592
|
37%
|
|
$31,424
|
$23,594
|
33%
|
|
|
|
|
|
|
|
|
|
|
Conference Call
The Company will host a conference call today at 10:00 AM ET. The call can be accessed on the
Company's website at www.iconixbrand.com or by telephone at
844-286-1555 or 270-823-1180 (conference ID: 3794894). A written
transcript will be posted online as soon as available.
About Iconix Brand Group, Inc.
Iconix Brand Group, Inc. owns, licenses and markets a portfolio
of consumer brands including: CANDIE'S ®, BONGO ®, JOE
BOXER ®, RAMPAGE ®, MUDD ®, MOSSIMO ®,
LONDON FOG ®, OCEAN
PACIFIC ®, DANSKIN ®, ROCAWEAR ®, CANNON ®,
ROYAL VELVET ®, FIELDCREST ®, CHARISMA ®,
STARTER ®, WAVERLY ®, ZOO YORK ®, UMBRO ®, LEE
COOPER ®, ECKO UNLTD. ®, MARC ECKO ®, ARTFUL
DODGER ®, and HYDRAULIC®. In addition, Iconix owns interests
in the MATERIAL GIRL ®, ED HARDY ®, TRUTH OR DARE ®,
MODERN AMUSEMENT ®, BUFFALO ® and PONY ® brands. The
Company licenses its brands to a network of retailers and
manufacturers. Through its in-house business development,
merchandising, advertising and public relations departments, Iconix
manages its brands to drive greater consumer awareness and
equity.
Forward-Looking Statements
In addition to historical information, this press release
contains forward-looking statements within the meaning of the
federal securities laws. Such forward-looking statements include
projections regarding the Company's beliefs and expectations about
future performance and, in some cases, may be identified by words
like "anticipate," "assume," "believe," "continue," "could,"
"estimate," "expect," "intend," "may," "plan," "potential,"
"predict," "project," "future," "will," "seek" and similar terms or
phrases. These statements are based on the Company's beliefs and
assumptions, which in turn are based on information available as of
the date of this press release. Forward-looking statements involve
known and unknown risks and uncertainties, which could cause actual
results to differ materially from those contained in any
forward-looking statement and could harm the Company's business,
prospects, results of operations, liquidity and financial condition
and cause its stock price to decline significantly. Many of these
factors are beyond the Company's ability to control or predict.
Important factors that could cause the Company's actual results to
differ materially from those indicated in the forward-looking
statements include, among others: the ability of the Company's
licensees to maintain their license agreements or to produce and
market products bearing the Company's brand names, the Company's
ability to retain and negotiate favorable licenses, the Company's
ability to meet its outstanding debt obligations and the events and
risks referenced in the sections titled "Risk Factors" in the
Company's Annual Report on Form 10‑K for the year ended
December 31, 2017 and subsequent Quarterly Reports on
Form 10‑Q and in other documents filed or furnished with the
Securities and Exchange Commission. Our forward-looking statements
do not reflect the potential impact of any acquisitions, mergers,
dispositions, business development transactions, joint ventures or
investments we may enter into or make in the future. Given these
uncertainties, you should not place undue reliance on these
forward-looking statements. These forward-looking statements are
made only as of the date hereof and the Company undertakes no
obligation to update or revise publicly any forward-looking
statements, except as required by law.
Media contact:
David K. Jones
Executive Vice President and Chief Financial
Officer
Iconix Brand Group, Inc.
djones@iconixbrand.com
212-730-0030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Income Statements
|
|
|
|
|
|
($, 000's, except
earnings per share data)
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
2017
|
%
Change
|
|
2018
|
2017
|
%
Change
|
|
|
|
|
|
|
|
|
Licensing
revenue
|
50,212
|
61,647
|
-19%
|
|
98,761
|
120,370
|
-18%
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
28,643
|
26,802
|
7%
|
|
62,241
|
52,192
|
19%
|
Loss on termination
of licenses
|
5,650
|
23,230
|
|
|
5,650
|
23,230
|
|
Depreciation and
amortization
|
632
|
571
|
|
|
1,286
|
1,223
|
|
Equity loss
(earnings) on joint ventures
|
(1,149)
|
(1,059)
|
|
|
(1,245)
|
(1,992)
|
|
Gain on
deconsolidation of joint venture
|
-
|
(3,772)
|
|
|
-
|
(3,772)
|
|
Gain on sale of
trademarks
|
(125)
|
-
|
|
|
(1,268)
|
-
|
|
Goodwill
impairment
|
37,812
|
-
|
|
|
37,812
|
-
|
|
Trademark
impairment
|
73,335
|
-
|
|
|
73,335
|
-
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
(94,586)
|
15,875
|
-696%
|
|
(79,050)
|
49,489
|
-260%
|
|
|
|
|
|
|
|
|
Other (income)
expenses
|
|
|
|
|
|
|
|
Interest expense
|
14,827
|
14,130
|
|
|
29,376
|
28,876
|
|
Interest income
|
(92)
|
(141)
|
|
|
(214)
|
(267)
|
|
Other income, net
|
(32,083)
|
-
|
|
|
(58,215)
|
(1)
|
|
(Gain) loss on extinguishment of debt
|
-
|
13,919
|
|
|
(4,473)
|
19,400
|
|
Foreign currency translation loss (gain)
|
704
|
3,416
|
|
|
152
|
3,845
|
|
Other expenses -
net
|
(16,644)
|
31,324
|
-153%
|
|
(33,374)
|
51,853
|
-164%
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
(77,942)
|
(15,449)
|
405%
|
|
(45,676)
|
(2,364)
|
1832%
|
|
|
|
|
|
|
|
|
Provision (benefit)
for income taxes
|
(2,804)
|
(5,501)
|
-49%
|
|
(1,154)
|
386
|
-399%
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
(75,138)
|
(9,948)
|
655%
|
|
(44,522)
|
(2,750)
|
1519%
|
|
|
|
|
|
|
|
|
Less: Net income
(loss) attributable to non-
controlling interest
|
4,291
|
3,904
|
10%
|
|
7,148
|
6,386
|
12%
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to Iconix Brand
Group, Inc.
|
(79,429)
|
(13,852)
|
473%
|
|
(51,670)
|
(9,136)
|
466%
|
|
|
|
|
|
|
|
|
Income (loss) from
discontinued operations,
before income taxes
|
-
|
(11,140)
|
100%
|
|
-
|
(23,924)
|
100%
|
Gain on sale of
Entertainment segment
|
-
|
104,327
|
|
|
-
|
104,327
|
|
Provision for income
taxes
|
-
|
34,060
|
|
|
-
|
28,962
|
|
Net income from
discontinued operations
|
-
|
59,127
|
|
|
-
|
51,441
|
|
Less: Net income
attributable to non-controlling
interest from discontinued operations
|
-
|
1,634
|
NA
|
|
-
|
2,943
|
NA
|
Net income (loss)
from discontinued operations
attributable to Iconix Brand Group, Inc.
|
-
|
57,493
|
100%
|
|
-
|
48,498
|
100%
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to Iconix Brand
Group, Inc.
|
(79,429)
|
43,641
|
282%
|
|
(51,670)
|
39,362
|
231%
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share - basic:
|
|
|
|
|
|
|
|
Continuing
operations
|
(1.26)
|
(0.26)
|
385%
|
|
(0.91)
|
(0.20)
|
355%
|
Discontinued
operations
|
-
|
1.01
|
100%
|
|
-
|
0.85
|
100%
|
Earnings (loss) per
share - basic
|
(1.26)
|
0.75
|
268%
|
|
(0.91)
|
0.65
|
240%
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share - diluted:
|
|
|
|
|
|
|
|
Continuing
operations
|
(1.26)
|
(0.26)
|
385%
|
|
(0.91)
|
(0.19)
|
379%
|
Discontinued
operations
|
-
|
1.00
|
100%
|
|
-
|
0.84
|
100%
|
Earnings (loss) per
share - diluted
|
(1.26)
|
0.74
|
270%
|
|
(0.91)
|
0.65
|
240%
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
65,976
|
57,082
|
16%
|
|
62,566
|
57,026
|
10%
|
|
|
|
|
|
|
|
|
Diluted
|
65,976
|
57,568
|
15%
|
|
62,566
|
57,568
|
9%
|
|
|
|
|
|
|
|
|
Forecasted
Reconciliation of Net Income: (2)
|
|
|
|
($, 000's)
|
Year
Ending
|
|
|
Dec. 31,
2018
|
|
|
Low
|
High
|
|
|
|
|
|
Forecasted GAAP Net
Income, excluding mark to market adjustment
|
(104,360)
|
(94,360)
|
|
|
|
|
|
Adjustment for
non-cash interest related to ASC 470
|
2,998
|
2,998
|
|
Trademark and
goodwill impairment
|
111,147
|
111,147
|
|
Gain on
extinguishment of debt
|
(4,473)
|
(4,473)
|
|
Special
charges
|
6,500
|
6,500
|
|
Loss on termination
of licenses
|
5,650
|
5,650
|
|
Costs associated with
recent debt financings
|
8,344
|
8,344
|
|
Gain on sale of
Investment
|
(958)
|
(958)
|
|
Foreign currency
translation
|
152
|
152
|
|
Tax on non-GAAP items
& valuation allowance/ foreign tax credit
|
(5,000)
|
(5,000)
|
|
Net
Adjustments
|
124,360
|
124,360
|
|
Forecasted Non-GAAP
Net Income
|
20,000
|
30,000
|
|
|
|
|
|
Footnotes
(1) Adjusted operating income is a non-GAAP financial measure
which represents operating income excluding non-cash impairment
charges, non-recurring gains and charges, and charges related to
professional fees incurred as a result of the correspondence with
the Staff of the SEC, the SEC investigation, internal
investigations, the previously disclosed class action and
derivative litigations, and costs related to the transition of
Iconix management. The Company believes these are useful financial
measures in evaluating its financial condition because they are
more reflective of the Company's business purpose, operations and
cash expenses.
Adjusted Operating
Income Reconciliation for the Three Months Ended Jun
30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaap
|
|
Trademark and
Goodwill Impairment
|
|
Special
Charges
|
|
Debt
Costs
|
|
Loss on
Termination of
Licensees
|
|
Gain on sale
of
trademarks and JV
deconsolidation
|
|
Adjusted
Operating
Income
|
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
Womens
|
(95,694)
|
23,349
|
|
111,147
|
-
|
|
-
|
-
|
|
-
|
-
|
|
-
|
2,600
|
|
-
|
-
|
|
15,453
|
25,949
|
Mens
|
664
|
(15,202)
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
5,650
|
20,630
|
|
-
|
-
|
|
6,314
|
5,428
|
Home
|
6,589
|
6,861
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
6,589
|
6,861
|
International
|
8,082
|
9,964
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
8,082
|
9,964
|
Corporate
|
(14,227)
|
(9,097)
|
|
-
|
-
|
|
2,677
|
2,550
|
|
2,905
|
-
|
|
-
|
-
|
|
(125)
|
(3,772)
|
|
(8,770)
|
(10,319)
|
Total
Income
|
(94,586)
|
15,875
|
|
111,147
|
-
|
|
2,677
|
2,550
|
|
2,905
|
-
|
|
5,650
|
23,230
|
|
(125)
|
(3,772)
|
|
27,668
|
37,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
Income Reconciliation for the Six Months Ended Jun
30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaap
|
|
Trademark and
Goodwill Impairment
|
|
Special
Charges
|
|
Debt
Costs
|
|
Loss on
Termination of Licensees
|
|
Gain on sale of
trademarks and JV deconsolidation
|
|
Adjusted Operating
Income
|
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
Womens
|
(81,066)
|
49,630
|
|
111,147
|
-
|
|
-
|
-
|
|
-
|
-
|
|
-
|
2,600
|
|
-
|
-
|
|
30,081
|
52,230
|
Mens
|
6,538
|
(9,259)
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
5,650
|
20,630
|
|
-
|
-
|
|
12,188
|
11,371
|
Home
|
12,332
|
13,486
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
12,332
|
13,486
|
International
|
14,569
|
15,484
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
14,569
|
15,484
|
Corporate
|
(31,423)
|
(19,852)
|
|
-
|
-
|
|
5,383
|
4,712
|
|
8,344
|
-
|
|
-
|
-
|
|
(1,268)
|
(3,772)
|
|
(18,964)
|
(18,912)
|
Total
Income
|
(79,050)
|
49,489
|
|
111,147
|
-
|
|
5,383
|
4,712
|
|
8,344
|
-
|
|
5,650
|
23,230
|
|
(1,268)
|
(3,772)
|
|
50,206
|
73,659
|
(2) Non-GAAP net income and non-GAAP diluted EPS (along with
non-GAAP weighted average diluted shares) are non-GAAP financial
measures which represent net income excluding any non-cash interest
related to ASC Topic 470, non-cash, non-recurring gains and
charges, foreign currency translation gains and losses, and charges
related to professional fees incurred as a result of the
correspondence with the Staff of the SEC, the SEC investigation,
internal investigations, the previously disclosed class action and
derivative litigations, and costs related to the transition of
Iconix management, all net of tax. The Company believes these are
useful financial measures in evaluating its financial condition
because they are more reflective of the Company's business purpose,
operations and cash expenses.
(3) Free Cash Flow, a non-GAAP financial measure, represents net
cash provided by operating activities, plus cash received from the
sale of trademarks and formation of joint ventures, less
distributions to non-controlling interests and capital
expenditures. Free Cash Flow excludes notes receivable from
sale of trademarks and the formation of joint ventures, cash used
to acquire the membership interests of our joint venture partners,
mandatory debt service requirements, and other non-discretionary
expenditures. Free Cash Flow should not be considered in isolation,
as a measure of residual cash flow available for discretionary
purposes, or as an alternative to operating results presented in
accordance with GAAP. The Company believes Free Cash Flow is useful
because it provides information regarding actual cash received in a
specific period from the Company's comprehensive business strategy
of maximizing the value of its brands through traditional
licensing, international joint ventures and other arrangements. We
have excluded the cash used to buy back our joint venture
membership interests from the above definition because we believe
that, like other acquisitions, such actions are capital
transactions. It also provides supplemental information to assist
investors in evaluating the Company's financial condition and
ability to pursue opportunities that enhance shareholder value.
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SOURCE Iconix Brand Group, Inc.