ICON Icon Energy Corporation

Iconix Brand Group Inc. (ICON) delivered its second quarter 2011 results with adjusted earnings of 45 cents a share, which soared 19.4% from 36 cents a share in the year-ago period, demonstrating steady organic strength across its portfolio of brands as well as strong margins. Earnings also surpassed the Zacks Consensus Estimate of 42 cents.

The adjusted earnings in the quarter excludes non-cash interest related to the company's two convertible notes, a non-cash gain of approximately $21.5 million related to the Iconix's acquisition of the global master license of the Ed Hardy brand, and a $2.7 million write-off related to the unamortized financing fees and original issue discount ("OID") associated with the company's early repayment of the entire principal balance outstanding on its term-loan facility of approximately $112.4 million.

On a reported basis, including one-time items, earnings came in at 55 cents a share versus 33 cents delivered in the prior-year quarter.

Iconix raised its fiscal 2011 reported earnings forecast by 11 cents to $1.61 - $1.66 per share to reflect the Ed Hardy non-cash gain, write-off of unamortized financing fees and non-cash interest associated with the company's recently issued convertible note.

The Zacks Consensus Estimate for fiscal 2011 is $1.66 per share. On an adjusted basis, Iconix reaffirmed its earnings of $1.63-$1.68 per share.

Quarter in Detail

Total revenue for the quarter jumped 17.0% to $89.3 million from $76.0 million in the year-ago period.

Iconix also reiterated its revenue target of $355.0-$365.0 million in 2011.

On a year-ago basis, EBITDA spiked 18.0% to $58.1 million in the quarter.

Iconix exited the year with free cash flow of $43.4 million. Capital expenditures for the quarter were $0.6 million.

For fiscal 2011, the company reiterates its free cash flow in the range of $167.0 million to $172.0 million.

Iconix has also announced that it will increase its ownership interest in the Zoo York brand to 100%. The company currently owns a 51% controlling interest in the brand and is planning to acquire the remaining 49% for $18 million.

Since taking control of the brand in late 2009, Iconix has partnered with Li & Fung for the core sportswear business and substantially expanded Zoo York's distribution into large scale department stores including J. C. Penney Company, Inc. (JCP) and Kohl's Corporation (KSS).

Iconix believes that it is well positioned to maintain its growth trends with the expansion of brands both in the U.S. and internationally and as well as acquisition of additional iconic brands. The recently acquired Ed Hardy brand from Nervous Tattoo has increased the total ownership stake of Iconix in the Ed Hardy brand to 85%. Besides, Iconix will gain control of the licensing and marketing functions.

The company also faces stiff competition from Gap Inc. (GPS), Cherokee Inc. (CHKE) and The Jones Group Inc. (JNY). Integration risks also remain a concern.

Currently, Iconix has a Zacks #3 Rank, implying a short-term Hold recommendation. On a long-term basis, the stock holds a Neutral rating.

 
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