ICONIX BRAND GROUP INC NEW YORK, July 29, 2014 /PRNewswire/ --
-- Record Q2 revenue of $118.9 million and non-GAAP diluted EPS of $0.75
-- Record Q2 EBITDA of $78.2 million and Q2 EBITDA margin of 66%
-- Free cash flow of $60.0 million for Q2 and $118.0 million for six month
period
-- Raising 2014 revenue guidance to $455-$465 million and non-GAAP diluted
EPS guidance to $2.60-$2.70
Iconix Brand Group, Inc. (NASDAQ: ICON) ("Iconix" or the "Company"), today announced financial results for the second quarter ended June 30, 2014.
Q2 2014 Results for Iconix Brand Group, Inc.:
Total revenue for the second quarter of 2014 was approximately $118.9 million, a 3% increase as compared to approximately $115.1 million in the second quarter of 2013. EBITDA attributable to Iconix for the second quarter was approximately $78.2 million, an 8% increase as compared to $72.7 million in the prior year quarter. Free cash flow attributable to Iconix for the second quarter was approximately $60.0 million, as compared to the prior year quarter of approximately $60.8 million. On a non-GAAP basis, as described in the tables below, net income attributable to Iconix was $39.6 million, as compared to the prior year quarter of approximately $42.7 million. Non-GAAP diluted EPS for the second quarter of 2014 increased 4% to $0.75 compared to $0.72 in the prior year quarter. GAAP net income attributable to Iconix for the second quarter of 2014 was approximately $35.3 million, as compared to $38.7 million in the prior year quarter, and GAAP diluted EPS for the second quarter of 2014 was $0.60 compared to $0.66 in the prior year quarter.
Six months ended June 30, 2014:
Total revenue for the six months ended June 30, 2014 was approximately $235.1 million, a 7% increase as compared to approximately $220.2 million for the prior year period. EBITDA attributable to Iconix for the six month period was approximately $147.9 million, an 8% increase as compared to approximately $137.2 million in the prior year period. Free cash flow attributable to Iconix for the six month period was approximately $118.0 million, a 5% increase over the prior year period of approximately $112.7 million. On a non-GAAP basis, as defined in the tables below, net income attributable to Iconix for the six month period was approximately $78.9 million, compared to approximately $78.9 million in the prior year period, and non-GAAP diluted earnings per share was approximately $1.49 for the six month period, a 19% increase versus $1.25 for the prior year period. GAAP net income attributable to Iconix for the six month period of 2014 was approximately $95.1 million, a 30% increase as compared to $72.9 million in the prior year period and GAAP diluted EPS for the six month period of 2014 increased 41% to $1.63 compared to $1.16 in the prior year period.
EBITDA, free cash flow, non-GAAP net income and non-GAAP diluted EPS are all non-GAAP metrics and reconciliation tables for each are attached to this press release.
Neil Cole, Chairman and CEO of Iconix Brand Group, Inc. commented, "With record results in the second quarter, we continue to demonstrate the power of our business model with our diversified revenue stream and strong free cash flow. As we look to the future we believe we can continue to deliver significant growth and increased value for our Company and shareholders through our global expansion plans, worldwide Peanuts business and additional acquisitions of global iconic brands.
2014 Guidance for Iconix Brand Group, Inc.:
-- Raising revenue guidance to $455-$465 million from $450-$460 million
-- Raising non-GAAP diluted EPS guidance to $2.60-$2.70 from $2.55-$2.65
-- Maintaining GAAP diluted EPS guidance of $2.50-$2.60
-- Raising free cash flow guidance to $215-$222 million from $213-$220
million
This guidance relates to the Company's existing portfolio of brands and does not include any additional acquisitions. In addition, this guidance does not assume any additional share repurchases or dilution from the Company's convertible notes above the current stock price.
See reconciliation tables below for non-GAAP metrics. These non-GAAP metrics may be inconsistent with similar measures presented by other companies and should only be used in conjunction with our results reported according to U.S. GAAP. Any financial measure other than those prepared in accordance with U.S. GAAP should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP.
About Iconix Brand Group, Inc.
Iconix Brand Group, Inc. owns, licenses and markets a growing portfolio of consumer brands including: CANDIE'S (R), BONGO (R), BADGLEY MISCHKA (R), JOE BOXER (R), RAMPAGE (R), MUDD (R), MOSSIMO (R), LONDON FOG (R), OCEAN PACIFIC (R), DANSKIN (R), ROCAWEAR (R), CANNON (R), ROYAL VELVET (R), FIELDCREST (R), CHARISMA (R), STARTER (R), WAVERLY (R), ZOO YORK (R), ED HARDY (R), SHARPER IMAGE (R), UMBRO (R), LEE COOPER (R), ECKO UNLTD. (R), and MARC ECKO (R). In addition, Iconix owns interests in the ARTFUL DODGER (R), MATERIAL GIRL (R), PEANUTS (R), TRUTH OR DARE (R), BILLIONAIRE BOYS CLUB (R), ICE CREAM (R), MODERN AMUSEMENT (R), and BUFFALO (R) brands. The Company licenses its brands to a network of leading retailers and manufacturers that touch every major segment of retail distribution from the luxury market to the mass market in both the U.S. and worldwide. Through its in-house business development, merchandising, advertising and public relations departments, Iconix manages its brands to drive greater consumer awareness and equity.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995. The statements that are not historical facts contained in this press release are forward-looking statements that involve a number of known and unknown risks, uncertainties and other factors, all of which are difficult or impossible to predict and many of which are beyond the control of the Company, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such factors include, but are not limited to, uncertainty regarding the results of the Company's acquisition of additional licenses, continued market acceptance of current products and the ability to successfully develop and market new products particularly in light of rapidly changing fashion trends, the impact of supply and manufacturing constraints or difficulties relating to the Company's licensees' dependence on foreign manufacturers and suppliers, uncertainties relating to customer plans and commitments, the ability of licensees to successfully market and sell branded products, competition, uncertainties relating to economic conditions in the markets in which the Company operates, the ability to hire and retain key personnel, the ability to obtain capital if required, the risks of litigation and regulatory proceedings, the risks of uncertainty of trademark protection, the uncertainty of marketing and licensing acquired trademarks and other risks detailed in the Company's SEC filings. The words "believe", "anticipate", "estimate", "expect", "confident", "continue", "will", "project", "provide", "guidance" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date the statement was made. All forward-looking statements are qualified by these cautionary statements and apply only as of the date they are made. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
Contact Information:
Jaime Sheinheit
Investor Relations
Iconix Brand Group
212.730.0030
Unaudited Condensed Consolidated Income Statements
(in thousands, except earnings per share data)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2014 2013 2014 2013
---- ---- ---- ----
Licensing and other revenue $118,943 $115,125 $235,081 $220,187
Selling, general and administrative expenses 44,293 43,611 92,495 82,437
Operating income 74,650 71,514 142,586 137,750
Interest and other expenses, net 20,765 13,102 3,427 26,969
Equity earnings on joint ventures (5,675) (2,264) (8,797) (4,200)
Other (income) expenses - net 15,090 10,838 (5,370) 22,769
------ ------ ------ ------
Income before income taxes 59,560 60,676 147,956 114,981
Provision for income taxes 20,778 18,661 46,332 33,692
------ ------ ------ ------
Net income $38,782 $42,015 $101,624 $81,289
======= ======= ======== =======
Less: Net income attributable to non-controlling interest 3,463 3,299 6,537 8,384
===== ===== ===== =====
Net income attributable to Iconix Brand Group, Inc. $35,319 $38,716 $95,087 $72,905
======= ======= ======= =======
Earnings per share:
Basic $0.73 $0.69 $1.94 $1.21
===== ===== ===== =====
Diluted $0.60 $0.66 $1.63 $1.16
===== ===== ===== =====
Weighted average number of common shares outstanding:
Basic 48,551 56,405 49,034 60,316
====== ====== ====== ======
Diluted 58,595 58,994 58,237 62,853
====== ====== ====== ======
Selected Balance Sheet Items: (Unaudited)
----------
(in thousands) 6/30/2014 12/31/2013
--------- ----------
Total Assets $2,844,612 $2,860,194
Total Liabilities $1,784,026 $1,758,252
Total Stockholders' Equity and Mezzanine Equity $1,060,586 $1,101,942
The following tables detail unaudited reconciliations from non-GAAP amounts to U.S. GAAP and include reconciliations related to ASC Topic 470 as it relates to accounting for convertible debt and the incremental dilutive shares related to our convertible debt that are covered by our existing convertible note hedges.
Note: All items in the following reconciliation tables are attributable to Iconix Brand Group, Inc. and exclude results related to non-controlling interests.
(in thousands, except per share data)
(Unaudited) (Unaudited)
---------- ----------
Six months ended
Three months ended
Net income reconciliation June 30, June 30, June 30, June 30,
2014 2013 2014 2013
--- ---- ---- ---- ----
Non-GAAP net income (1) $39,639 $42,651 $78,921 $78,870
======= ======= ======= =======
GAAP net income $35,319 $38,716 $95,087 $72,905
Adjustments: 6,647 6,148 13,022 9,320
Non-cash interest related to ASC Topic 470
Non-cash gain related to investment in Iconix Latin America - - (37,893) -
Taxes related to above item (2,327) (2,213) 8,705 (3,355)
------ ------ ----- ------
Net 4,320 3,935 (16,166) 5,965
----- ----- ------- -----
Non-GAAP net income $39,639 $42,651 $78,921 $78,870
======= ======= ======= =======
Non-GAAP weighted average diluted shares reconciliation
-------------------------------------------------------
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2014 2013 2014 (3) 2013
---- ---- ------- ----
Non-GAAP weighted average diluted shares 52,851 58,994 52,997 62,853
====== ====== ====== ======
GAAP weighted average diluted shares 58,595 58,994 58,237 62,853
Less: additional incremental dilutive shares
covered by hedges for: (2)
2.50% Convertible Notes (2,481) - (2,265) -
1.50% Convertible Notes (3,263) - (2,975) -
------ --- ------ ---
Subtotal (5,744) - (5,240) -
Non-GAAP weighted average diluted shares 52,851 58,994 52,997 62,853
====== ====== ====== ======
(Unaudited) (Unaudited)
Three months ended Six months ended
Diluted EPS reconciliation June 30, June 30, June 30, June 30,
2014 2013 2014 (3) 2013
--- ---- ---- ------- ----
Non-GAAP diluted EPS (1) $0.75 $0.72 $1.49 $1.25
===== ===== ===== =====
GAAP diluted EPS $0.60 $0.66 $1.63 $1.16
Adjustments for non-cash interest related to ASC 470, net of tax $0.15 $0.06 $0.28 $0.09
Non-cash gain related to investment in Iconix Latin America, net of tax - - ($0.42) -
--- --- ------ ---
Non-GAAP diluted EPS $0.75 $0.72 $1.49 $1.25
===== ===== ===== =====
Forecasted Diluted EPS Year Ending
Dec. 31, 2014
--- -------------
High Low
---- ---
Forecasted Non-GAAP diluted EPS (1) $2.70 $2.60
===== =====
Forecasted GAAP diluted EPS $2.60 $2.50
Non-cash gain related to investment in Iconix Latin ($0.42) ($0.42)
America, net of tax
Adjustments for non-cash interest related to ASC 470, net $0.52 $0.52
of tax, and incremental dilutive shares covered by hedges
Forecasted Non-GAAP Diluted EPS $2.70 $2.60
===== =====
(1) 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 and non-cash non-recurring gains and charges, net of tax, and any incremental dilutive shares related to our
convertible notes that are covered by their respective hedges. The Company believes these are useful financial
measures in evaluating its financial condition because they are representative of only actual cash results.
(2) Based on the average closing stock price for the three month and six month periods ended June 30, 2014 there
were potential dilutive shares related to our convertible notes for GAAP purposes; however, the Company will not
be responsible for issuing a portion of these shares as they are covered by our convertible notes hedges.
(3) Non-GAAP diluted shares for the six month period ended June 30, 2014 include a correction to the first quarter
2014 Non-GAAP diluted share count by 1.2 million fewer shares related to the anti-dilutive impact of the Company's
convertible notes hedges.
EBITDA Reconciliation from Net Income
-------------------------------------
(in thousands)
(Unaudited) (Unaudited)
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2014 2013 2014 2013
---- ---- ---- ----
EBITDA (4) $78,150 $72,651 $147,927 $137,249
======= ======= ======== ========
Reconciliation of EBITDA:
Net Income 35,319 38,716 95,087 72,905
Add: Income taxes 20,778 18,661 46,332 33,692
Add: Net interest expense and non-cash gain related to 20,650 13,043 3,194 26,336
investment in Iconix Latin America
Add: Depreciation and amortization of certain intangibles 1,403 2,231 3,314 4,316
----- ----- ----- -----
EBITDA $78,150 $72,651 $147,927 $137,249
======= ======= ======== ========
EBITDA Reconciliation from Cash Flow from Operations (Unaudited)
Six months ended
--- ----------------
June 30, 2014 June 30, 2013
------------- -------------
EBITDA (4) $147,927 $137,249
======== ========
Reconciliation of EBITDA:
Net cash provided by operating activities 84,231 101,952
Add / (Less):
Cash interest expense, net 24,181 14,705
Cash taxes 18,421 25,280
Other 3,227 5,188
Net income attributable to non-controlling interest (6,537) (8,384)
Stock compensation expense (8,247) (7,931)
Provision for doubtful accounts (1,945) (2,106)
Net change in balance sheet items 34,596 8,545
EBITDA $147,927 $137,249
======== ========
(4) EBITDA, a non-GAAP financial measure, represents net income before income taxes, interest, other non-operating gains
and losses, depreciation and amortization expenses. The Company believes EBITDA and EBITDA margin provide additional
information for determining its ability to meet future debt service requirements, investing and capital expenditures, and is
useful because it provides supplemental information to assist investors in evaluating the Company's financial condition.
EBITDA margin represents EBITDA divided by licensing and other revenue.
Free Cash Flow Reconciliation from Net Income
---------------------------------------------
(Unaudited) (Unaudited)
----------
(in thousands) Three months ended Six months ended
------------------ ----------------
June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013
------------- ------------- ------------- -------------
Free Cash Flow (5) $59,992 $60,849 $117,997 $112,669
======= ======= ======== ========
Reconciliation of Free Cash Flow:
Net Income 35,319 38,716 95,087 72,905
Add/(Less):
Depreciation and amortization of intangibles 1,403 2,231 3,314 4,316
Amortization of convertible note 7,350 6,923 14,428 10,537
Amortization of finance fees 1,309 895 2,711 1,727
Non-cash compensation expense 5,658 6,036 8,173 7,931
Provision for doubtful accounts 945 1,182 1,945 2,106
Non-cash income taxes 8,609 5,193 30,848 13,366
Non-cash gain related to investment in Iconix Latin America - - (37,893) -
Other (65) 225 235 450
--- --- --- ---
Subtotal 25,209 22,684 23,761 40,432
Less: Capital expenditures (536) (551) (851) (668)
---- ---- ---- ----
Free Cash Flow $59,992 $60,849 $117,997 $112,669
======= ======= ======== ========
Free Cash Flow Reconciliation from Cash Flow from Operations (Unaudited)
Six months ended
--- ----------------
June 30, 2014 June 30, 2013
------------- -------------
Free Cash Flow (5) $117,997 $112,669
======== ========
Reconciliation of Free Cash Flow:
Net cash provided by operating activities 84,231 101,952
Add / (Less):
Non-cash deferred tax items 2,937 4,954
Net income attributable to non-controlling interest (6,537) (8,384)
Gain on sale of securities 5,395
Capital expenditures (851) (668)
Other 3,621 875
Net change in balance sheet items 34,596 8,545
Free Cash Flow $117,997 $112,669
======== ========
Forecasted Free Cash Flow
-------------------------
Year Ending
Dec. 31, 2014
-------------
High Low
---- ---
Free Cash Flow (5) $222,000 $215,000
=================
Reconciliation of Free Cash Flow:
Net income 154,000 148,000
Add:
Depreciation and amortization of intangibles 5,000 5,000
Amortization of convertible note 29,500 29,500
Amortization of finance fees 5,000 5,000
Non-cash compensation expense 18,500 18,000
Bad debt expense 4,000 3,500
Non-cash income taxes 45,000 45,000
Non-cash non-recurring gain (38,000) (38,000)
Other 1,000 1,000
-----
subtotal 68,000 67,000
Less: Capital expenditures (2,000) (2,000)
--------------------
Free Cash Flow $222,000 $215,000
==============
(5) Free Cash Flow, a non-GAAP financial measure, represents net income before depreciation, amortization, non-cash
compensation expense, bad debt expense, net equity earnings from certain joint ventures, non-cash income taxes, non-
cash interest related to convertible debt, non-cash non-recurring gains and charges, less capital expenditures. Free Cash
Flow excludes any changes in Balance Sheet items, 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 supplemental information to assist investors in evaluating the
Company's financial condition.
SOURCE Iconix Brand Group, Inc.
