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8-K
ICONIX BRAND GROUP, INC. filed this Form 8-K on 11/09/2018
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SG&A Expenses:

 

Total SG&A expenses in the third quarter of 2018 were $30.2 million, a 40% increase compared to $21.5 million in the third quarter of 2017. Included in these expenses was an $8.2 million bad debt expense as a result of the Sears bankruptcy filing.  Excluding this bad debt expense, SG&A expenses were up 2% in the third quarter of 2018 as compared to the third quarter of 2017.  In the third quarter of 2018, advertising expense increased 56% as compared to the third quarter of 2017 as result of increases in marketing spend for the Buffalo, Starter and Umbro brands.  Stock based compensation was a benefit of $1.6 million in the third quarter of 2018 as compared to a benefit of $0.9 million in the third quarter of 2017.

 

Trademark and Goodwill Impairment:

 

In the third quarter of 2018, the Company recorded a non-cash trademark impairment charge of $4.4 million in the Womens segment related to a write-down in the Joe Boxer trademark as compared to $521.7 million in the third quarter of 2017, comprised of $227.6 million in the Womens segment, $135.9 million in the Mens segment, $69.5 million in the Home segment and $88.7 million in the International segment, to reduce various trademarks in those segments to fair value.  The Company also recorded a non-cash goodwill impairment charge of $103.9 million in the third quarter of 2017 due to impairment of goodwill in the Womens segment, Mens segment and Home segment of $73.9 million, $1.5 million and $28.4 million, respectively, of which there was no comparable amount in the third quarter of 2018.

 

Operating Income:

  

Adjusted Operating Income by Segment (1)  Three months ended September 30,   Nine months ended September 30, 
($, 000's)  2018   2017   % Change   2018   2017   % Change 
                         
Womens   7,620    19,013    -60%   37,701    71,243    -47%
Mens   1,855    8,629    -79%   14,043    20,000    -30%
Home   3,555    6,675    -47%   15,887    20,161    -21%
International   9,188    6,183    49%   23,757    21,667    10%
Corporate   (3,927)   (6,551)   40%   (22,892)   (25,460)   10%
Adjusted Operating Income   18,291    33,949    -46%   68,496    107,611    -36%
                               
Adjusted Operating Margin by Segment   Three months ended September 30,    Nine months ended September 30, 
    2018    2017    Var    2018    2017    % Change 
                               
Womens   50%   90%   -40%   77%   93%   -15%
Mens   25%   76%   -50%   51%   63%   -13%
Home   50%   89%   -38%   77%   89%   -12%
International   55%   47%   8%   49%   51%   -2%
Adjusted Operating Margin   40%   64%   -24%   47%   62%   -15%

 

Operating income for the third quarter of 2018 was $12.1 million, as compared to operating loss of $595.9 million in the third quarter of 2017.  Operating income in the third quarter of 2018 included trademark impairments of $4.4 million and special charges of $1.8 million.  Operating loss in the third quarter of 2017 included trademark and goodwill impairments of $625.5 million, special charges of $2.4 million, a loss on termination of licenses of $2.8 million and gain on sale of trademarks of $0.9 million.  When excluding these items, adjusted operating income was $18.3 million and $33.9 million in the third quarter of 2018 and the third quarter of 2017, respectively, and adjusted operating margin was 40% and 64% in the third quarter of 2018 and the third quarter of 2017, respectively.  Operating loss in the third quarter of 2018 includes a $8.2 million bad debt expense as a result of the Sears bankruptcy filing.

 

Operating loss for the nine months ended September 30, 2018 was $66.9 million, as compared to operating loss of $546.4 million in the nine months ended September 30, 2017.  Operating loss in the nine months ended September 30, 2018 included goodwill and trademark impairments of $115.5 million, special charges of $7.2 million, costs associated with recent debt financings of $8.3 million, a loss on termination of licenses of $5.7 million and gain on sale of trademarks of $1.3 million.  Operating loss in the nine months ended September 30, 2017 included goodwill and trademark impairments of $625.5 million, special charges of $7.1 million, loss on termination of licenses of $26.0 million, a gain on sale of trademarks of $0.9 million, and a gain on deconsolidation of joint venture of $3.8 million.  When excluding these items, adjusted operating income was $68.5 million and $107.6 million in the nine months ended September 30, 2018 and the nine months ended September 30, 2017, respectively, and adjusted operating margin was 47% and 62%, respectively. 

 

 

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