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10-K
ICONIX BRAND GROUP, INC. filed this Form 10-K on 03/28/2019
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Depreciation and Amortization. Depreciation and amortization was $2.3 million for FY 2018, compared to $2.5 million in FY 2017, a decrease of $0.1 million or 5%. The decrease was mostly a result of lower amortization costs related to the Buffalo brand.

Equity Earnings (Loss) on Joint Ventures. Equity Earnings (Loss) on Joint Ventures was $3.0 million in income in FY 2018, as compared to $3.3 million in losses in FY 2017. The improvement primarily came from the absence of asset impairment charges that occurred in FY 2017 within the Australia joint venture and SE Asia joint venture.

Gain on Deconsolidation of Joint Venture.  There was no gain on deconsolidation of joint venture during FY 2018 as compared to $3.8 million for FY 2017 due to the deconsolidation of Southeast Asia joint venture.  

Gain on Sale of Trademarks. Gain on Sale of Trademarks was $1.3 million for FY 2018 as compared to a $0.9 million gain for FY 2017. The gains related to the completion of the sale of the Sharper Image and Badgley Mischka trademarks in certain of the Company’s international joint ventures.

Trademark, Goodwill & Investment Impairment.  Trademark, Goodwill & Investment Impairment loss for FY 2018 was approximately $176.7 million as compared to $646.5 million in FY 2017.  The Trademark Impairment in FY 2018 was approximately $136.4 million as compared to $525.7 million in FY 2017. The charge in FY 2018 primarily related to write-downs in the women’s segment while the charge in FY 2017 primarily related to write-downs in the women’s segment and men’s segments. The Goodwill Impairment in FY 2018 was $37.8 million related to a write down in our women’s segment while the charge in FY 2017 was $103.9 million primarily related to a write-down in our women’s segment and home segment primarily due to declines in net sales in certain brands within the segments and an inability to secure additional license agreements with guaranteed minimum royalties in future periods for these brands. Investment Impairment was $2.5 million in FY 2018 related to a write-down in iBrands investment as compared to $16.8 million in FY 2017 related to a write-down in MG Icon investment.

Operating (Loss) Income. Total operating loss for FY 2018 was $119.0 million as compared to a loss of $564.7 million in FY 2017. Excluding the trademark, goodwill & investment impairment, loss on termination of licenses, gain on sale of trademarks and gain on deconsolidation of joint ventures, operating income in FY 2018 was $67.0 million, or 36% of revenue, as compared to income of $113.1 million, or 50% of revenue, in FY 2017. Operating loss from the women’s segment was $128.1 million in FY 2018 as compared to $215.6 million in FY 2017. Excluding trademark & goodwill impairment and the loss on the termination of licenses, women’s operating income in FY 2018 was $42.5 million as compared to operating income of $87.9 million in FY 2017. Operating income from the men’s segment was $11.8 million in FY 2018 as compared to a loss of $144.8 million in FY 2017. Excluding trademark & goodwill impairment and the loss on the termination of licenses, men’s operating income in FY 2018 was $22.4 million as compared to income of $19.0 million in FY 2017. Operating income from the home segment was $17.2 million in FY 2018 as compared to a loss of $76.7 million in FY 2017. Excluding trademark & goodwill impairment, home operating income was $19.9 million in FY 2018 as compared to income of $25.3 million in FY 2017. Operating income from the international segment was $27.4 million in FY 2018 as compared to a loss of $64.8 million in FY 2017. Excluding trademark & goodwill impairment, international operating income was $28.2 million in FY 2018 as compared to income of $31.4 million in FY 2017. Corporate operating loss was $47.4 million in FY 2018 as compared to a loss of $62.8 million in FY 2017. Excluding investment impairment, gains on sale of trademarks and gain on deconsolidation of joint venture, corporate operating loss was $46.2 million in FY 2018 as compared to a loss of $50.6 million in FY 2017.

Other Expenses (income)- Net. Other expenses (income)- net was income of $35.9 million for FY 2018 as compared to an expense of $88.8 million for the FY 2017, a decrease of $124.7 million. The decrease was primarily related to the following: (i) a gain of $82.1 million in FY 2018 related to the mark-to-market adjustment to the carrying value of the Company’s 5.75% Convertible Notes based on the Company’s accounting treatment which requires the fair value of the liability at the end of each period, (ii) a gain on the extinguishment of debt of $4.5 million in FY 2018 as compared to a loss of $20.9 million in FY 2017 (iii) a $8.7 million decrease in interest expense in FY 2018 as compared to FY 2017.

Provision for Income Taxes. The effective tax rate from continuing operations in FY 2018 was -7.9% resulting in a $6.5 million tax expense as compared to FY 2017 which had a tax rate of 14.7% resulting in a $96.0 million tax benefit.  The decrease in the effective tax rate for the FY 2018 as compared to the FY 2017 is primarily a result of foreign tax expense calculated in local jurisdictions where there is no net operating losses available to offset the current tax liability, partially offset by a tax benefit resulting from the tax impact of impairment expenses recorded on indefinite lived intangible assets.

Net (Loss) Income from Continuing Operations. Our net loss from continuing operations was approximately $89.7 million for FY 2018, compared to net loss from continuing operations of approximately $557.5 million for FY 2017, as a result of the factors discussed above.

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