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Iconix Brand Group Reports Record Revenue and Earnings for the Second Quarter 2011

- Q2 non-GAAP diluted EPS of $0.43 compared to $0.36 in prior year quarter
- Q2 revenue of $89.3 million, a 17% increase over prior year quarter
- Q2 Free Cash Flow of $43.4 million, an 18% increase over prior year quarter
- Increasing ownership in Zoo York to 100%

NEW YORK, July 27, 2011 /PRNewswire via COMTEX/ --

Iconix Brand Group, Inc. (NASDAQ: ICON) ("Iconix" or the "Company"), today announced financial results for the second quarter ended June 30, 2011.

Q2 2011 results for Iconix Brand Group, Inc.:

Total revenue for the second quarter of 2011 was approximately $89.3 million, a 17% increase as compared to approximately $76.0 million in the second quarter of 2010. On a non-GAAP basis, which excludes non-cash interest related to the Company's two convertible notes and two non-recurring items described below, net income was $32.3 million, a 21% increase over the prior year quarter. Non-GAAP diluted EPS for the second quarter was $0.43 compared to $0.36 in the prior year quarter. EBITDA attributable to Iconix for the second quarter was approximately $58.1 million, an 18% increase over the prior year quarter. Free cash flow attributable to Iconix for the second quarter was approximately $43.4 million, an 18% increase over the prior year quarter. GAAP net income for the second quarter was approximately $41.5 million, up 69% from the prior year quarter and GAAP diluted EPS was $0.55 compared to $0.33 in the prior year quarter.

GAAP net income and GAAP diluted EPS for the second quarter and six month period ending June 30, 2011 include the following two non-recurring items; 1) a non-cash gain of approximately $21.5 million related to the Company's acquisition of the global master license of the Ed Hardy brand in which the Company transitioned from a non-controlling interest to a controlling interest. This gain, which is driven by a re-measurement of the Company's initial investment in the brand, is included in 'interest and other (income) expense, net' on the Company's unaudited condensed consolidated income statement; and 2) 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. This charge also is recorded in 'interest and other (income) expense, net' on the Company's unaudited condensed consolidated income statement.

Six months ended June 30, 2011:

Total revenue for the six months ended June 30, 2011 was approximately $181.6 million, a 23% increase as compared to approximately $147.7 million for the prior year period. EBITDA attributable to Iconix for the six month period increased 18% to approximately $116.9 million. Free cash flow for the six month period was approximately $89.4 million, a 16% increase over the prior year period. On a non-GAAP basis, as defined above, net income attributable to Iconix for the six month period increased 23% to approximately $66.1 million as compared to the prior year period and non-GAAP diluted earnings per share increased to $0.88 versus $0.72 for the prior year period. On a GAAP basis, net income attributable to Iconix increased 48% to approximately $73.0 million as compared to the prior year period and GAAP diluted earnings per share was $0.97 versus $0.66 for the prior year.

EBITDA, free cash flow, non-GAAP net income and non-GAAP 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, "We are pleased to report that our Company achieved record results for the second quarter both on the top and bottom line. As our brands gain momentum both domestically and internationally, we continue to demonstrate the power of our business model. In addition to our strong performance in the first half of this year, we also strengthened our balance sheet and increased our ownership in two of our brands. Looking ahead, we see many growth opportunities for our portfolio and with our current capital structure we are well positioned to continue to execute on our acquisition strategy."

2011 Guidance for Iconix Brand Group, Inc.:

The Company is reaffirming its full year 2011 revenue guidance of $355-$365 million and full year 2011 non-GAAP diluted EPS guidance of $1.63-$1.68. The Company is raising its GAAP diluted EPS guidance by $0.11 to a range of $1.61-$1.66 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 Company estimates that free cash flow for 2011 will be approximately $167-$172 million. This guidance relates to the existing portfolio of brands only and does not include any acquisitions.

Other Company News:

The Company announced today that it has entered into an agreement to increase its ownership interest in the Zoo York brand to 100%. The Company currently owns a 51% controlling interest in the brand, and through the transaction will acquire the remaining 49% for $18 million. Since taking control of the brand in late 2009, the Company partnered with Li & Fung for the core sportswear business and substantially expanded Zoo York's distribution into large scale department stores including JC Penney and Kohl's.

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), LONDON FOG (R), MOSSIMO (R) OCEAN PACIFIC(R), DANSKIN (R) ROCA WEAR(R), CANNON (R), ROYAL VELVET (R), FIELDCREST (R), CHARISMA (R), STARTER (R), and WAVERLY (R). In addition, Iconix owns an interest in the ARTFUL DODGER (R), ED HARDY (R), ECKO (R), MARC ECKO (R), ZOO YORK (R), MATERIAL GIRL(TM) and PEANUTS (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

Condensed Consolidated Income Statements

(in thousands, except earnings per share data)



(Unaudited)


(Unaudited)


Three Months Ended June 30,


Six Months Ended June 30,


2011

2010


2011


2010








Licensing and other revenue

$ 89,293

$76,013


$ 181,649


$ 147,717








Selling, general and administrative expenses

31,662

26,369


63,667


48,687

Expenses related to specific litigation

45

201


92


207








Operating income

57,586

49,443


117,890


98,823








Interest and other (income) expense, net

(8,383)

9,948


952


19,923








Equity earnings on joint ventures

(2,517)

(1,104)


(3,138)


(2,217)








Other (income) expenses - net

(10,900)

8,844


(2,186)


17,706








Income before income taxes

68,486

40,599


120,076


81,117








Provision for income taxes

23,640

13,631


40,104


26,790








Net income

$ 44,846

$ 26,968


$ 79,972


$ 54,327








Less: Net income attributable to non-controlling interest

3,303

2,427


6,997


5,012








Net income attributable to Iconix Brand Group, Inc.

$41,543

$ 24,541


$ 72,975


$ 49,315








Earnings per share:







Basic

$ 0.57

$ 0.34


$ 1.00


$ 0.69








Diluted

$ 0.55

$ 0.33


$ 0.97


$ 0.66















Weighted average number of common shares outstanding:







Basic

72,962

72,169


72,865


71,855








Diluted

75,423

74,749


75,396


74,589



Selected Balance Sheet Items:

(in thousands)

(Unaudited)

6/30/2011

12/31/2010




Total Assets

$2,134,611

$1,951,470

Total Liabilities

$877,922

$812,556

Stockholders' Equity

$1,256,689

$1,138,914


The following tables detail unaudited reconciliations from non-GAAP amounts to U.S. GAAP and include reconciliations related to the adoption of ASC Topic 470 as it relates to accounting for convertible debt, which became effective retroactively for the fiscal years beginning after December 15, 2008.

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)


Three months ended

Six months ended

Net income reconciliation

June 30,

2011

June 30,

2010

June 30,

2011

June 30,

2010

Non-GAAP net income (1)

$32,316

$26,692

$66,059

$53,657







GAAP net income

$41,543

$24,541


$72,975

$49,315







Adjustments:

Non-cash interest related to ASC Topic 470

4,575

3,347


8,097

6,700

Non-cash gain related to investment in Ed Hardy

(21,465)

-


(21,465)

-

Write-off of deferred financing fees and OID

2,651

-


2,651

-

Taxes related to above items

5,012

(1,196)


3,801

(2,358)

Net

(9,227)

2,151


(6,916)

4,342







Non-GAAP net income

$32,316

$26,692


$66,059

$53,657




(Unaudited)

Three months ended


(Unaudited)

Six months ended

Diluted EPS reconciliation

June 30,

2011

June 30,

2010


June 30,

2011

June 30,

2010

Non-GAAP diluted EPS (1)

$0.43

$0.36


$0.88

$0.72







GAAP diluted EPS

$0.55

$0.33


$0.97

$0.66







Adjustments for non-cash interest related ASC 470,
non-cash gain related to investment in Ed Hardy, and
write-off of deferred financing fees and original issue
discount, net of tax

$(0.12)

$0.03


$(0.09)

$0.06







Non-GAAP diluted EPS

$0.43

$0.36


$0.88

$0.72



Forecasted Diluted EPS

Year Ending
Dec. 31, 2011





High

Low












Non-GAAP diluted EPS (1)

$1.68

$1.63












GAAP diluted EPS

$1.66

$1.61












Adjustments for non-cash interest related ASC 470, non-cash

gain related to investment in Ed Hardy, and write-off of deferred

financing fees and original issue discount, net of tax

$0.02

$0.02





Non-GAAP Diluted EPS

$1.68

$1.63





(1) Non-GAAP net income and non-GAAP EPS, are non-GAAP financial measures, which represent net income excluding any non-cash interest related to the adoption of ASC Topic 470, non-cash gains and non-recurring charges related to the early extinguishment of debt, net of tax. The Company believes these are useful financial measures in evaluating its financial condition because they are representative of only actual cash results.


(in thousands)


(Unaudited)


(Unaudited)



Three months ended


Six months ended



June 30,

2011

June 30,

2010


June 30,

2011

June 30,

2010

EBITDA (2)

$58,121

$49,403


$116,914

$98,850








Reconciliation of EBITDA:






Net Income

41,543

24,541


72,975

49,315







Add: Income taxes

23,640

13,631


40,104

26,790







Add: Net interest expense and Ed Hardy gain

(8,898)

9,231


(300)

18,476








Add: Depreciation and amortization of certain intangibles

1,836

2,000


4,135

4,269

EBITDA

$58,121

$49,403


$116,914

$98,850








(2) EBITDA, a non-GAAP financial measure, represents net income before income taxes, interest, Ed Hardy gain, depreciation and amortization expenses. The Company believes EBITDA provides additional information for determining its ability to meet future debt service requirements, investing and capital expenditures.



(in thousands)

(Unaudited)

Three months ended

(Unaudited)

Six months ended


June 30,

2011

June 30,

2010

June 30,

2011

June 30,

2010

Free Cash Flow (3)

$43,436

$36,861

$89,362

$76,921







Reconciliation of Free Cash Flow:





Net Income

41,543

24,541

72,975

49,315


Add: Non-cash income taxes, non-cash interest
related to convertible debt, depreciation, amortization of
certain intangibles and finance fees, non-cash
compensation expense, bad debt expense, net equity
earnings from certain joint ventures, non-cash
gain/loss from sale of trademarks and re-measurement
of investments (4)

2,521

12,945 *

18,828

28,255 *

Less: Capital expenditures

(628)

(625)

(2,441)

(649)







Free Cash Flow

$43,436

$36,861

$89,362

$76,921




(in thousands)

Year Ending


Dec. 31, 2011


High

Low

Forecasted Free Cash Flow (3)

$172,000

$167,000




Reconciliation of Free Cash Flow:



Net Income

$126,000

$122,000

Add: Non-cash income taxes, non-cash interest

related to convertible debt, depreciation, amortization

of certain intangibles and finance fees, non-cash

compensation expense, bad debt expense, net equity

earnings from certain joint ventures and non-cash

gain/loss from sale of trademarks and re-measurement

of investments

49,000

49,000




Less: Capital expenditures

(3,000)

(4,000)




Forecasted Free Cash Flow

$172,000

$167,000




(3) 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 gains/loss from sale of trademarks and re-measurement of investments, less capital expenditures. The Free Cash Flow also excludes any changes in Balance Sheet items. The Company believes Free Cash Flow is useful in evaluating its financial condition because it is representative of cash flow from operations that is available for repaying debt, investing and capital expenditures.

(4) Reflects adjustment to previously reported amounts for quarterly flow of non-cash taxes for 2010, no impact on a full year basis.

SOURCE Iconix Brand Group, Inc.



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