- Q3 revenue of $59.4 million, an 8% increase over $55.1 million last year
- Q3 EBITDA of $43.0 million and 72.5% EBITDA margin
- Q3 Free cash flow of $35.4 million, a 15% increase over last year
- Q3 non-GAAP net income of $22.6 million, a 23% increase over last year
- Q3 non-GAAP diluted EPS of $0.31, compared to $0.30 last year.
NEW YORK, Oct. 27 /PRNewswire-FirstCall/ -- Iconix Brand Group, Inc. (Nasdaq: ICON - News; "Iconix" or the "Company"), today announced financial results for the third quarter ended September 30, 2009.
Q3 2009 results:
Revenue for the third quarter of 2009 was approximately $59.4 million, an 8% increase as compared to approximately $55.1 million in the third quarter of 2008. Third quarter 2009 revenue includes a gain of $3.7 million related to a transaction involving the sale of the Joe Boxer trademark in Canada. Excluding this gain, our third quarter 2009 revenue was $55.7 million or 6% higher than the third quarter 2008 revenue of $52.5 million, which excludes the $2.6 million gain related to the Iconix China joint venture transaction. EBITDA for the third quarter was approximately $43.0 million, a 14% increase as compared to approximately $37.9 million in the prior year quarter. Free cash flow for the quarter was $35.4 million a 15% increase as compared to approximately $30.9 million in the prior year quarter. On a non-GAAP basis, which excludes non-cash interest related to the adoption of the new accounting treatment for convertible debt, net income increased 23% to approximately $22.6 million, as compared to $18.3 million in the prior year quarter and diluted earnings per share for the third quarter of 2009 was $0.31 versus $0.30 in the prior year quarter. On a GAAP basis, net income increased 25% to approximately $20.5 million, as compared to $16.4 million in the prior year quarter and diluted earnings per share for the third quarter of 2009 was $0.28 versus $0.27 in the prior year quarter.
Nine months ended September 30, 2009:
Revenue for the nine months ended September 30, 2009 was approximately $166.3 million, a 2% increase as compared to approximately $162.5 million in the prior year period. EBITDA for the nine month period increased 8% to approximately $121.2 million as compared to approximately $111.8 million in the comparable prior year period, and free cash flow increased 12% to approximately $101.6 million as compared to approximately $90.7 million in the comparable prior year period. Non-GAAP net income as defined above for the 2009 nine month period increased 16% to approximately $61.5 million as compared to approximately $53.0 million in the comparable prior year period and non-GAAP diluted earnings per share increased to $0.93 versus $0.87 in the comparable prior year period. On a GAAP basis, net income increased 16% to approximately $55.4 million, as compared to $47.6 million in the comparable prior year period and diluted earnings per share for the nine month period was $0.83 versus $0.78 in the comparable prior year period. 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, "I believe our ability to achieve positive organic growth and record earnings despite facing some unforeseen challenges within the quarter speaks to the strength of our business model. Assuming the closing of the Ecko acquisition that we announced this morning, we will have a portfolio of 21 powerful iconic lifestyle brands that together represent close to $10 billion in annual retail sales. As I look ahead to 2010, I believe that we are as well positioned as ever and have a strong foundation from which to grow. Our model continues to generate strong cash flows and even after our latest acquisition we will still have a significant cash balance to execute acquisitions and create additional value for our shareholders."
2009 Guidance:
The Company is reiterating its recently revised revenue guidance of $215-$220 million and full year 2009 non-GAAP diluted EPS of $1.17-$1.22 and GAAP diluted EPS of $1.06-$1.11. The Company estimates that free cash flow for 2009 will be approximately $123- $126 million. This guidance relates to the existing portfolio of brands only and does not include the Ecko acquisition, as the timing of the close is uncertain, nor any additional acquisitions. In addition, while the Company expects to close the Ecko acquisition in the fourth quarter of 2009, any accretion related to the acquisition will be offset by the deal costs which are now expensed as incurred and not capitalized as a component of the purchase price.
2010 Guidance:
The Company is issuing 2010 revenue guidance of $260-$270 million. This includes the assumption that the Ecko acquisition will close in the fourth quarter of 2009. Therefore, the 2010 royalty revenue guidance includes $42-$44 million in anticipated net royalty revenue from the consolidation of the newly formed joint venture related to the Ecko acquisition. Based on a pre-defined revenue and profit sharing calculation in the agreement the Iconix share of the gross royalties will be approximately $26 million. The Company projects its 2010 non-GAAP diluted EPS to be $1.25-$1.30 and GAAP diluted EPS to be $1.13-$1.18. The Company estimates that free cash flow for 2010 will be approximately $140- $145 million. This guidance relates to the existing portfolio of brands inclusive of the Ecko acquisition and assumes no additional acquisitions.
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.
Iconix Brand Group Inc. (Nasdaq: ICON - News) owns, licenses and markets a growing portfolio of consumer brands including CANDIE'S ®, BONGO ®, BADGLEY MISCHKA ®, JOE BOXER ® RAMPAGE ® MUDD ®, LONDON FOG ®, MOSSIMO ® OCEAN PACIFIC ®, DANSKIN ® ROCA WEAR®, CANNON ®, ROYAL VELVET ®, FIELDCREST ®, CHARISMA ®, STARTER ® and WAVERLY ®. In addition, Iconix owns an interest in the ARTFUL DODGER ® and ED HARDY ® 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 around the world. Iconix, through its in-house advertising, promotion and public relations agency, markets its brands to continually 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, including the prospectus supplement relating to the offering. The words "believe", "anticipate," "expect", "confident", "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 Sept. 30, Nine Months Ended Sept 30,
---------------------------- --------------------------
2009 2008* 2009 2008*
---------------------------- --------------------------
Licensing and other
revenue $59,367 $55,135 $166,276 $162,502
Selling, general and
administrative
expenses 21,023 18,558 54,661 55,589
Expenses related
to specific
litigation - 279 137 665
---------------------------- --------------------------
Operating income 38,344 36,298 111,478 106,248
Other expenses
- net 6,462 10,938 25,029 32,759
---------------------------- --------------------------
Income before income
taxes 31,882 25,360 86,449 73,489
Provision for
income taxes 11,428 8,939 31,055 25,914
---------------------------- --------------------------
Net income $20,454 $16,421 $55,394 $47,575
============================ ==========================
Earnings per share:
Basic $0.29 $0.28 $0.87 $0.83
============================ ==========================
Diluted $0.28 $0.27 $0.83 $0.78
============================ ==========================
Weighted average
number of common
shares outstanding:
Basic 71,336 57,841 63,850 57,662
============================ ==========================
Diluted 74,070 61,091 66,426 61,241
============================ ==========================
Selected Balance Sheet Items:
(in thousands) 9/30/2009 12/31/2008*
--------- -----------
(Unaudited)
Total Assets $1,630,371 $1,420,259
Total Liabilities $743,087 $776,170
Stockholders' Equity $887,284 $644,089
*Results for the three months and nine months ended September 30, 2009 and
the December 31, 2008 Balance Sheet have been adjusted for the
retrospective adoption of Financial Accounting Standards Board Staff
Position No. APB 14-1 (FSP APB 14-1), which became effective for the
fiscal years beginning after December 15, 2008.
The following tables detail unaudited reconciliations from non-GAAP
amounts to U.S. GAAP relating to the adoption of FASB Staff Position No.
APB 14-1 "Accounting for Convertible Debt Instruments That May Be Settled
In Cash Upon Conversion (Including Partial Cash Settlements)", which
became effective retroactively for the fiscal years beginning after
December 15, 2008.
(in thousands, except per share data)
(Unaudited) (Unaudited)
----------- -----------
Three months ended Nine months ended
Sept 30, Sept 30, Sept 30, Sept 30,
-------- -------- -------- --------
Net income reconciliation 2009 2008 2009 2008
------------------------- ---- ---- ---- ----
Non-GAAP Net Income (1) $22,600 $18,317 $61,468 $53,017
==================== =====================
GAAP Net income $20,454 $16,421 $55,394 $47,575
Add: Non cash interest
related to FSP APB 14-1 3,345 2,930 9,461 8,582
Deduct: Income taxes
related to non cash
interest (1,199) (1,034) (3,387) (3,140)
-------------------- ---------------------
Net 2,146 1,896 6,074 5,442
-------------------- ---------------------
Non-GAAP Net Income $22,600 $18,317 $61,468 $53,017
==================== =====================
(Unaudited) (Unaudited)
Three months ended Nine months ended
Sept 30, Sept 30, Sept 30, Sept 30,
Diluted EPS -------- -------- -------- --------
reconciliation 2009 2008 2009 2008
--------------- ---- ---- ---- ----
Non-GAAP Diluted
EPS (1) $0.31 $0.30 $0.93 $0.87
=================== ====================
GAAP Diluted EPS $0.28 $0.27 $0.83 $0.78
Add: Non-cash
interest related
to FSP APB 14-1,
net of tax $0.03 $0.03 $0.09 $0.09
------------------- --------------------
Non-GAAP Diluted EPS $0.31 $0.30 $0.93(a) $0.87
=================== ====================
(a) due to rounding this amount may not add down
Year
Forecasted Diluted EPS Year Ending Year Ending Ended
---------------------- 12/31/10 12/31/09 12/31/08
High Low High Low Actual
Non-GAAP Diluted EPS (1) $1.30 $1.25 $1.22 $1.17 $1.15
=============== ============= =======
GAAP Diluted EPS $1.18 $1.13 $1.11 $1.06 $1.02
Add: Non-cash interest related to
FSP APB 14-1, net of tax $0.12 $0.12 $0.11 $0.11 $0.13
--------------- ------------- -------
Non-GAAP Diluted EPS $1.30 $1.25 $1.22 $1.17 $1.15
=============== ============= =======
(1) Non-GAAP Net Income and non-GAAP diluted EPS, are non-GAAP financial
measures, which represent net income excluding any non-cash interest,
net of tax, relating to the adoption of FSP APB 14-1. The Company
believes these are useful financial measures in evaluating its
financial condition because it is representative of only actual cash
interest paid on outstanding debt.
(Unaudited) (Unaudited)
Three months ended Nine months ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008* 2009 2008*
--------------------- ---------------------
EBITDA (1) $43,037 $37,875 $121,213 $111,816
===================== =====================
Reconciliation of EBITDA:
Net Income before taxes 31,882 25,360 86,449 73,489
Add: Net interest expense 9,021 10,510 28,395 32,331
Add: Depreciation and
amortization of
certain intangibles 2,134 2,005 6,369 5,996
--------------------- ---------------------
EBITDA $43,037 $37,875 $121,213 $111,816
===================== =====================
(1) EBITDA, a non-GAAP financial measure, represents income from
operations before income taxes, interest, 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.
(Unaudited) (Unaudited)
Three months ended Nine months ended
------------------ -----------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
------------------------ -----------------------
Free Cash Flow (2) $35,448 $30,948 $101,648 $90,690
======================== =======================
Reconciliation of
Free Cash Flow:
Net Income 20,454 16,421 55,394 47,575
Add: Non-cash
income taxes,
non-cash interest
related to FSP
APB 14-1,
depreciation,
amortization of
trademarks and
finance fees,
non-cash
compensation
expense, bad
debt expense
and net equity
earnings from
joint ventures and
sale of trademarks 16,763 14,647 48,043 47,360
Less: Capital
expenditures (1,769) (120) (1,789) (4,245)
------------------------ -----------------------
Free Cash Flow $35,448 $30,948 $101,648 $90,690
======================== =======================
(2) 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 joint ventures,
non-cash income taxes, non-cash interest related to FSP APB 14-1, and
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.
Year Ending Year Ending
(in thousands) Dec 31, 2010 Dec 31, 2009
High Low High Low
---- --- ---- ---
Forecasted Free
Cash Flow (3) $145,000 $140,000 $125,800 $122,800
================== ==================
Reconciliation of
Free Cash Flow:
GAAP Net Income $88,600 $84,700 75,500 72,000
Add: Non-cash income
taxes, non-cash
interest related to
convertible debt,
depreciation,
amortization of
trademarks and finance
fees, non-cash
compensation expense,
bad debt expense and
net equity earnings
from joint ventures 59,900 57,800 53,300 53,300
Less: Capital
expenditures (3,500) (2,500) (3,000) (2,500)
------------------ ------------------
Forecasted Free
Cash Flow $145,000 $140,000 $125,800 $122,800
================== ==================
(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 joint ventures,
non-cash income taxes, non-cash interest related to FSP APB 14-1, and
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.