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Iconix Brand Group Reports Record Revenue And Earnings For The Third Quarter 2014

NEW YORK, Oct. 28, 2014 /PRNewswire/ --

  • Record Q3 diluted non-GAAP EPS of $0.73, a 23% increase over prior year quarter
  • Record Q3 revenue of $113.8 million, a 6% increase over prior year quarter
  • Raising 2014 diluted non-GAAP EPS guidance to $2.72-$2.77
  • Providing 2015 revenue guidance of $485-$500 million
  • Providing 2015 diluted non GAAP EPS guidance of $2.90-$3.10

Iconix Brand Group, Inc. (NASDAQ: ICON) ("Iconix" or the "Company"), today announced financial results for the third quarter ended September 30, 2014.

Q3 2014 Results for Iconix Brand Group, Inc.

Total revenue for the third quarter of 2014 was approximately $113.8 million, a 6% increase as compared to approximately $107.2 million in the third quarter of 2013. On a non-GAAP basis, as described in the tables below, net income attributable to Iconix was $38.3 million, a 16% increase as compared to the prior year quarter of approximately $33.1 million. Non-GAAP diluted EPS for the third quarter of 2014 increased 23% to $0.73 compared to $0.59 in the prior year quarter. GAAP net income attributable to Iconix for the third quarter of 2014 was approximately $33.8 million, a 16% increase as compared to $29.0 million in the prior year quarter, and GAAP diluted EPS for the third quarter of 2014 was $0.58, a 15% increase compared to $0.50 in the prior year quarter.  Free cash flow attributable to Iconix for the third quarter was approximately $61.8 million, a 14% increase as compared to the prior year quarter of approximately $54.3 million. EBITDA attributable to Iconix for the third quarter was approximately $65.5 million, as compared to approximately $65.6 million in the prior year quarter.  

Nine months ended September 30, 2014:

Total revenue for the nine months ended September 30, 2014 was approximately $348.8 million, a 7% increase as compared to approximately $327.4 million for the prior year period. On a non-GAAP basis, as defined in the tables below, net income attributable to Iconix for the nine month period was approximately $117.2 million, a 5% increase as compared to approximately $112.0 million in the prior year period, and non-GAAP diluted earnings per share was approximately $2.22 for the nine month period, a 20% increase versus $1.85 for the prior year period. GAAP net income attributable to Iconix for the nine month period of 2014 was approximately $128.9 million, a 26% increase as compared to $101.9 million in the prior year period, and GAAP diluted EPS for the nine month period of 2014 increased 33% to $2.21 compared to $1.67 in the prior year period.  Free cash flow attributable to Iconix for the nine month period was approximately $179.8 million, an 8% increase over the prior year period of approximately $167.0 million. EBITDA attributable to Iconix for the nine month period was approximately $213.4 million, a 5% increase as compared to approximately $202.8 million 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, "Our strong third quarter and year to date results reflect the continued strength of our overall portfolio and the power of our business model. With solid brand performance domestically supported by large direct-to-retail licenses, and double digit growth around the world driven by our global brands and joint ventures, we continue to execute in line with our successful track record. As we look to 2015, we expect to continue to drive positive organic growth, and with our strong balance sheet we plan to deliver additional value as we execute on our acquisition strategy and continue to opportunistically repurchase stock."

2014 Guidance for Iconix Brand Group, Inc.:

  • Maintaining 2014 revenue guidance of $455-$465 million
  • Raising 2014 non-GAAP diluted EPS guidance to $2.72-$2.77 from $2.60-$2.70
  • Raising 2014 GAAP diluted EPS guidance to $2.61-$2.65 from $2.50-$2.60 
  • Maintaining 2014 free cash flow guidance of $215-$222 million

This guidance relates to the Company's existing portfolio of brands and does not include any additional acquisitions.

2015 Guidance for Iconix Brand Group, Inc.:

The Company is initiating the following guidance for 2015

  • 2015 revenue guidance of $485-$500 million
  • 2015 non-GAAP diluted EPS guidance of $2.90-$3.10
  • 2015 GAAP diluted EPS guidance of $2.82-$3.00
  • 2015 free cash flow guidance of $220-230 million

This guidance relates to the Company's existing portfolio of brands and does not include any 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.

About Iconix Brand Group, Inc.

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), BUFFALO (R) and NICK GRAHAM (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 Sept. 30,


Nine Months Ended Sept. 30,


2014

2013


2014

2013







Licensing and other revenue

$ 113,750

$ 107,175


$ 348,831

$ 327,362







Selling, general and administrative expenses

50,190

45,705


142,685

128,142







Operating income

63,560

61,470


206,146

199,220







Interest and other expenses, net

20,525

20,614


23,952

47,583







Equity earnings on joint ventures

(4,084)

(3,388)


(12,881)

(7,588)







Other expenses – net

16,441

17,226


11,071

39,995







Income before income taxes

47,119

44,244


195,075

159,225







Provision for income taxes

9,907

13,740


56,239

47,432







Net income

$ 37,212

$ 30,504


$ 138,836

$ 111,793







Less: Net income attributable to non-controlling interest

3,433

1,507


9,970

9,891







Net income attributable to Iconix Brand Group, Inc.

$33,779

$28,997


$ 128,866

$ 101,902







Earnings per share:






Basic        

$  0.70

$  0.54


$  2.65

$  1.76







Diluted

$  0.58

$  0.50


$  2.21

$  1.67













Weighted average number of common shares outstanding:






Basic

47,991

53,325


48,682

57,966







Diluted

58,457

57,805


58,306

61,150







 

Selected Balance Sheet Items:

(Unaudited)


(in thousands)

9/30/2014

12/31/2013




Total Assets

$2,848,233

$2,864,158

Total Liabilities

$1,798,750

$1,762,216

Total Stockholders' Equity and Mezzanine Equity

$1,049,483

$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, incremental dilutive shares related to our convertible debt that are covered by our existing convertible note hedges, and non-cash gains related to the re-measurement of investments.  

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


Nine months ended

Net income reconciliation

Sept. 30,

2014

Sept. 30,

2013


Sept. 30,

2014

Sept. 30,

2013

Non-GAAP net income (1)

$38,270

$33,089


$117,191

$111,959







GAAP net income

$33,779

$28,997


$128,866

$101,902







Adjustments:

    Non-cash interest related to ASC Topic 470

6,910

6,393


19,932

15,713

    Non-cash gain related to investment in Iconix Latin America

-

-


(37,893)

-

    Taxes related to above item

(2,419)

(2,301)


6,286

(5,656)

    Net

4,491

4,092


(11,675)

10,057







Non-GAAP net income

$38,270

$33,089


$117,191

$111,959



Non-GAAP weighted average diluted shares reconciliation 



(Unaudited)

Three months ended


(Unaudited)

Nine months ended


Sept. 30,
2014

Sept. 30,
2013


Sept. 30,
2014 (3)

Sept. 30,
2013







Non-GAAP weighted average diluted shares

52,704

56,153


52,895

60,599







GAAP weighted average diluted shares

58,457

57,805


58,306

61,150







   Less: additional incremental dilutive shares

    covered by hedges for: (2)






               2.50% Convertible Notes

(2,485)

(728)


(2,338)

(243)

               1.50% Convertible Notes

(3,268)

(924)


(3,073)

(308)

        Subtotal

(5,753)

(1,652)


(5,411)

(551)







Non-GAAP weighted average diluted shares

52,704

56,153


52,895

60,599
















(Unaudited)


(Unaudited)


 Three months ended


 Nine months ended

Diluted EPS reconciliation

Sept 30,

2014

Sept 30,

2013


Sept 30,

2014 (3)

Sept 30,

2013

Non-GAAP diluted EPS (1)

$0.73

$0.59


$2.22

$1.85







GAAP diluted EPS

$0.58

$0.50


$2.21

$1.67







Adjustments for non-cash interest related to ASC 470, net of tax

$0.15

$0.09


$0.43

$0.18

Non-cash gain related to investment in Iconix Latin America, net of tax

-

-


($0.42)

-







Non-GAAP diluted EPS

$0.73

$0.59


$2.22

$1.85









Forecasted Diluted EPS

Year Ending
Dec. 31, 2014


Year Ending
Dec. 31, 2015


High

Low


High

Low







Forecasted Non-GAAP  diluted EPS (1)

$2.77

$2.72


$3.10

$2.90







Forecasted GAAP diluted EPS

$2.65

$2.61


$3.00

$2.82







Non-cash gain related to re-measurement of investment, net of tax

($0.43)

($0.43)


($0.52)

($0.52)

Adjustments for non-cash interest related to ASC 470, net of tax, and incremental dilutive shares covered by hedges

$0.55

$0.54


$0.62

$0.60

Forecasted Non-GAAP  Diluted EPS

$2.77

$2.72


$3.10

$2.90





(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 nine month periods ended September 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 nine month period ended September 30, 2014 includes 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


            Nine months ended


Sept. 30,
2014

Sept. 30,

 2013


Sept. 30,
2014

Sept. 30,

 2013

EBITDA  (4)

$65,497

$65,564


$213,424

$202,813







Reconciliation of EBITDA:






Net Income

33,779

28,997


128,866

101,902







Add: Income taxes

9,907

13,740


56,239

47,432







Add: Net interest expense and non-cash gain related to investment in Iconix Latin America

20,410

20,489


23,604

46,825







Add: Depreciation and amortization of certain intangibles

1,401

2,338


4,715

6,654

EBITDA

$65,497

$65,564


$213,424

$202,813







 

EBITDA Reconciliation from Cash Flow from Operations

(Unaudited)

Nine months ended


Sept. 30, 2014


Sept. 30, 2013





EBITDA (4)

$      213,424


$      202,813





Reconciliation of EBITDA:




Net cash provided by operating activities

124,446


160,218

Add / (Less):




   Cash interest expense, net

35,807


26,980

   Cash taxes

24,027


32,186

   Other

5,516


6,756

   Net income attributable to non-controlling interest

(9,970)


(9,891)

   Stock compensation expense

(14,726)


(12,528)

   Provision for doubtful accounts

(5,522)


(4,724)

   Net change in balance sheet items

53,846


3,816





EBITDA

$      213,424


$      202,813



(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)


Three months ended


Nine months ended

(in thousands)

Sept. 30, 2014

Sept. 30, 2013


Sept. 30, 2014 

Sept. 30, 2013

Free Cash Flow (5)

$61,784

$54,312


$179,781

$166,982







Reconciliation of Free Cash Flow:






  Net Income

33,779

28,997


128,866

101,902


Add/(Less):







Depreciation and amortization of intangibles

1,401

2,338


4,715

6,654


Amortization of convertible note

7,613

7,168


22,041

17,705


Amortization of finance fees

1,286

1,171


3,997

2,898


Non-cash compensation expense

6,379

4,597


14,552

12,528


Provision for doubtful accounts

3,577

2,618


5,522

4,724


Non-cash income taxes

7,834

7,817


38,682

21,183


Non-cash gain related to investment in Iconix Latin America

-

-


(37,893)

-


Other

150

-


385

450


      Subtotal

28,240

25,709


52,001

66,142

  Less: Capital expenditures

(235)

(394)


(1,086)

(1,062)








Free Cash Flow

$61,784

$54,312


$179,781

$166,982

 

Free Cash Flow Reconciliation from Cash Flow from Operations

(Unaudited)

Nine months ended


Sept. 30, 2014


Sept. 30, 2013





Free Cash Flow (5)

$      179,781


$      166,982





Reconciliation of Free Cash Flow:




Net cash provided by operating activities

124,446


160,218

Add / (Less):




   Non-cash deferred tax items

6,469


5,937

   Net income attributable to non-controlling interest

(9,970)


(9,891)

   Gain on sale of securities

125


5,395

   Capital expenditures

(1,086)


(1,046)

   Other

5,951


2,553

   Net change in balance sheet items

53,846


3,816





Free Cash Flow

$      179,781


$      166,982

 









Year Ending


Year Ending

Forecasted Free Cash Flow

Dec. 31, 2014


Dec. 31, 2015


High

Low


High

Low

Free Cash Flow

$220,000

$215,000


 

$230,000

$220,000







Reconciliation of Free Cash Flow:






Net income

154,000

148,000


 

166,000

156,000

Add:






   Depreciation and amortization of intangibles

5,000

5,000


 

5,800

5,800

   Amortization of convertible note

29,500

29,500


 

31,500

31,500

   Amortization of finance fees

5,000

5,000


 

4,700

4,700

   Non-cash compensation expense

18,500

18,500


 

20,000

16,000

   Bad debt expense

4,000

3,500


 

2,000

4,000

   Non-cash income taxes

45,000

45,000


 

46,000

47,000

   Non-cash non-recurring gain

(38,000)

(38,000)


 

(44,000)

(44,000)

   Other

1,000

1,000


-

-

     subtotal

68,000

67,000


67,000

66,000







Less: Capital expenditures

(2,000)

(2,000)


(2,000)

(1,000)







Free Cash Flow

$222,000

$215,000


$230,000

$220,000


(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.