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Iconix Brand Group Reports Financial Results For The Fourth Quarter And Full Year 2014

NEW YORK, Feb. 26, 2015 /PRNewswire/ --

  • 2014 revenue of $461.2 million, a 7% increase over prior year
  • 2014 diluted non GAAP EPS of $2.78, a 16% increase over prior year
  • Q4 total revenue of $112.4 million, a 7% increase over prior year quarter
  • Q4 diluted non GAAP EPS of $0.56, a 4% increase over prior year
  • 2014 share repurchases of approximately $193 million or 5.0 million shares

Iconix Brand Group, Inc. (NASDAQ: ICON) ("Iconix" or the "Company"), today announced financial results for the fourth quarter and year ended December 31, 2014.  

In connection with the Company's evolving business model, financial reporting includes a more detailed breakdown of revenue and a new presentation of free cash flow.

Full Year 2014 Results for Iconix Brand Group, Inc.:

Total revenue for the full year 2014 was approximately $461.2 million, a 7% increase as compared to approximately $432.6 million for the prior year. Licensing revenue for 2014 was approximately $406.9 million, a 2% increase as compared to approximately $398.0 million in the prior year. Other revenue for 2014 was approximately $54.3 million, a 57% increase as compared to approximately $34.6 million in the prior year. On a non-GAAP basis, as defined in the tables below, net income attributable to Iconix for 2014 was approximately $145.5 million, a 2% increase as compared to approximately $142.2 million in the prior year, and non-GAAP diluted earnings per share was approximately $2.78 for 2014, a 16% increase versus $2.39 for the prior year. GAAP net income attributable to Iconix for 2014 was approximately $152.7 million, a 19% increase as compared to $128.0 million in the prior year, and GAAP diluted EPS for 2014 increased 26% to $2.66 as compared to $2.11 in the prior year. EBITDA attributable to Iconix for 2014 was approximately $263.8 million, as compared to approximately $262.9 million in the prior year. Free cash flow attributable to Iconix, as redefined in the tables below, was approximately $174.3 million for 2014, a 26% decrease as compared to approximately $235.5 million in the prior year. In connection with the formation of joint ventures and sale of certain trademarks the Company generated approximately $51.2 million of notes receivable in 2014 as compared to approximately $15.8 million in 2013.

Q4 2014 Results for Iconix Brand Group, Inc.

Total revenue for the fourth quarter of 2014 was approximately $112.4 million, a 7% increase as compared to approximately $105.3 million in the fourth quarter of 2013. Licensing revenue increased 16% to approximately $102.2 million as compared to approximately $88.3 million in the prior year quarter. Other revenue was $10.3 million in the fourth quarter compared to $17.0 million in the prior year quarter. On a non-GAAP basis, as described in the tables below, net income attributable to Iconix was $28.3 million, a 6% decrease as compared to the prior year quarter of approximately $30.2 million. Non-GAAP diluted EPS for the fourth quarter of 2014 increased 4% to $0.56 as compared to $0.54 in the prior year quarter. GAAP net income attributable to Iconix for the fourth quarter of 2014 was approximately $23.9 million, a 9% decrease as compared to $26.1 million in the prior year quarter, and GAAP diluted EPS for the fourth quarter of 2014 was $0.44, as compared to $0.44 in the prior year quarter.  EBITDA attributable to Iconix for the fourth quarter was approximately $50.4 million, a 16% decrease as compared to approximately $60.1 million in the prior year quarter.  Free cash flow attributable to Iconix, as redefined in the tables below, for the fourth quarter was approximately $46.3 million, a 19% decrease as compared to the prior year quarter of approximately $57.4 million.

EBITDA, free cash flow, non-GAAP net income and non-GAAP diluted EPS are all non-GAAP metrics. Definitions along with reconciliation tables for, each are attached to this press release.

Neil Cole, Chairman and CEO of Iconix Brand Group, Inc. commented, "We are pleased with our performance in 2014 and are enthusiastic about our growing global brand management platform, which today includes a diversified portfolio of over 35 brands across women's, men's, home and entertainment. In 2015, we expect to achieve strong top and bottom line growth driven by steady expansion in our domestic licensing business, rapid growth in our international business both inside our joint ventures and across the territories that we control, the excitement surrounding our upcoming Peanuts movie and the benefits of our recently announced Strawberry Shortcake and PONY transactions."

2015 Guidance for Iconix Brand Group, Inc.:

  • Raising 2015 revenue guidance to $490-$510 million from $485-$500 million
  • Raising 2015 non-GAAP diluted EPS guidance to $3.00-$3.15 from $2.90-$3.10
  • Raising 2015 GAAP diluted EPS guidance to $3.06-$3.20 from $2.82-$3.00 
  • Establishing new 2015 free cash flow calculation and guidance of $208-$218 million

This guidance relates to the Company's existing portfolio of brands, and includes the Company's recently announced PONY and Strawberry Shortcake transactions, but does not include any additional acquisitions.

See reconciliation tables below for non-GAAP metrics. Please note that, for comparative purposes, the definition of free cash flow has been updated.  Please see the free cash flow reconciliation table and accompanying discussion below regarding this change. 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), 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), 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), ED HARDY (R), TRUTH OR DARE (R), BILLIONAIRE BOYS CLUB (R), ICE CREAM (R), MODERN AMUSEMENT (R), BUFFALO (R), NICK GRAHAM (R) and PONY (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 December 31,


Year Ended December 31,


2014

2013


2014

2013







Licensing revenue

$102,161

$88,265


$406,940

$398,047







Other revenue

10,251

16,999


54,303

34,579


   Total revenue

112,412

105,264


461,243

432,626








Selling, general and administrative expenses

62,725

47,073


205,410

175,215







Operating income

49,687

58,191


255,833

257,411







Other (income)/expenses












          Interest expense, net

19,745

21,295


81,590

68,878

          Other income

-

-


(37,893)

-







          Equity earnings on joint ventures

(4,149)

(4,541)


(17,030)

(12,129)


Other expenses - net

15,596

16,754


26,667

56,749







Income before income taxes

34,091

41,437


229,166

200,662







Provision for income taxes

5,498

10,643


61,737

58,075

Net income

$28,593

$30,794


$167,429

$142,587







Less: Net income attributable to non-controlling interest

$4,723

$4,648


$14,693

$14,539







Net income attributable to Iconix Brand Group, Inc.

$23,870

$26,146


$152,736

$128,048







Earnings per share:






         Basic

$0.50

$0.51


$3.15

$2.28







         Diluted

$0.44

$0.44


$2.66

$2.11







Weighted average number of common shares outstanding:






         Basic

47,685

51,288


48,431

56,281







         Diluted

54,552

59,540


57,366

60,734







 

 

Revenue by Division

(in thousands)







Three Months Ended Dec. 31,


Year Ended Dec. 31,


2014

2013


2014

2013

Womens

$34,048

$30,080


$148,482

$138,262

Mens

$32,696

$30,188


$111,693

$143,916

Home

$10,504

$9,147


$43,694

$40,920

Entertainment

$24,913

$18,850


$103,071

$74,949

Other

$10,251

$16,999


$54,303

$34,579

Total

$112,412

$105,264


$461,243

$432,626

 

 

Selected Balance Sheet Items:

(Unaudited)


(in thousands)

12/31/2014

12/31/2013




Total Assets

$2,873,391

$2,864,158

Total Liabilities

$1,804,630

$1,762,216

Total Stockholders' Equity and
Mezzanine Equity

$1,068,761

$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


Year ended


Net income reconciliation

Dec. 31,

2014

Dec. 31,

2013


Dec. 31,

2014

Dec. 31,

2013




Non-GAAP net income (1)

$28,337

$30,215


$145,528

$142,173









GAAP net income

$23,870

$26,146


$152,736

$128,048









Adjustments:






Non-cash interest related to ASC Topic 470

6,872

6,358

26,804

22,071


    Non-cash gain related to investment in Iconix Latin 
     America

-

-


(37,893)

-


    Taxes related to above items

(2,405)

(2,289)


3,881

(7,946)


    Net

4,467

4,069


(7,208)

14,125









Non-GAAP net income

$28,337

$30,215


$145,528

$142,173








 

                      

Non-GAAP weighted average diluted shares reconciliation






(Unaudited)

Three months ended


(Unaudited)

Year ended


Dec. 31,
2014


Dec. 31,
2013


Dec. 31,
2014 (3)


Dec. 31,
2013









Non-GAAP weighted average diluted shares

50,352


55,819


52,257


59,390









GAAP weighted average diluted shares

54,552


59,540


57,366


60,734









   Less: additional incremental dilutive shares

    covered by hedges for: (2)













               2.50% Convertible Notes

(1,819)


(2,199)


(2,209)


(732)









               1.50% Convertible Notes

(2,381)


(1,522)


(2,900)


(612)


        Subtotal

(4,200)


(3,721)


(5,109)


(1,344)










Non-GAAP weighted average diluted shares

50,352


55,819


52,257


59,390









 

 


(Unaudited)

Three months ended


(Unaudited)

Year ended

Diluted EPS reconciliation

Dec. 31,

2014

Dec. 31,

2013


Dec. 31,

 2014 (3)

Dec. 31,

2013

Non-GAAP  diluted EPS (1)

$0.56

$0.54


$2.78

$2.39







GAAP diluted EPS

$0.44

$0.44


$2.66

$2.11







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

$0.12

$0.10


$0.54

$0.28

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

-

-


($0.42)

-







Non-GAAP  diluted EPS

$0.56

$0.54


$2.78

$2.39

 

 

Forecasted Diluted EPS




Year Ending
Dec. 31, 2015










High

Low
















Forecasted Non-GAAP  diluted EPS (1)





$3.15

$3.00
















Forecasted GAAP diluted EPS





$3.20

$3.06
















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





($0.53)

($0.53)





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





$0.48

$0.47





Forecasted Non-GAAP  Diluted EPS





$3.15

$3.00





 

(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 year ended December 31, 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 year ended December 31, 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





(Unaudited)


(Unaudited)


Three months ended


Year ended


Dec. 31,
2014

Dec. 31,
2013


Dec. 31,
2014

Dec. 31,
2013


EBITDA  (4)

$50,358

$60,130


$263,783

$262,943







Reconciliation of EBITDA:












Net Income

$23,870

$26,146


$152,736

$128,048







Add: Income taxes

5,498

10,643


61,737

58,075







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

19,630

21,170


43,234

67,995







Add: Depreciation and amortization of certain
intangibles

1,360

2,171


6,076

8,825


EBITDA

$50,358

$60,130


$263,783

$262,943

 

 

EBITDA Reconciliation from Cash Flow from Operations

(Unaudited)

Year ended


Dec. 31, 2014


Dec. 31, 2013





EBITDA (4)

$      263,783


$      262,943





Reconciliation of EBITDA:




Net cash provided by operating activities

$162,520


$203,152

Add / (Less):




   Gain from sale of trademarks and formation of joint ventures

54,303


34,579

   Cash interest expense, net

46,713


39,224

   Cash taxes

16,163


26,659

   Other

8,705


2,220

   Net income attributable to non-controlling interest

(14,693)


(14,539)

   Stock compensation expense

(18,492)


(20,018)

   Provision for doubtful accounts

(11,127)


(9,718)

   Net change in balance sheet items

19,691


1,384





EBITDA

$      263,783


$      262,943

 

(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 provides 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.

 

Free Cash Flow Reconciliation

With respect to the redefined presentation of free cash flow, the Company's historic reported free cash flow did not account for the timing of payments. It reflected both cash from operations plus any notes the Company received in year from business initiatives such as the formation of joint ventures. The increased number of joint venture transactions in 2014 has led to an increase in the receivable component of the Company's previous free cash flow calculation.  The revised free cash flow calculation includes only cash received in the period.

The tables below reflect our new presentation of free cash flow.

 


(Unaudited)


(Unaudited)


Three months ended


Year ended

(in thousands)

Dec. 31, 2014

Dec. 31, 2013


Dec. 31, 2014

Dec. 31, 2013


Free Cash Flow (5)

$46,302

$57,426


$174,282

$235,519







Reconciliation of Free Cash Flow:












     Net cash provided by operating activity  

$38,074

$42,934


$162,520

$203,152







               Less: Capital expenditures

(419)

(163)


(1,505)

(1,209)







               Add: Cash received from sale of
               trademarks and formation of joint ventures

10,185

18,505


24,915

41,866







               Less: Distributions to non-controlling
               interests

(1,538)

(3,850)


(11,648)

(8,290)







Free Cash Flow

$46,302

$57,426


$174,282

$235,519

 

 








Forecasted Free Cash Flow

Year Ending
Dec. 31, 2015




High

Low



Free Cash Flow (5)

$218,000

$208,000








Reconciliation of Free Cash Flow:





Net cash provided by operating activity

$195,000

$190,000



   Less: Capital expenditures

(2,000)

(2,000)



   Add: Cash received from sale of
trademarks and formation of joint
ventures

43,000

38,000



   Less: Distributions to non-
controlling interests

(18,000)

(18,000)








Free Cash Flow

$218,000

$208,000










 

(5)

 Free Cash Flow, a non-GAAP financial measure, represents net cash provided by operating activities, plus cash received from the sale of trademarks and formation of joint ventures, less distributions to non-controlling interests and capital expenditures.  Free Cash Flow excludes notes receivable from sale of trademarks and the formation of joint ventures, 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 information regarding actual cash received in a specific period from the Company's comprehensive business strategy of maximizing the value of its brands through traditional licensing, international joint ventures and other arrangements. It also provides supplemental information to assist investors in evaluating the Company's financial condition and ability to pursue opportunities that enhance shareholder value.

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SOURCE Iconix Brand Group, Inc.