-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DwXKeRWGNYE+IB9UysJAYMX0yHycAGW6kbXdScVaBeQKtuz2xLiU0DydxG6NHwrR jRLA6zrkp0cMozm5jCjmFw== 0001144204-09-055677.txt : 20091030 0001144204-09-055677.hdr.sgml : 20091030 20091030165207 ACCESSION NUMBER: 0001144204-09-055677 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20091026 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20091030 DATE AS OF CHANGE: 20091030 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICONIX BRAND GROUP, INC. CENTRAL INDEX KEY: 0000857737 STANDARD INDUSTRIAL CLASSIFICATION: FOOTWEAR, (NO RUBBER) [3140] IRS NUMBER: 112481903 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10593 FILM NUMBER: 091148737 BUSINESS ADDRESS: STREET 1: 1450 BROADWAY, 4TH FL CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 212-730-0030 MAIL ADDRESS: STREET 1: 1450 BROADWAY, 4TH FL CITY: NEW YORK STATE: NY ZIP: 10018 FORMER COMPANY: FORMER CONFORMED NAME: CANDIES INC DATE OF NAME CHANGE: 19930604 FORMER COMPANY: FORMER CONFORMED NAME: MILLFELD TRADING CO INC DATE OF NAME CHANGE: 19920703 8-K 1 v164335_8k.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of The
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
October 26, 2009
 
ICONIX BRAND GROUP, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
  
0-10593
  
11-2481093
(State or Other
  
(Commission
  
(IRS Employer
Jurisdiction of
  
File Number)
  
Identification No.)
Incorporation)
        
 
1450 Broadway, New York, New York
10018
(Address of Principal Executive Offices)
(Zip Code)
 
Registrant’s telephone number, including area code     (212) 730-0030
 
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)


o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 
 
Item 1.01
Entry Into a Material Definitive Agreement.

On October 26, 2009, Iconix Brand Group, Inc., a Delaware corporation (“Iconix”), entered into a Contribution and Sale Agreement (the “Purchase Agreement”) by and among IP Holder LLC (the “JV”) (now known as IP Holdings Unltd LLC), a Delaware limited liability company, Seth Gerszberg (“SG”), Suchman LLC (“Suchman”), a New Jersey limited liability company, wholly-owned by SG, Yakira, L.L.C., a New Jersey limited liability company (“Yakira”), Ecko.Complex, LLC (“Ecko.Complex”), a New Jersey limited liability company,  Zoo York LLC, a New Jersey limited liability company (“ZY”), and Zoo York THC LLC, a New Jersey limited liability company (“ZY THC” and, together with Yakira, Ecko.Complex and ZY, the “Ecko Companies”).

Upon the closing of the transactions contemplated by the Purchase Agreement, the JV will acquire certain of the names, brands, trademarks and intellectual property related to the Marc Ecko and the Zoo York brands and other associated brands worldwide (the “Ecko Assets”).

The Purchase Agreement provides for (i) Iconix to contribute $63,500,000 in cash to the JV in exchange for a 51% membership interest in the JV and (ii) the assumption of certain liabilities by the JV.

Upon the closing of the transactions contemplated by the Purchase Agreement, the Ecko Companies will sell and/or contribute all of their right, title and interest in the Ecko Assets to the JV in exchange for (i) $63,500,000, (ii) the issuance of a non-negotiable promissory note in the principal amount of $90,000,000 by the JV to LF Centennial Limited and (iii) a 49% membership interest in the JV.  In addition, the Purchase Agreement provides for the JV to enter into (i) a license agreement with an affiliate of SG and Suchman, 3TAC, LLC (the “Core License Agreement”) and (ii) a royalty agreement with Marc Ecko effective upon the closing of the transactions contemplated by the Purchase Agreement pursuant to which Marc Ecko will receive 0.5% of net sales of Ecko products under the Core License Agreement and 5% of net revenues (as defined in the royalty agreement).

Upon the closing of the transactions contemplated by the Purchase Agreement, Icon JV Holdings LLC, a wholly-owned subsidiary of Iconix, and Suchman will enter into a joint venture operating agreement in respect of the JV.  Icon JV Holdings LLC will be responsible for day to day management of the JV and Suchman will be the license manager of the JV.  The JV will be managed by a managing board of five people, three appointed by Iconix and two by SG.  Certain material non-ordinary course decisions relating to the JV will require an 80% vote of the managing board.  Iconix will control ordinary course decisions of the JV as a 51% member, as the administrative member and/or through certain decisions that are to be made only by Iconix pursuant to the JV operating agreement.

The Purchase Agreement contains customary representations, warranties and covenants, and the transactions contemplated by the Purchase Agreement are subject to customary closing conditions including Suchman and other of its affiliates obtaining financing.  Early termination of the mandatory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has been granted with respect to the transactions contemplated by the Purchase Agreement.  Iconix, on the one hand, and SG and the Ecko Companies, on the other hand, have each agreed, subject to certain limitations, to indemnify the other for damages arising for the breach of their respective representations, warranties, covenants or obligations in the Purchase Agreement.

Item 2.02
Results of Operations and Financial Condition. and Exhibits.

On October 27, 2009, Iconix issued a press release announcing its financial results for the fiscal quarter and nine months ended September 30, 2009.  As noted in the press release, Iconix has provided certain non-U.S. generally accepted accounting principles (“GAAP”) financial measures, the reasons it provides such measures and a reconciliation of the non-U.S. GAAP measures to U.S. GAAP measures. Readers should consider non-GAAP measures in addition to, and not as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP. A copy of Iconix’ press release is attached hereto as Exhibit 99.1 and the information contained therein insofar as it discloses historical information regarding the Company’s results of operations or financial condition for the fiscal quarter and nine months ended September 30, 2009 is incorporated herein by reference.

 
 
 

Item 9.01
Financial Statements and Exhibits.

(d)
Exhibits.

99.1
Press Release dated October 27, 2009.
 
 
 
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
ICONIX BRAND GROUP, INC.
(Registrant)
  
       
 
By:
/s/ Warren Clamen
  
   
Name: Warren Clamen
  
   
Title:  Executive Vice President and Chief Financial Officer
  
       

Date: October 30, 2009
 
 
 
 
 EX-99.1 2 v164335_ex99-1.txt Iconix Brand Group, Inc. Reports Record Revenue and Earnings for the Third Quarter 2009 - 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) ("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) 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) and ED HARDY (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 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. CONTACT: Jaime Sheinheit, Investor Relations, Iconix Brand Group, +1-212-730-0030 -----END PRIVACY-ENHANCED MESSAGE-----