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): June 30, 2017
Iconix Brand Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 001-10593 | 11-2481093 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
1450 Broadway, New York, NY | 10018 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrants telephone number, including area code (212) 730-0030
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.02 | Termination of a Material Definitive Agreement |
On June 30, 2017, Iconix Brand Group, Inc., a Delaware corporation (the Company), paid down the approximately $210 million balance under the Companys senior secured term loan (the Senior Secured Term Loan) pursuant to a credit agreement, dated as of March 7, 2016 (the Credit Agreement), by and among IBG Borrower LLC (IBG Borrower), as borrower, the Company and certain wholly-owned subsidiaries of IBG Borrower, as guarantors, Cortland Capital Market Services LLC, as administrative agent and collateral agent, and the lenders party thereto from time to time, including CF ICX LLC and Fortress Credit Co LLC (the Lenders). The key terms of the Credit Agreement were disclosed on the Companys Current Report on Form 8-K, dated March 7, 2016, as filed with the U.S. Securities and Exchange Commission on March 8, 2016. The repayment under the Senior Secured Term Loan effectively terminates the Credit Agreement with no further outstanding balances remaining thereunder. A prepayment premium of approximately $16 million was paid by the Company to the Lenders upon termination of the Credit Agreement. The repayment and prepayment premium were made with the proceeds of the sale of the Companys entertainment division, as described in Item 2.01 below, and cash on hand.
Item 2.01 | Completion of Acquisition or Disposition of Assets |
On June 30, 2017, the Company completed its previously announced sale of its entertainment division, which includes an 80% interest in the Peanuts® brand and a 100% interest in the Strawberry Shortcake® brand, to DHX Media Ltd. (DHX) for a total purchase price of $345 million, subject to customary working capital adjustments. The sale was made pursuant to the Membership Interest Purchase Agreement by and among the Company, Icon NY Holdings LLC, IBG Borrower, DHX and DHX SSP Holdings LLC (DHX SSP) and the Membership Interest Purchase Agreement by and among the Company, IBG Borrower, DHX and DHX SSP, each dated as of May 9, 2017 (collectively, the Agreements).
Item 2.04 | Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement |
On June 30, 2017, as a result of the sale of the Companys entertainment division described in Item 2.01 above, the Company made principal prepayments of approximately $152 million in the aggregate (the Prepayments) on its Series 2012-1 4.229% Senior Secured Notes, Class A-2 (the 2012 Senior Secured Notes) and Series 2013-1 4.352% Senior Secured Notes, Class A-2 (the 2013 Senior Secured Notes and, together with the 2012 Senior Secured Notes, the Senior Secured Notes), in accordance with the terms of the Senior Secured Notes. The Prepayments were made with the proceeds of the sale of the Companys entertainment division. The 2012 Senior Secured Notes were issued under a base indenture dated November 29, 2012 among Icon Brand Holdings LLC, Icon DE Intermediate Holdings LLC, Icon DE Holdings LLC and Icon NY Holdings LLC, each a limited-purpose, bankruptcy remote, wholly-owned direct or indirect subsidiary of the Company, and Citibank, N.A., as trustee and securities intermediary (the Base Indenture) and related supplemental indenture dated November 29, 2012. The 2013 Senior Secured Notes were issued under the Base Indenture and related supplemental indenture dated June 21, 2013. Following the Prepayments, the outstanding total principal balance of the Senior Secured Notes was approximately $433 million. The legal final maturity date of the Senior Secured Notes is in January of 2043, but it is anticipated that, unless earlier prepaid to the extent permitted under the Base Indenture and related supplemental indentures, the outstanding total principal balance of the Senior Secured Notes will be repaid in January 2020.
The information regarding repayment under the Senior Secured Term Loan included in Item 1.02 above is incorporated herein by reference.
Item 7.01 | Regulation FD Disclosure |
On July 3, 2017, the Company issued a press release announcing the sale of its entertainment division, the termination of its Credit Agreement and principal prepayment on a portion of its Senior Secured Notes described in Items 1.02, 2.01 and 2.04, a copy of which is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
The information in this Item 7.01, including Exhibit 99.1, is furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, regardless of any general incorporation language in those filings. In addition, the press release contains statements intended as forward-looking statements which are subject to the cautionary statements about forward-looking statements set forth in such press release.
Item 9.01 | Financial Statements and Exhibits |
(b) Pro Forma Financial Information
The pro forma financial information required to be furnished under this Item 9.01(b) is furnished as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.
(d) Exhibits
Exhibit |
Description | |
99.1 | Press Release of Iconix Brand Group, Inc., dated July 3, 2017.* | |
99.2 | Unaudited Pro Forma Condensed Financial Information.* |
* | Furnished herewith. |
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. | ||||
By: | /s/ David K. Jones | |||
Name: | David K. Jones | |||
Title: | Executive Vice President and Chief Financial Officer |
Date: July 7, 2017
EXHIBIT INDEX
Exhibit |
Description | |
99.1 | Press Release of Iconix Brand Group, Inc., dated July 3, 2017.* | |
99.2 | Unaudited Pro Forma Condensed Financial Information.* |
* | Furnished herewith. |
Exhibit 99.1
Iconix Reduces Debt by $362 Million and Completes the Sale of the Entertainment Segment
NEW YORK, July 3, 2017 /PRNewswire/ Iconix Brand Group, Inc. (Nasdaq: ICON) (Iconix or the Company), today announced a substantial reduction of its debt in conjunction with the completion of the previously reported sale of its entertainment segment for $345 million in cash, subject to customary working capital adjustments. The sale of the entertainment segment included the Companys 80% interest in the Peanuts brand and 100% interest in the Strawberry Shortcake brand.
The net proceeds from this transaction plus additional cash on the Companys balance sheet were used to pay down approximately $362 million principal amount of debt. This includes the full extinguishment of the $210 million outstanding balance of the Companys Senior Secured Term Loan and a mandatory payment of approximately $152 million of the Companys Senior Secured Notes issued under the Companys securitization facility. Following these transactions, the Companys total debt is approximately $828 million in principal amount, which includes approximately $433 million of Senior Secured Notes, a $100 million Variable Funding Note, and approximately $295 million of 2018 Convertible Notes.
John Haugh, Chief Executive Officer of Iconix, said, Improving the balance sheet has been a key objective of our Company, and with the entertainment sale complete we have made significant progress on this objective. In a little more than one year, we have reduced our debt by over $650 million and improved our leverage by approximately two turns.
The entertainment segments historical results will be reported in Iconix consolidated financial statements as a discontinued operation and in subsequent periods, Iconix consolidated financial statements will no longer reflect the assets, liabilities, results of operations or cash flows attributable to the entertainment segment.
About Iconix Brand Group, Inc.
Iconix Brand Group, Inc. owns, licenses and markets a portfolio of consumer brands including: CANDIES (R), BONGO (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), UMBRO (R), LEE COOPER (R), ECKO UNLTD. (R), MARC ECKO (R), and ARTFUL DODGER. In addition, Iconix owns interests in the MATERIAL GIRL (R), ED HARDY (R), TRUTH OR DARE (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 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.
Forward-Looking Statements
In addition to historical information, this press release contains forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements include projections regarding the Companys beliefs and expectations about future performance and, in some cases, may be identified by words like anticipate, assume, believe, continue, could, estimate, expect, intend, may, plan, potential, predict, project, future, will, seek and similar terms or phrases. These statements are based on the Companys beliefs and assumptions, which in turn are based on information available as of the date of this press release. Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement and could harm the Companys business, prospects, results of operations, liquidity and financial condition and cause its stock price to decline significantly. Many of these factors are beyond the Companys ability to control or predict. Important factors that could cause the
Companys actual results to differ materially from those indicated in the forward-looking statements include, among others: the ability of the Companys licensees to maintain their license agreements or to produce and market products bearing the Companys brand names, the Companys ability to retain and negotiate favorable licenses, the Companys ability to meet its outstanding debt obligations and the events and risks referenced in the sections titled Risk Factors in the Companys Annual Report on Form 10-K for the year ended December 31, 2016 and subsequent Quarterly Reports on Form 10-Q and in other documents filed or furnished with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and, except as required by applicable law, the Company undertakes no obligation to update or revise publicly any forward-looking statements.
Contact Information:
Jaime Sheinheit
Iconix Brand Group
jsheinheit@iconixbrand.com
212.730.0030
Exhibit 99.2
Unaudited Pro Forma Condensed Consolidated Financial Statements
On May 9, 2017, Iconix Brand Group, Inc. (Iconix or the Company) signed agreements to sell DHX Media, Ltd. (DHX) the Companys Entertainment business, which included an 80% interest in the Peanuts brand and a 100% interest in the Strawberry Shortcake brand, for a total purchase price of $345 million, subject to a customary working capital adjustment. The sales were made pursuant to the Membership Interest Purchase Agreement between the Company, Icon NY Holdings, LLC (Icon NY), IBG Borrower LLC (IBG Borrower, collectively with the Company and Icon NY, the Sellers), DHX and DHX SSP Holdings LLC (DHX SSP, and collectively with DHX, the Purchasers) and the Membership Interest Purchase Agreement, between the Company, IBG Borrower, DHX and DHX SSP, each dated as of May 9, 2017 (collectively, the Agreements).
On June 30, 2017, we completed the sale of our Entertainment business to DHX. The purchase price is subject to customary post-closing adjustments. As a result, the Iconix Entertainment business historical results will be reported in Iconixs consolidated financial statements as discontinued operations and in subsequent periods Iconixs consolidated financial statements will no longer reflect the assets, liabilities, results of operations or cash flows attributable to the Entertainment business.
The following unaudited pro forma condensed consolidated financial information and explanatory notes present the historical unaudited condensed consolidated balance sheet of Iconix as of March 31, 2017 and December 31, 2016 and the historical unaudited condensed consolidated statement of operations of Iconix for the three months ended March 31, 2017 as well as for the years ended December 31, 2016, December 31, 2015 and December 31, 2014. Consistent with the requirements of Article 11 of Regulation S-X, the unaudited pro forma condensed consolidated statements of operations have been presented on a continuing operations basis and are not necessarily indicative of the financial position or results of operations that would have actually occurred had the disposition been completed at or as of the dates indicated, nor is it indicative of the future operating results or financial position of Iconix in future periods.
The unaudited pro forma condensed consolidated financial statements give effect to the sale of our Entertainment business, which occurred on June 30, 2017 and the planned use of certain proceeds from that sale as if the transaction had occurred as of January 1, 2016 for purposes of the unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2016 and the three months ended March 31, 2017, respectively, and as of December 31, 2016 and March 31, 2017 for purposes of the unaudited pro forma condensed consolidated balance sheets for those respective periods. There were no pro forma adjustments in respect to the condensed consolidated statement of operations for the three months ended March 31, 2017. The adjustments included in these unaudited pro forma condensed consolidated financial statements are preliminary and may be revised.
The unaudited pro forma condensed consolidated financial information should be read in conjunction with the Companys audited consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission (the SEC) on March 15, 2017 as well as the Companys unaudited condensed consolidated financial statements and notes thereto included in the Companys Quarterly Report on Form 10-Q for the three months ended March 31, 2017 filed with the SEC on May 10, 2017.
Unaudited Pro Forma Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheet as of March 31, 2017
(in thousands, except par value)
Proforma Adjustments | ||||||||||||||||||||
Iconix Consolidated Historical |
Disposition of Iconix Entertainment |
Use of Proceeds from the Sale of Iconix Entertainment |
Pro Forma Adjusted |
|||||||||||||||||
Assets |
||||||||||||||||||||
Current Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 109,375 | $ | 338,000 | A | $ | (338,000 | ) | F | $ | 109,375 | |||||||||
Restricted cash |
98,725 | | | 98,725 | ||||||||||||||||
Accounts receivable, net |
59,921 | | | 59,921 | ||||||||||||||||
Other assets current |
32,864 | | | 32,864 | ||||||||||||||||
Current assets held for sale |
303,683 | (303,683 | ) | B | | | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Current Assets |
604,568 | 34,317 | (338,000 | ) | 300,885 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Property and equipment: |
||||||||||||||||||||
Furniture, fixtures and equipment |
20,704 | | | 20,704 | ||||||||||||||||
Less: Accumulated depreciation |
(14,258 | ) | | | (14,258 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
6,446 | | | 6,446 | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Other Assets: |
||||||||||||||||||||
Other assets |
10,040 | | | 10,040 | ||||||||||||||||
Deferred income tax asset |
884 | | | 884 | ||||||||||||||||
Trademarks and other intangibles, net |
1,005,457 | | | 1,005,457 | ||||||||||||||||
Investments and joint ventures |
98,065 | | | 98,065 | ||||||||||||||||
Goodwill |
171,250 | | | 171,250 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
1,285,696 | | | 1,285,696 | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Assets |
$ | 1,896,710 | $ | 34,317 | $ | (338,000 | ) | $ | 1,593,027 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities, Redeemable Non-Controlling Interest and Stockholders Equity |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Accounts payable and accrued expenses |
$ | 49,601 | 51,080 | C | $ | (61,365 | ) | G | $ | 39,316 | ||||||||||
Deferred revenue |
9,042 | | | 9,042 | ||||||||||||||||
Current portion of long-term debt |
453,464 | | | 453,464 | ||||||||||||||||
Other liabilities current |
666 | | | 666 | ||||||||||||||||
Current liabilities held for sale |
27,056 | (27,056 | ) | B | | | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Current Liabilities |
539,829 | 24,024 | (61,365 | ) | 502,488 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Deferred income tax liability |
80,529 | (13,034 | ) | G | 67,495 | |||||||||||||||
Other tax liabilities |
8,391 | | | 8,391 | ||||||||||||||||
Long-term debt, less current maturities |
706,163 | | (258,492 | ) | H | 447,671 | ||||||||||||||
Other liabilities |
9,747 | | | 9,747 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Liabilities |
$ | 1,344,659 | $ | 10,990 | $ | (319,857 | ) | $ | 1,035,792 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Redeemable Non-Controlling Interests |
53,632 | | | 53,632 | ||||||||||||||||
Commitments and contingencies |
||||||||||||||||||||
Stockholders Equity: |
||||||||||||||||||||
Common stock |
90 | | | 90 | ||||||||||||||||
Additional paid-in capital |
1,035,483 | | | 1,035,483 | ||||||||||||||||
Retained earnings |
251,911 | 67,112 | E | (18,143 | ) | I | 300,880 | |||||||||||||
Accumulated other comprehensive loss |
(68,369 | ) | | | (68,369 | ) | ||||||||||||||
Less: Treasury stock |
(843,795 | ) | | | (843,795 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Iconix Brand Group, Inc. Stockholders Equity |
375,320 | 67,112 | (18,143 | ) | 424,289 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Non-controlling interests, net of installment payments due from non-controlling interest holders |
123,099 | (43,785 | ) | B | | 79,314 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Stockholders Equity |
$ | 498,419 | $ | 23,327 | $ | (18,143 | ) | $ | 503,603 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Liabilities, Redeemable Non-Controlling Interest and Stockholders Equity |
$ | 1,896,710 | $ | 34,317 | $ | (338,000 | ) | $ | 1,593,027 | |||||||||||
|
|
|
|
|
|
|
|
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.
Unaudited Pro Forma Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheet as of December 31, 2016
(in thousands, except par value)
Proforma Adjustments | ||||||||||||||||||||
Iconix Consolidated Historical |
Disposition of Iconix Entertainment |
Use of Proceeds from the Sale of Iconix Entertainment |
Pro Forma Adjusted |
|||||||||||||||||
Assets |
||||||||||||||||||||
Current Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 137,114 | $ | 338,000 | A | $ | (338,000 | ) | F | $ | 137,114 | |||||||||
Restricted cash |
177,269 | | | 177,269 | ||||||||||||||||
Accounts receivable, net |
64,376 | | | 64,376 | ||||||||||||||||
Other assets current |
31,676 | | | 31,676 | ||||||||||||||||
Current assets held for sale |
302,342 | (302,342 | ) | B | | | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Current Assets |
712,777 | 35,658 | (338,000 | ) | 410,435 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Property and equipment: |
||||||||||||||||||||
Furniture, fixtures and equipment |
20,508 | | | 20,508 | ||||||||||||||||
Less: Accumulated depreciation |
(13,827 | ) | | | (13,827 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
6,681 | | | 6,681 | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Other Assets: |
||||||||||||||||||||
Other assets |
10,719 | | | 10,719 | ||||||||||||||||
Deferred income tax asset |
884 | | | 884 | ||||||||||||||||
Trademarks and other intangibles, net |
1,003,895 | | | 1,003,895 | ||||||||||||||||
Investments and joint ventures |
99,309 | | | 99,309 | ||||||||||||||||
Goodwill |
171,250 | | | 171,250 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
1,286,057 | | | 1,286,057 | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Assets |
$ | 2,005,515 | $ | 35,658 | $ | (338,000 | ) | $ | 1,703,173 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities, Redeemable Non-Controlling Interest and Stockholders Equity |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Accounts payable and accrued expenses |
$ | 60,401 | $ | 48,822 | C | $ | (59,916 | ) | G | $ | 49,307 | |||||||||
Deferred revenue |
8,399 | | | 8,399 | ||||||||||||||||
Current portion of long-term debt |
160,435 | | | 160,435 | ||||||||||||||||
Other liabilities current |
1,311 | | | 1,311 | ||||||||||||||||
Current liabilities held for sale |
28,583 | (28,583 | ) | B | | | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Current Liabilities |
259,129 | 20,239 | (59,916 | ) | 219,452 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Deferred income tax liability |
86,099 | (10,205 | ) | G | | 75,894 | ||||||||||||||
Other tax liabilities |
5,243 | | | 5,243 | ||||||||||||||||
Long-term debt, less current maturities |
1,093,725 | | (258,510 | ) | H | 835,215 | ||||||||||||||
Other liabilities |
9,946 | | | 9,946 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Liabilities |
$ | 1,454,142 | $ | 10,034 | $ | (318,426 | ) | $ | 1,145,750 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Redeemable Non-Controlling Interests, net of installment payments due from non-controlling interest holders |
56,729 | | | 56,729 | ||||||||||||||||
Commitments and contingencies |
||||||||||||||||||||
Stockholders Equity: |
||||||||||||||||||||
Common stock |
89 | | | 89 | ||||||||||||||||
Additional paid-in capital |
1,033,729 | | | 1,033,729 | ||||||||||||||||
Retained earnings |
254,915 | 68,118 | E | (19,574 | ) | I | 303,459 | |||||||||||||
Accumulated other comprehensive loss |
(70,428 | ) | | | (70,428 | ) | ||||||||||||||
Less: Treasury stock |
(842,952 | ) | | | (842,952 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Iconix Brand Group, Inc. Stockholders Equity |
375,353 | 68,118 | (19,574 | ) | 423,897 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Non-controlling interests, net of installment payments due from non-controlling interest holders |
119,291 | (42,494 | ) | B | | 76,797 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Stockholders Equity |
$ | 494,644 | $ | 25,624 | $ | (19,574 | ) | $ | 500,694 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Liabilities, Redeemable Non-Controlling Interest and Stockholders Equity |
$ | 2,005,515 | $ | 35,658 | $ | (338,000 | ) | $ | 1,703,173 | |||||||||||
|
|
|
|
|
|
|
|
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.
Unaudited Pro Forma Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 2017
(in thousands, except earnings per share data)
Pro Forma Adjustments | ||||||||||||
Iconix Consolidated Historical |
Use of Proceeds from the Sale of Iconix Entertainment |
Pro Forma Adjusted |
||||||||||
Licensing revenue |
$ | 58,722 | $ | 58,722 | ||||||||
|
|
|
|
|
|
|||||||
Selling, general and administrative expenses |
25,392 | 25,392 | ||||||||||
Depreciation and amortization |
653 | 653 | ||||||||||
Equity earnings on joint ventures |
(933 | ) | (933 | ) | ||||||||
Gains on sale of trademarks, net |
| | ||||||||||
|
|
|
|
|
|
|||||||
Operating income |
33,610 | 33,610 | ||||||||||
|
|
|
|
|
|
|||||||
Other expenses (income): |
||||||||||||
Interest expense |
15,049 | 15,049 | ||||||||||
Interest income |
(126 | ) | (126 | ) | ||||||||
Other income, net |
(1 | ) | (1 | ) | ||||||||
Loss on extinguishment of debt |
5,482 | 5,482 | ||||||||||
Foreign currency translation loss |
429 | 429 | ||||||||||
|
|
|
|
|
|
|||||||
Other expenses net |
20,833 | 20,833 | ||||||||||
|
|
|
|
|
|
|||||||
Income before income taxes |
12,777 | 12,777 | ||||||||||
|
|
|
|
|
|
|||||||
Provision for income taxes |
5,887 | 5,887 | ||||||||||
|
|
|
|
|
|
|||||||
Net income |
6,890 | 6,890 | ||||||||||
Less: Net income attributable to non-controlling interest |
2,488 | 2,488 | ||||||||||
|
|
|
|
|
|
|||||||
Net income attributable to Iconix Brand Group, Inc. |
$ | 4,402 | $ | 4,402 | ||||||||
|
|
|
|
|
|
|||||||
Earnings per share: |
||||||||||||
Basic |
$ | 0.08 | $ | 0.08 | ||||||||
|
|
|
|
|||||||||
Diluted |
$ | 0.08 | $ | 0.08 | ||||||||
|
|
|
|
|||||||||
Weighted average number of common shares outstanding: |
||||||||||||
Basic |
56,964 | 56,964 | ||||||||||
|
|
|
|
|||||||||
Diluted |
56,964 | 56,964 | ||||||||||
|
|
|
|
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.
Unaudited Pro Forma Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Statement of Operations for the Year Ended December 31, 2016
(in thousands, except earnings per share data)
Pro Forma Adjustments |
||||||||||||||
Iconix Consolidated Historical |
Discontinued Operations |
Pro Forma Adjusted |
||||||||||||
Licensing revenue |
$ | 368,461 | $ | (113,318 | ) | $ | 255,143 | |||||||
|
|
|
|
|
|
|||||||||
Selling, general and administrative expenses |
206,589 | (77,832 | ) | 128,757 | ||||||||||
Depreciation and amortization |
3,461 | (668 | ) | 2,793 | ||||||||||
Equity earnings on joint ventures |
(3,578 | ) | | (3,578 | ) | |||||||||
Gains on sale of trademarks, net |
(38,104 | ) | | (38,104 | ) | |||||||||
Goodwill impairment |
18,331 | | 18,331 | |||||||||||
Trademark impairment |
424,890 | (5,128 | ) | 419,762 | ||||||||||
|
|
|
|
|
|
|||||||||
Operating loss |
(243,128 | ) | (29,690 | ) | (272,818 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Other expenses (income): |
||||||||||||||
Interest expense |
97,542 | (20,286 | ) | D | 77,256 | |||||||||
Interest income |
(1,580 | ) | 676 | (904 | ) | |||||||||
Other income, net |
(17,508 | ) | | (17,508 | ) | |||||||||
Loss on extinguishment of debt, net |
5,903 | | 5,903 | |||||||||||
Foreign currency translation loss (gain) |
(1,484 | ) | 198 | (1,286 | ) | |||||||||
|
|
|
|
|
|
|||||||||
Other expenses net |
82,873 | (19,412 | ) | 63,461 | ||||||||||
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations before income taxes |
(326,001 | ) | (10,278 | ) | (336,279 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Benefit for income taxes |
(76,492 | ) | (1,689 | ) | (78,181 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Net loss from continuing operations |
(249,509 | ) | (8,589 | ) | (258,098 | ) | ||||||||
Less: Net income (loss) attributable to non-controlling interest from continuing operations |
2,625 | (5,952 | ) | (3,327 | ) | |||||||||
|
|
|
|
|
|
|||||||||
Net loss from continuing operations attributable to Iconix Brand Group, Inc. |
$ | (252,134 | ) | $ | (2,637 | ) | $ | (254,771 | ) | |||||
|
|
|
|
|
|
|||||||||
Loss per share: |
||||||||||||||
Basic |
$ | (4.82 | ) | $ | (4.82 | ) | ||||||||
|
|
|
|
|||||||||||
Diluted |
$ | (4.82 | ) | $ | (4.82 | ) | ||||||||
|
|
|
|
|||||||||||
Weighted average number of common shares outstanding: |
||||||||||||||
Basic |
52,338 | 52,338 | ||||||||||||
|
|
|
|
|||||||||||
Diluted |
52,338 | 52,338 | ||||||||||||
|
|
|
|
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.
Unaudited Pro Forma Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Statement of Operations for the Year Ended December 31, 2015
(in thousands, except earnings per share data)
Pro Forma Adjustments |
||||||||||||||
Iconix Consolidated Historical |
Discontinued Operations |
Pro Forma Adjusted |
||||||||||||
Licensing revenue |
$ | 379,197 | $ | (107,607 | ) | $ | 271,590 | |||||||
|
|
|
|
|
|
|||||||||
Selling, general and administrative expenses |
204,946 | (70,940 | ) | 134,006 | ||||||||||
Depreciation and amortization |
4,720 | (403 | ) | 4,317 | ||||||||||
Equity earnings on joint ventures |
(5,330 | ) | | (5,330 | ) | |||||||||
Gains on sale of trademarks, net |
| | | |||||||||||
Goodwill impairment |
35,132 | | 35,132 | |||||||||||
Trademark impairment |
402,392 | | 402,392 | |||||||||||
|
|
|
|
|
|
|||||||||
Operating loss |
(262,663 | ) | (36,264 | ) | (298,927 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Other expenses (income): |
||||||||||||||
Interest expense |
86,233 | (6,806 | ) | D | 79,427 | |||||||||
Interest income |
(4,230 | ) | 855 | (3,375 | ) | |||||||||
Other income, net |
(50,904 | ) | | (50,904 | ) | |||||||||
Loss on extinguishment of debt, net |
| | | |||||||||||
Foreign currency translation gain |
(9,488 | ) | (588 | ) | (10,076 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Other expenses net |
21,611 | (6,539 | ) | 15,072 | ||||||||||
|
|
|
|
|
|
|||||||||
Loss before income taxes |
(284,274 | ) | (29,725 | ) | (313,999 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Benefit for income taxes |
(95,344 | ) | (8,625 | ) | (103,969 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Loss |
(188,930 | ) | (21,100 | ) | (210,030 | ) | ||||||||
Less: Net income (loss) attributable to non-controlling interest |
373 | (6,023 | ) | (5,650 | ) | |||||||||
|
|
|
|
|
|
|||||||||
Net loss attributable to Iconix Brand Group, Inc. |
$ | (189,303 | ) | $ | (15,077 | ) | $ | (204,380 | ) | |||||
|
|
|
|
|
|
|||||||||
Loss per share: |
||||||||||||||
Basic |
$ | (3.92 | ) | $ | (3.92 | ) | ||||||||
|
|
|
|
|||||||||||
Diluted |
$ | (3.92 | ) | $ | (3.92 | ) | ||||||||
|
|
|
|
|||||||||||
Weighted average number of common shares outstanding: |
||||||||||||||
Basic |
48,293 | 48,293 | ||||||||||||
|
|
|
|
|||||||||||
Diluted |
48,293 | 48,293 | ||||||||||||
|
|
|
|
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.
Unaudited Pro Forma Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Statement of Operations for the Year Ended December 31, 2014
(in thousands, except earnings per share data)
Pro Forma Adjustments |
||||||||||||||
Iconix Consolidated Historical |
Discontinued Operations |
Pro Forma Adjusted |
||||||||||||
Licensing revenue |
$ | 391,490 | $ | (103,071 | ) | $ | 288,419 | |||||||
|
|
|
|
|
|
|||||||||
Selling, general and administrative expenses |
181,651 | (70,072 | ) | 111,579 | ||||||||||
Depreciation and amortization |
7,135 | (897 | ) | 6,238 | ||||||||||
Equity earnings on joint ventures |
(11,325 | ) | | (11,325 | ) | |||||||||
Gains on sale of trademarks, net |
(6,399 | ) | | (6,399 | ) | |||||||||
Goodwill impairment |
| | | |||||||||||
Trademark impairment |
| | | |||||||||||
|
|
|
|
|
|
|||||||||
Operating income |
220,428 | (32,102 | ) | 188,326 | ||||||||||
|
|
|
|
|
|
|||||||||
Other expenses (income): |
||||||||||||||
Interest expense |
84,523 | (6,872 | ) | D | 77,651 | |||||||||
Interest income |
(3,711 | ) | 610 | (3,101 | ) | |||||||||
Other income, net |
(29,239 | ) | | (29,239 | ) | |||||||||
Loss on extinguishment of debt, net |
| | | |||||||||||
Foreign currency translation loss |
1,745 | (507 | ) | 1,238 | ||||||||||
|
|
|
|
|
|
|||||||||
Other expenses net |
53,318 | (6,769 | ) | 46,549 | ||||||||||
|
|
|
|
|
|
|||||||||
Income before income taxes |
167,110 | (25,333 | ) | 141,777 | ||||||||||
|
|
|
|
|
|
|||||||||
Provision for income taxes |
48,288 | (7,142 | ) | 41,146 | ||||||||||
|
|
|
|
|
|
|||||||||
Net income |
118,822 | (18,191 | ) | 100,631 | ||||||||||
Less: Net income attributable to non-controlling interest |
15,099 | (6,271 | ) | 8,828 | ||||||||||
|
|
|
|
|
|
|||||||||
Net income attributable to Iconix Brand Group, Inc. |
$ | 103,723 | $ | (11,920 | ) | $ | 91,803 | |||||||
|
|
|
|
|
|
|||||||||
Earnings per share: |
||||||||||||||
Basic |
$ | 2.14 | $ | 2.14 | ||||||||||
|
|
|
|
|||||||||||
Diluted |
$ | 1.81 | $ | 1.81 | ||||||||||
|
|
|
|
|||||||||||
Weighted average number of common shares outstanding: |
||||||||||||||
Basic |
48,431 | 48,431 | ||||||||||||
|
|
|
|
|||||||||||
Diluted |
57,366 | 57,366 | ||||||||||||
|
|
|
|
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
NOTE 1 BASIS OF PRO FORMA PRESENTATION
The disposition of the Iconix Entertainment business qualifies for presentation as a discontinued operation under Accounting Standards Codification (ASC 205-20-45 Presentation of Financial Statements, Discontinued Operations, Other Presentation Matters).
We have adjusted our historical condensed consolidated statements of operations to reflect the Iconix Entertainment business as a discontinued operation for the periods presented as well as to reflect this transaction as if it had occurred as of January 1, 2016. We have adjusted the unaudited condensed consolidated balance sheet as if the transactions had been consummated as of December 31, 2016. The Iconix Entertainment business sale was completed on June 30, 2017.
The cash proceeds from the Iconix Entertainment business sale were used to (i) repay $152.5 million of our Senior Secured Notes, (ii) pay the transaction costs, (iii) pay the income taxes payable generated from the sale and (iv) repay $135.5 million of our Senior Secured Term Loan with CF ICX LLC and Fortress Credit Co LLC including $15.9 million of principal prepayment premium.
The unaudited pro forma condensed consolidated financial information does not reflect nonrecurring charges resulting from this disposition or future events that may occur after the disposition of this business, the potential realization of operating costs reductions (such as the elimination of talent and agent expenses), restructuring activities or other costs, and does not consider potential impact of current market conditions on revenues, expenses or other asset dispositions.
NOTE 2 ICONIX ENTERTAINMENT BUSINESS SALE
The following pro forma adjustments have been reflected in the unaudited pro forma condensed consolidated financial information. All adjustments to the historical unaudited condensed consolidated balance sheet assume the transaction occurred on December 31, 2016 and, therefore, do not reflect the changes in assets and liabilities sold subsequent to that date.
A. | Net cash proceeds received less anticipated transaction and other costs: |
Pro Forma Adjustment (in thousands) |
||||
Cash proceeds of the sale |
$ | 345,000 | ||
Less: Estimated transaction costs |
7,000 | |||
|
|
|||
Total cash proceeds less transaction costs |
$ | 338,000 | ||
|
|
B. | Represents the assets and liabilities of the Iconix Entertainment business which are subject to sale under the Member Interest Purchase Agreements, and the respective non-controlling interest to be eliminated upon the sale of business, as of the respective balance sheet date. |
C. | The table below represents the tax expense and related taxes payable associated with the Iconix Entertainment business sale. The tax expense is based on the jurisdictional tax rates for each legal entity that will recognize taxable gains associated with this sale offset by the use of foreign tax credits and net operating losses for taxable gains in the United States (U.S.): |
Pro Forma Adjustment (in thousands) |
||||||||
March 31, 2017 | December 31, 2016 | |||||||
Income tax expense at statutory rates |
$ | 38,046 | $ | 38,617 | ||||
Cumulative book tax differences |
27,550 | 24,721 | ||||||
Benefit of U.S. net operating loss utilization |
(6,516 | ) | (6,516 | ) | ||||
Benefit of U.S. foreign tax credit utilization |
(8,000 | ) | (8,000 | ) | ||||
|
|
|
|
|||||
Total income tax payable |
$ | 51,080 | $ | 48,822 | ||||
|
|
|
|
We have applied an effective tax rate of 36.2% which represents the stand-alone tax rate associated with the Iconix Entertainment business adjusted for the impact of the cumulative book tax differences, utilization of net operating loss carryforwards in the U.S and foreign tax credits utilized.
D. | Represents the allocation of interest expense to the Entertainment business in accordance of ASC 205-20-45-6 which was calculated utilized the estimated expected debt repayments of $135.5 million for our Senior Secured Term Loan and $152.5 million for our Senior Secured Notes. |
E. | The gain on sale of our Entertainment business if we had completed the sale as of March 31, 2017 and December 31, 2016 is calculated as follows: |
Pro Forma Adjustment (in thousands) |
||||||||
March 31, 2017 | December 31, 2016 | |||||||
Net cash proceeds |
$ | 338,000 | $ | 338,000 | ||||
Net assets sold |
(276,627 | ) | (273,759 | ) | ||||
Elimination of non-controlling interest |
43,785 | 42,494 | ||||||
|
|
|
|
|||||
Pre-tax gain on sale |
105,158 | 106,735 | ||||||
Tax expense |
38,046 | 38,617 | ||||||
|
|
|
|
|||||
After-tax gain on sale |
$ | 67,112 | $ | 68,118 | ||||
|
|
|
|
NOTE 3 USE OF PROCEEDS FROM THE ICONIX ENTERTAINMENT BUSINESS
We intend to use the cash proceeds from the sale of our Entertainment business to (i) repay $152.5 million of our Senior Secured Notes, (ii) pay the transaction costs, (iii) pay the income taxes payable generated from the sale and (iv) repay $135.5 million of our Senior Secured Term Loan with CF ICX LLC and Fortress Credit Co LLC including $15.9 million of principal prepayment premium.
For the purposes of the pro forma adjustments, the debt repayments were recalculated as if the debt was paid off as of the respective balance sheet date. Additionally, the income tax payable was calculated by calculating the pre-tax gain utilizing the net assets of the Entertainment business as of the respective balance sheet date. Refer to Note 2 for further details.
We have also adjusted our unaudited historical condensed consolidated statement of operations for the year ended December 31, 2016 and the three months ended March 31, 2017 to reflect the anticipated use of certain proceeds from the sale of the Iconix Entertainment business as if those proceeds had paid-off debt as of January 1, 2016 and January 1, 2017, respectively.
F. | Represents the recalculated payments against our debt as if the transaction had occurred on the respective period as follows: |
Pro Forma Adjustment (in thousands) |
||||||||
March 31, 2017 | December 31, 2016 | |||||||
Repayment of Senior Secured Notes |
$ | 152,151 | $ | 161,373 | ||||
Repayment of Senior Secured Term Loan |
120,724 | 111,245 | ||||||
Prepayment premium associated with the Senior Secured Term Loan |
14,045 | 16,561 | ||||||
|
|
|
|
|||||
Total |
$ | 286,920 | $ | 289,178 | ||||
|
|
|
|
Additionally, as noted above, the cash proceeds, net of transactions costs, from the sale of our Entertainment business will also be utilized to pay the income taxes payable generated from the sale as is calculated above in Note 1 and accordingly, we have included the income tax payable amount calculated as of the respective balance sheet date.
G. | Represents the reduction of income taxes payable for the payment of the income taxes generated as a result of the gain on sale of the Iconix Entertainment business as well as the reduction in income taxes (which was calculated utilizing the estimated statutory effective tax rate of 36.2%) related to the following items: (i) prepayment premium associated with the Senior Secured Term Loan, and (ii) write off of the pro-rata portion of the deferred financing costs and the original issue discount of the Senior Secured Notes and the Senior Secured Term Loan. For purposes of the unaudited pro forma consolidated balance sheet as of December 31, 2016 and March 31, 2017, we have assumed the use of proceeds occurred as of that date. |
Pro Forma Adjustment (in thousands) |
||||||||
March 31, 2017 | December 31, 2016 | |||||||
Income tax expense at statutory rates |
$ | 38,046 | $ | 38,617 | ||||
Cumulative book tax differences |
13,034 | 10,205 | ||||||
|
|
|
|
|||||
Total income tax payable |
51,080 | 48,822 | ||||||
Tax on Make Whole Premium / Deferred Financing Charges writeoff |
10,285 | 11,094 | ||||||
|
|
|
|
|||||
$ | 61,365 | $ | 59,916 | |||||
|
|
|
|
In addition, this represents the reduction of the deferred tax liability resulting from the gain on sale of the Entertainment business.
Pro Forma Adjustment (in thousands) |
||||||||
March 31, 2017 | December 31, 2016 | |||||||
Reversal of cummulative book tax difference |
$ | (27,550 | ) | $ | (24,721 | ) | ||
Use of available tax attributes |
14,516 | 14,516 | ||||||
|
|
|
|
|||||
Total deferred tax expense |
$ | (13,034 | ) | $ | (10,205 | ) | ||
|
|
|
|
H. | Represents the repayment of debt balances as are calculated above in F offset by the write-off of the pro-rata portion of the deferring financing costs and the amortization of the original issue discount. |
Pro Forma Adjustment (in thousands) |
||||||||
March 31, 2017 | December 31, 2016 | |||||||
Securitization - Release price on 12/31/16 |
$ | 152,151 | $ | 161,373 | ||||
Fortress Split |
120,724 | 111,245 | ||||||
Prorata portion of Deferred Financing Charges to writeoff |
14,383 | 14,108 | ||||||
|
|
|
|
|||||
$ | 258,492 | $ | 258,510 | |||||
|
|
|
|
I. | Represents the after-tax impact of the use of proceeds on retained earnings assuming the transaction occurred as of December 31, 2016. |
Pro Forma Adjustment (in thousands) |
||||||||
March 31, 2017 | December 31, 2016 | |||||||
Tax effected Make Whole Premium |
$ | 8,964 | $ | 5,992 | ||||
Tax effected Deferred Financing Charges writeoff |
9,179 | 9,004 | ||||||
|
|
|
|
|||||
$ | 18,143 | $ | 14,995 | |||||
|
|
|
|
NOTE 4 DISCONTINUED OPERATIONS
In March 2017, our Board of Directors approved a plan to sell the businesses underlying our Entertainment segment. On May 9, 2017, we signed a definitive agreement to sell these businesses for $345 million in cash, subject to a customary working capital adjustment. On June 30, 2017 we completed the sale of our Entertainment business to DHX. The table below classifies the results of our Entertainment segment as discontinued operations in our unaudited pro forma condensed consolidated statement of operations for the years ended December 31, 2016, 2015, and 2014. Additionally, the assets and liabilities associated with the discontinued operations are classified as held for sale in our unaudited pro forma condensed consolidated balance sheets as of March 31, 2017 and December 31, 2016. The assets and liabilities as December 31, 2016 are classified as current in our condensed consolidated balance sheet as we expected to close the sale of the Entertainment segment within one year of such date.
The financial results of our Entertainment segment, net of income taxes, have been removed to reflect the effect of the disposition and the retrospective presentation as discontinued operations in future filings. The following table presents the financial results of the Entertainment segment for the years ended December 31, 2016, 2015 and 2014:
Year Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(unaudited in thousands) | ||||||||||||
Licensing revenue |
$ | 113,318 | $ | 107,607 | $ | 103,071 | ||||||
Selling, general and administrative expenses |
82,960 | 70,940 | 70,072 | |||||||||
Depreciation and amortization |
668 | 403 | 897 | |||||||||
|
|
|
|
|
|
|||||||
Operating income |
29,690 | 36,264 | 32,102 | |||||||||
|
|
|
|
|
|
|||||||
Other expenses (income): |
||||||||||||
Interest expense |
20,286 | 6,806 | 6,872 | |||||||||
Interest income |
(676 | ) | (855 | ) | (610 | ) | ||||||
Loss on extinguishment of debt |
| | | |||||||||
Foreign currency translation loss (gain) |
(198 | ) | 588 | 507 | ||||||||
|
|
|
|
|
|
|||||||
Other expenses net |
19,412 | 6,539 | 6,769 | |||||||||
|
|
|
|
|
|
|||||||
Income from operations of discontinued operations before income taxes |
10,278 | 29,725 | 25,333 | |||||||||
Provision for income taxes |
1,689 | 8,625 | 7,142 | |||||||||
|
|
|
|
|
|
|||||||
Net income from discontinued operations |
8,589 | 21,100 | 18,191 | |||||||||
Less: Net income attributable to non-controlling interest from discontinued operations |
5,952 | 6,023 | 6,271 | |||||||||
|
|
|
|
|
|
|||||||
Income from discontinued operations attributable to Iconix Brand Group, Inc. |
$ | 2,637 | $ | 15,077 | $ | 11,920 | ||||||
|
|
|
|
|
|
Upon consummation of the sale of the Entertainment segment, the cash proceeds were utilized by the Company to make mandatory principal prepayments on both its Senior Secured Notes and Senior Secured Term Loan (as well as a corresponding prepayment premium). As a result and in accordance with ASC 205-20-45-6, the Company has allocated interest expense of $20.0 million, $6.8 million, and $6.9 million for the years ended December 31, 2016, December 31, 2015, and December 31, 2014, respectively, from continuing operations to discontinued operations.