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Iconix announces financial results

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Iconix Brand Group, Inc. reported financial results for the fourth quarter and full year ended 31st December, 2020.

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Bob Galvin, CEO commented, “Our entire organization committed to delivering the best possible results for our licensees and our shareholders this past year and I want to thank each of our associates for their dedication during this very difficult period. We operated at a high level throughout the pandemic due to our consistent focus on our business objectives. While we are hopeful that the pandemic will subside in 2021, we will continue to address the many pandemic-related challenges we face between now and then, and, at the same time, continue to focus on realizing the opportunity that exists for our brands through focusing on building our pipeline of future business. We had great success during this pandemic year, as we signed 190 deals for aggregate guaranteed minimum royalties of approximately $134 million, approximately the same amount that we signed in 2019.

Galvin continued, “We have also made great strides to de-lever our balance sheet. From December 31, 2019 to today, through proceeds from assets sales and cash flow, we have reduced our Term Loan balance by over 52%, or approximately $92 million.”

For the fourth quarter of 2020, total revenue was $33.9 million, a 22% decline, compared to $43.2 million in the fourth quarter of 2019. Revenue across all segments, except Home segment, was primarily negatively impacted by the effects of the COVID-19 pandemic on the global economy. The 21% decrease in revenue in Women’s segment was principally as a result of a decrease in licensing revenue from Mudd and London Fog brands partially offset by an increase in our Danskin Brand.

Revenue from the Men’s segment decreased 35% mainly due to a decrease in licensing revenue from Buffalo and Ecko Unltd brands partly offset by an increase in Umbro brand. Sales in Home segment improved by 62% principally due to an increase in licensing revenue from Charisma and Cannon brands, partially offset by a decrease in our Fieldcrest brand. International segment revenue declined 30% mainly due to decreases in Latin America and Europe.

For the twelve months ended 31st December, 2020, total revenue was $108.6 million, a 27% decline, compared to $149.0 million in the twelve months ended 31st December, 2019. The decrease was primarily driven by decreases in Woman’s, Men’s and International segments as a result of the negative impacts of the COVID-19 pandemic on the global economy.

Total SG&A expenses in the fourth quarter of 2020 were $17.4 million, a 27% decline compared to $23.9 million in the fourth quarter of 2019. The decline for the quarter was primarily driven by a decrease in professional fees, advertising costs and bad debt expense.

Total SG&A expenses in the twelve months ended 31st December, 2020 were $59.4 million, a 30% decline compared to $84.7 million in the twelve months ended December 31, 2019, as the company have aligned its costs to the current business level. The decline was primarily due to decreases in advertising expense, compensation costs and professional fees.

In the fourth quarter of 2020, the Company recorded a non-cash trademark impairment charge of $11.3 million. The charge for the fourth quarter of 2020 was mostly based on the current and estimated future cash flows on the fair value of the Candies and Rampage indefinite-lived trademarks. The Company recorded investment impairments of $2.4 million in the fourth quarter of 2020 as a result of a reduction in the fair value of Candies joint venture in China.

In the fourth quarter of 2019, the Company recorded a non-cash trademark impairment charge of $65.6 million, primarily related to the write-down in the Joe Boxer and Mudd trademarks in the Women’s segment and Fieldcrest in the Home segment. The Company also recorded a non-cash investment impairment charge of $9.6 million in the fourth quarter of 2019 due to impairment of the Company’s investment in MG Icon, which owns the Material Girl trademark, and an asset impairment charge of $1.8 million related to the consolidation and partial sublease of New York office space.

Total trademark, investment and asset impairment for the twelve months ended 31st December, 2020 was $54.7 million as compared to $94.0 million for the twelve months ended 31st December, 2019.

Operating income for the fourth quarter of 2020 was $2.6 million, as compared to operating loss of $60.4 million for the fourth quarter of 2019.  The fourth quarter 2020 results include $13.8 million of charges related to impairments. Adjusted EBITDA in the fourth quarter of 2020 was $18.4 million, which represents operating income of $2.6 million excluding net adjustments of $15.8 million. Adjusted EBITDA in the fourth quarter of 2019 was $21.1 million, which represents operating loss of $60.4 million excluding net charges of $81.5 million. The change period over period in Adjusted EBITDA was primarily as a result of reduced revenue largely driven by the impact of the COVID-19 pandemic on business, somewhat offset by reduced expenses driven by the Company’s cost reduction initiative.

Adjusted EBITDA margin in the fourth quarter of 2020 was 54% as compared to Adjusted EBITDA margin in the fourth quarter of 2019 of 49%. The change period over period in Adjusted EBITDA margin is primarily a result of the Company’s expenses decreasing at a faster rate than revenue.

Interest expense in the fourth quarter of 2020 was $15.4 million as compared to $13.5 million in the fourth quarter of 2019. The legal final maturity date of the Securitization Notes is in January of 2043. The Company did not repay or refinance the Securitization Notes prior to the anticipated repayment date. Therefore, beginning January 2020, the Company accrues additional interest on the Securitization Notes that is not payable until 2043. The increase in interest expense period over period was primarily the result of the step up in interest for the securitization.

In the fourth quarter of 2020, Other loss was $1.7 million as compared to a loss of $12.1 million in the fourth quarter of 2019. This result is primarily from the Company’s accounting for the 5.75% Convertible Notes, which requires recording the fair value of this debt at the end of each period with any change from the prior period accounted for as other income or loss in the respective period’s consolidated income statement.

Interest expense in the twelve months ended 31st December, 2020 was $67.7 million as compared to $56.9 million for the twelve months ended 31st December, 2019. For Other loss, net for the twelve months ended 31st December, 2020, the Company recognized a $3.6 million loss as compared to a $5.3 million in the prior year period.

The effective income tax rate for the fourth quarter of 2020 was 14.4%, which resulted in a $2.2 million income tax benefit, as compared to an effective income tax rate of -5.1% in the fourth quarter of 2019, which resulted in a $4.4 million income tax expense.  The income tax benefit for the fourth quarter of 2020, was primarily driven by a decrease in foreign taxes and a consolidated pretax loss for the quarter. The income tax expense for the fourth quarter of 2019 was primarily driven by the increase in foreign withholding taxes.

The effective tax rate for the twelve months ended 31st December, 2020 was 42.6%, which resulted in a 2.2 million tax benefit as compared to an effective income tax rate of -6.0% for the twelve months ended 31st December, 2019, which resulted in a $5.7 million tax expense. The increase in the effective tax rate was primarily due to a $6.7 million tax benefit generated during the current year related to the CARES Act which was calculated against a pre-tax loss as compared to the prior year where the Company calculated a current tax expense due to foreign withholding taxes calculated against a pre-tax loss.

GAAP net loss attributable to Iconix for the fourth quarter of 2020 reflected a net loss of $14.1 million, compared to a net loss of $93.0 million for the fourth quarter of 2019. GAAP diluted EPS for the fourth quarter of 2020 reflected a loss of $1.06 per share, compared to a loss of $7.94 per share for the fourth quarter of 2019.

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GAAP net loss attributable to Iconix for the twelve months ended 31st December, 2020 reflected a net loss of $7.3 million, compared to a net loss of $109.5 million for the twelve months ended 31st December, 2019. GAAP diluted EPS for the twelve months ended 31st December, 2020 reflected a loss of $0.60 per share compared to a loss of $10.37 per share for the twelve months ended 31st December, 2019.

Adjusted EBITDA for the fourth quarter of 2020 was $18.4 million, compared to $21.1 million for the fourth quarter of 2019.

 

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