ICONIX BRAND GROUP, INC. Executive Summary. We are a brand management company and owner of a diversified portfolio of approximately 30 global consumer brands across women's, men's, home and international industry segments. Our business strategy is to maximize the value of our brands primarily through strategic licenses and joint venture partnerships around the world, as well as to grow the portfolio of brands through strategic acquisitions.
As of
We principally look to monetize the Intellectual Property ("IP") related to our brands throughout the world and in all relevant categories by licensing directly with leading retailers ("direct to retail" or "DTR"), through a consortia of wholesale licensees, through joint ventures in specific territories and via other activity such as corporate sponsorships and content as well as the sale of IP for specific categories or territories. Products bearing our brands are sold across a variety of distribution channels. The licensees are generally responsible for designing, manufacturing, and distributing the licensed products. We support our brands with marketing, advertising and promotional campaigns designed to increase brand awareness. Additionally, we provide our licensees with coordinated trend direction to enhance product appeal and help build and maintain brand integrity.
Globally, we have over 50 DTR licenses and 420 total licenses. Licensees are
selected based upon our belief that such licensees will be able to produce and
sell quality products in the categories and distribution channels of their
specific expertise and that they are capable of exceeding minimum sales targets
and royalties that we generally require for each brand. This licensing strategy
is designed to permit us to operate our licensing business, leverage our core
competencies of marketing and brand management with minimal working capital, and
generally without inventory, production or distribution costs or risks, and
maintain high margins. The majority of our licensing agreements include minimum
guaranteed royalty revenue, which provides us with greater visibility into
future cash flows. As of
Our Candie's and Mudd exclusive DTR license agreement at Kohl's expired under
its terms in
Our goal of maximizing the value of our IP also includes, in certain instances, the sale to third parties of a brand's trademark in specific territories or categories. As such, we evaluate potential offers to acquire some or all of a brand's IP by comparing whether the offer is more valuable than our estimate of the current and potential revenue streams to be earned via our traditional licensing model. Further, as part of our evaluation process, we also consider whether or not the buyer's future development of the brand may help to expand the brand's overall recognition and global revenue potential.
We identify our operating segments according to how business activities are managed and evaluated and, for which separate financial information is available and utilized on a regular basis by the Chief Executive Officer in deciding how to allocate resources and in assessing performance.
34
--------------------------------------------------------------------------------
We have disclosed these reportable segments for the periods shown below.
For the Three Months
Ended March 31,
2021 2020
Licensing revenue:
Women's $ 3,806 $ 6,478
Men's 5,612 6,757
Home 2,466 3,162
International 11,750 11,554
$ 23,634 $ 27,951
Operating income (loss):
Women's $ 3,772 $ (1,143 )
Men's 4,812 3,807
Home 1,829 (811 )
International 7,780 1,841
Corporate 7,080 (8,544 )
$ 25,273 $ (4,850 )
COVID-19 Pandemic
The spread of the novel coronavirus or COVID-19 ("COVID-19") during the first
quarter of 2020 and its continued spread into 2021, has caused an economic
downturn on a global scale, as well as significant volatility in the financial
markets. In
Results of Operations
Licensing Revenue. Total revenue for the
Selling, General and Administrative Expenses. Total selling, general and
administrative expenses ("SG&A") were
Depreciation and Amortization. Depreciation and amortization was
35
--------------------------------------------------------------------------------
Equity (earnings)loss on joint ventures. Equity earnings on joint ventures was
less than
Gain on Sale of Trademarks and Investment. Gain on Sale of Trademarks and
Investment reflects the
Trademarks Impairment. Trademark Impairment loss for the
Operating Income. Total operating income for the
Other Expenses (income)-Net. Other expenses - net was approximately
Provision for (Benefit) for Income Taxes. The effective income tax rate for the
Net Income (loss). Our net income was approximately
Liquidity and Capital Resources
Liquidity
Our principal capital requirements are to refinance or extinguish existing
indebtedness and to fund working capital needs. We currently rely primarily on
asset sales and the issuance of indebtedness to refinance existing
indebtedness. At
Our Securitization Notes include a financial test, known as the debt service
coverage ratio ("DSCR") that measures the amount of principal and interest
required to be paid on the Co-Issuers' debt to the approximate cash flow
available to pay such principal and interest. As a result of a decline in
royalty collections during the twelve months ended
36
--------------------------------------------------------------------------------
In
We may, from time to time, seek to retire or repurchase our outstanding debt through cash purchases and/or exchanges for equity or debt securities, in open market transactions, privately negotiated transactions, or otherwise. Such repurchase or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any such transactions may individually or in the aggregate, be material.
This "Liquidity" section should be read in conjunction with the "COVID-19 Pandemic" section above. See Note 8 of the Notes to unaudited condensed consolidated financial statements for detail on our existing debt arrangements.
Operating Activities
Net cash provided by operating activities increased
Investing Activities
Net cash provided by investing activities increased approximately
Financing Activities
Net cash used in financing activities increased approximately
Other Matters
Critical Accounting Policies
Our consolidated financial statements are based on the accounting policies used.
Certain accounting polices require that estimates and assumptions be made by
management for use in the preparation of the financial statements. Critical
accounting policies are those that are central to the presentation of the
Company's financial condition and results and that require subjective or complex
estimates by management. We believe that the assumptions and estimates
associated with revenue recognitions, allowances for doubtful accounts and
impairment of our intangible assets have the greatest impact on our condensed
consolidated financial statements. Therefore, we consider these to be our
critical accounting policies and estimates. There have been no material changes
with respect to our critical accounting policies from those disclosed in its
2020 Annual Report on Form 10-K filed with the
Recent Accounting Pronouncements
Refer to Note 20 of the notes to unaudited condensed consolidated financial statements for recent accounting pronouncements.
The statements that are not historical facts contained in this Quarterly Report
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 our control, which may cause our actual
results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by such forward
looking statements. These risks are detailed in our Form 10-K for the fiscal
year ended
37
--------------------------------------------------------------------------------
© Edgar Online, source
