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 60 DTR licenses and more than 450 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 requires 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 DTR license agreement at Kohl's will expire 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.
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We have disclosed these reportable segments for the periods shown below.
For the Three Months
Ended March 31,
2020 2019
Licensing revenue:
Women's $ 6,478 $ 8,367
Men's 6,757 10,935
Home 3,162 3,490
International 11,554 13,150
$ 27,951 $ 35,942
Operating income (loss):
Women's $ (1,143 ) $ 7,627
Men's 3,807 7,546
Home (811 ) 3,006
International 1,841 8,423
Corporate (8,544 ) (8,204 )
$ (4,850 ) $ 18,398
COVID-19 Pandemic
The spread of the novel coronavirus or COVID-19 ("COVID-19") during the first
quarter of 2020 has caused an economic downturn on a global scale, as well as
significant volatility in the financial markets. In
As the pandemic continues to unfold, the extent of the pandemic's effect on our operational and financial performance and liquidity will depend in large part on future developments, which cannot be predicted with confidence at this time. Future developments include changes in the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the resumption of widespread economic activity. Any prolonged material disruption on discretionary spending and consumer demand could negatively affect our licenses and impact our financial position, results of operations and cash flows.
Results of Operations
Licensing Revenue. Total revenue for the
Selling, General and Administrative Expenses. Total selling, general and
administrative expenses ("SG&A") were
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international segment decreased 13% from
Depreciation and Amortization. Depreciation and amortization decreased to
Equity (earnings)loss on joint ventures. Equity earnings on joint ventures was a
loss of
Trademark &
Operating Segment Brand / Trademark Territory Amount
Women's Rampage US $ 4,630
Women's Joe Boxer US 1,225
Home Waverly US 1,783
Home Royal Velvet US 838
International Umbro International 944
Other various various 4,313
Total $ 13,733 Operating Income (loss). Total operating loss for the
Other Expenses (income)-Net. Other expenses (income)- net was approximately
Provision for Income Taxes. The effective income tax rate for the
Net Income (loss). Our net income was a loss of 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
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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
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 7 of the Notes to unaudited condensed consolidated financial statements for detail on our existing debt arrangements.
Operating Activities
Net cash used by operating activities decreased
Investing Activities
Net cash used in investing activities decreased approximately
Financing Activities
Net cash used in financing activities increased approximately
Other Matters
Critical Accounting Policies
The Company's 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. There have been no material changes with
respect to the Company's critical accounting policies from those disclosed in
its 2019 Annual Report on Form 10-K filed with the
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Recent Accounting Pronouncements
See Note 19 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
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