United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
☒ |
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Quarterly Period Ended June 30, 2019
OR
☐ |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Transition Period From to .
Commission file number 1-10593
ICONIX BRAND GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware |
|
11-2481903 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
1450 Broadway, New York, NY |
|
10018 |
(Address of principal executive offices) |
|
(Zip Code) |
(212) 730-0030
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
Common Stock, $0.001 par value |
|
ICON |
|
The Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
☐ |
|
|
|
|
|
|
|
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
☒ |
|
|
|
|
|
|
|
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.
As of August 7, 2019, 11,630,515 shares of the registrant’s Common Stock, par value $.001 were outstanding.
Item 1. Financial Statements
Iconix Brand Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except par value)
|
June 30, 2019 |
|
|
December 31, 2018 |
|
|||
Assets |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
52,426 |
|
|
$ |
66,609 |
|
Restricted cash |
|
|
14,632 |
|
|
|
16,026 |
|
Accounts receivable, net |
|
|
29,496 |
|
|
|
37,671 |
|
Contract asset |
|
|
4,924 |
|
|
|
4,802 |
|
Other assets – current |
|
|
42,800 |
|
|
|
28,057 |
|
Total Current Assets |
|
|
144,278 |
|
|
|
153,165 |
|
Property and equipment: |
|
|
|
|
|
|
|
|
Furniture, fixtures and equipment |
|
|
22,884 |
|
|
|
22,525 |
|
Less: Accumulated depreciation |
|
|
(18,573 |
) |
|
|
(17,644 |
) |
|
|
|
4,311 |
|
|
|
4,881 |
|
Other Assets: |
|
|
|
|
|
|
|
|
Other assets |
|
|
5,634 |
|
|
|
5,979 |
|
Contract asset |
|
|
15,968 |
|
|
|
14,560 |
|
Right-of-use asset |
|
|
7,425 |
|
|
|
— |
|
Trademarks and other intangibles, net |
|
|
340,843 |
|
|
|
337,700 |
|
Investments and joint ventures |
|
|
89,581 |
|
|
|
89,691 |
|
Goodwill |
|
|
26,099 |
|
|
|
26,099 |
|
|
|
|
485,550 |
|
|
|
474,029 |
|
Total Assets |
|
$ |
634,139 |
|
|
$ |
632,075 |
|
Liabilities, Redeemable Non-Controlling Interest and Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
46,007 |
|
|
$ |
44,856 |
|
Deferred revenue |
|
|
7,595 |
|
|
|
5,405 |
|
Current portion of long-term debt |
|
|
67,163 |
|
|
|
54,263 |
|
Other liabilities – current |
|
|
12,788 |
|
|
|
9,788 |
|
Total Current Liabilities |
|
|
133,553 |
|
|
|
114,312 |
|
Deferred income tax liability |
|
|
5,510 |
|
|
|
4,566 |
|
Long-term debt, less current maturities (includes $23,190 and $48,076, respectively, at fair value) |
|
|
574,978 |
|
|
|
620,966 |
|
Other liabilities |
|
|
9,195 |
|
|
|
3,829 |
|
Total Liabilities |
|
|
723,236 |
|
|
|
743,673 |
|
Redeemable Non-Controlling Interest |
|
|
34,343 |
|
|
|
34,137 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Stockholders’ Deficit: |
|
|
|
|
|
|
|
|
Common stock, $.001 par value shares authorized 260,000; shares issued 14,928 and 11,162, respectively |
|
|
15 |
|
|
|
11 |
|
Additional paid-in capital |
|
|
1,045,518 |
|
|
|
1,037,372 |
|
Accumulated losses |
|
|
(293,580 |
) |
|
|
(312,796 |
) |
Accumulated other comprehensive loss |
|
|
(53,671 |
) |
|
|
(53,068 |
) |
Less: Treasury stock – 3,369 and 3,323 shares at cost, respectively |
|
|
(844,334 |
) |
|
|
(844,253 |
) |
Total Iconix Brand Group, Inc. Stockholders’ Deficit |
|
|
(146,052 |
) |
|
|
(172,734 |
) |
Non-Controlling Interest, net of installment payments due from non-controlling interest holders |
|
|
22,612 |
|
|
|
26,999 |
|
Total Stockholders’ Deficit |
|
|
(123,440 |
) |
|
|
(145,735 |
) |
Total Liabilities, Redeemable Non-Controlling Interest and Stockholders’ Equity |
|
$ |
634,139 |
|
|
$ |
632,075 |
|
See Notes to Unaudited Condensed Consolidated Financial Statements.
2
Iconix Brand Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except earnings per share data)
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|
||||||||||
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
|||||
Licensing revenue |
|
$ |
34,394 |
|
|
$ |
50,212 |
|
|
$ |
70,336 |
|
|
$ |
98,761 |
|
|
Selling, general and administrative expenses |
|
|
16,435 |
|
|
|
28,643 |
|
|
|
34,528 |
|
|
|
62,241 |
|
|
Loss on termination of licenses |
|
|
— |
|
|
|
5,650 |
|
|
|
— |
|
|
|
5,650 |
|
|
Depreciation and amortization |
|
|
482 |
|
|
|
632 |
|
|
|
974 |
|
|
|
1,286 |
|
|
Equity earnings on joint ventures |
|
|
(1,095 |
) |
|
|
(1,149 |
) |
|
|
(2,137 |
) |
|
|
(1,245 |
) |
|
Gain on sale of trademarks |
|
|
— |
|
|
|
(125 |
) |
|
|
— |
|
|
|
(1,268 |
) |
|
Goodwill impairment |
|
|
— |
|
|
|
37,812 |
|
|
|
— |
|
|
|
37,812 |
|
|
Trademark impairment |
|
|
— |
|
|
|
73,335 |
|
|
|
— |
|
|
|
73,335 |
|
|
Operating income (loss) |
|
|
18,572 |
|
|
|
(94,586 |
) |
|
|
36,971 |
|
|
|
(79,050 |
) |
|
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
14,465 |
|
|
|
14,827 |
|
|
|
28,970 |
|
|
|
29,376 |
|
|
Interest income |
|
|
(90 |
) |
|
|
(92 |
) |
|
|
(162 |
) |
|
|
(214 |
) |
|
Other income, net |
|
|
1,140 |
|
|
|
(32,083 |
) |
|
|
(18,795 |
) |
|
|
(58,215 |
) |
|
Gain on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,473 |
) |
|
Foreign currency translation (gain) loss |
|
|
(258 |
) |
|
|
704 |
|
|
|
369 |
|
|
|
152 |
|
|
Other expenses (income) – net |
|
|
15,257 |
|
|
|
(16,644 |
) |
|
|
10,382 |
|
|
|
(33,374 |
) |
|
Income (loss) before income taxes |
|
|
3,315 |
|
|
|
(77,942 |
) |
|
|
26,589 |
|
|
|
(45,676 |
) |
|
(Benefit) provision for income taxes |
|
|
(130 |
) |
|
|
(2,804 |
) |
|
|
1,838 |
|
|
|
(1,154 |
) |
|
Net income (loss) |
|
|
3,445 |
|
|
|
(75,138 |
) |
|
|
24,751 |
|
|
|
(44,522 |
) |
|
Less: Net income attributable to non-controlling interest |
|
|
2,174 |
|
|
|
4,291 |
|
|
|
5,535 |
|
|
|
7,148 |
|
|
Net income (loss) attributable to Iconix Brand Group, Inc. |
|
$ |
1,271 |
|
|
$ |
(79,429 |
) |
|
$ |
19,216 |
|
|
$ |
(51,670 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.12 |
|
|
$ |
(12.04 |
) |
|
$ |
2.04 |
|
|
$ |
(8.26 |
) |
|
Diluted |
|
$ |
0.12 |
|
|
$ |
(12.04 |
) |
|
$ |
0.08 |
|
|
$ |
(8.26 |
) |
|
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
10,377 |
|
|
|
6,598 |
|
|
|
9,426 |
|
|
|
6,257 |
|
|
Diluted |
|
|
10,377 |
|
|
|
6,598 |
|
|
|
44,779 |
|
|
|
6,257 |
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements.
3
Iconix Brand Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income
(in thousands)
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Net income (loss) |
|
$ |
3,445 |
|
|
$ |
(75,138 |
) |
|
$ |
24,751 |
|
|
$ |
(44,522 |
) |
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation (loss) gain |
|
|
1,121 |
|
|
|
(5,541 |
) |
|
|
(603 |
) |
|
|
(2,780 |
) |
Total other comprehensive (loss) income |
|
|
1,121 |
|
|
|
(5,541 |
) |
|
|
(603 |
) |
|
|
(2,780 |
) |
Comprehensive income (loss) |
|
$ |
4,566 |
|
|
$ |
(80,679 |
) |
|
$ |
24,148 |
|
|
$ |
(47,302 |
) |
Less: comprehensive income attributable to non-controlling interest |
|
|
2,174 |
|
|
|
4,291 |
|
|
|
5,535 |
|
|
|
7,148 |
|
Comprehensive income (loss) attributable to Iconix Brand Group, Inc. |
|
$ |
2,392 |
|
|
$ |
(84,970 |
) |
|
$ |
18,613 |
|
|
$ |
(54,450 |
) |
See Notes to Unaudited Condensed Consolidated Financial Statements.
4
Iconix Brand Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statement of Stockholders’ Deficit
(in thousands)
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|
|||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
||||
Beginning balance (shares) |
|
|
12,207 |
|
|
|
9,682 |
|
|
|
11,162 |
|
|
|
9,016 |
|
|
Shares issued on vesting of restricted stock |
|
|
8 |
|
|
|
4 |
|
|
|
95 |
|
|
|
29 |
|
|
Shares issued on conversion of 5.75% Convertible Notes |
|
|
2,713 |
|
|
|
463 |
|
|
|
3,671 |
|
|
|
1,104 |
|
|
Common Stock (shares) |
|
|
14,928 |
|
|
|
10,149 |
|
|
|
14,928 |
|
|
|
10,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance (amount) |
|
$ |
12 |
|
|
$ |
10 |
|
|
$ |
11 |
|
|
$ |
9 |
|
|
Shares issued on conversion of 5.75% Convertible Notes |
|
|
3 |
|
|
|
— |
|
|
|
4 |
|
|
|
1 |
|
|
Common Stock (amount) |
|
$ |
15 |
|
|
$ |
10 |
|
|
$ |
15 |
|
|
$ |
10 |
|
|
Beginning balance |
|
|
1,039,474 |
|
|
|
1,031,171 |
|
|
|
1,037,372 |
|
|
|
1,044,599 |
|
|
Shares issued on conversion of 5.75% Convertible Notes |
|
|
4,179 |
|
|
|
3,947 |
|
|
|
6,179 |
|
|
|
12,693 |
|
|
Write-off of equity component of 1.50% Convertible Notes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(23,250 |
) |
|
Elimination of non-controlling interest related to the acquisition of additional interest in Hydraulic joint venture |
|
|
— |
|
|
|
2,097 |
|
|
|
— |
|
|
|
2,097 |
|
|
Change in redemption value of redeemable non-controlling interest |
|
|
1,586 |
|
|
|
— |
|
|
|
1,586 |
|
|
|
— |
|
|
Compensation expense in connection with restricted stock |
|
|
258 |
|
|
|
499 |
|
|
|
398 |
|
|
|
1,518 |
|
|
Tax benefit related to amortization of convertible notes' discount |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
35 |
|
|
Foreign currency translation |
|
|
21 |
|
|
|
(44 |
) |
|
|
(17 |
) |
|
|
(22 |
) |
|
Additional Paid-In Capital |
|
$ |
1,045,518 |
|
|
$ |
1,037,670 |
|
|
$ |
1,045,518 |
|
|
$ |
1,037,670 |
|
|
Beginning balance |
|
|
(294,460 |
) |
|
|
(182,105 |
) |
|
|
(312,796 |
) |
|
|
(223,718 |
) |
|
Cumulative effect of accounting change for adoption of ASU 606 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16,540 |
|
|
Cumulative effect of accounting change for adoption of ASU 2016-01 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,177 |
) |
|
Change in redemption value of redeemable non-controlling interest |
|
|
(391 |
) |
|
|
504 |
|
|
|
— |
|
|
|
995 |
|
|
Net (loss) income |
|
|
1,271 |
|
|
|
(79,429 |
) |
|
|
19,216 |
|
|
|
(51,670 |
) |
|
Accumulated Losses |
|
$ |
(293,580 |
) |
|
$ |
(261,030 |
) |
|
$ |
(293,580 |
) |
|
$ |
(261,030 |
) |
|
Beginning balance |
|
|
(54,792 |
) |
|
|
(45,342 |
) |
|
|
(53,068 |
) |
|
|
(51,280 |
) |
|
Cumulative effect of accounting change for adoption of ASU 2016-01 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,177 |
|
|
Foreign currency translation |
|
|
1,121 |
|
|
|
(5,541 |
) |
|
|
(603 |
) |
|
|
(2,780 |
) |
|
Accumulated Other Comprehensive Loss |
|
$ |
(53,671 |
) |
|
$ |
(50,883 |
) |
|
$ |
(53,671 |
) |
|
$ |
(50,883 |
) |
|
Beginning balance |
|
|
(844,309 |
) |
|
|
(844,055 |
) |
|
|
(844,253 |
) |
|
|
(844,030 |
) |
|
Shares repurchased on vesting of restricted stock |
|
|
(25 |
) |
|
|
(121 |
) |
|
|
(81 |
) |
|
|
(146 |
) |
|
Treasury Stock |
|
$ |
(844,334 |
) |
|
$ |
(844,176 |
) |
|
$ |
(844,334 |
) |
|
$ |
(844,176 |
) |
|
Beginning balance |
|
|
31,614 |
|
|
|
25,495 |
|
|
|
26,999 |
|
|
|
23,444 |
|
|
Cumulative effect of accounting change for adoption of ASC 606 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,176 |
|
|
Elimination of non-controlling interest related to the acquisition of additional interest in Hydraulic joint venture |
|
|
— |
|
|
|
(2,097 |
) |
|
|
— |
|
|
|
(2,097 |
) |
|
Payments from non-controlling interest holders, net of imputed interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
195 |
|
|
Reclass from redeemable NCI |
|
|
(4,759 |
) |
|
|
— |
|
|
|
(856 |
) |
|
|
— |
|
|
Net (loss) income |
|
|
1,238 |
|
|
|
4,291 |
|
|
|
4,599 |
|
|
|
7,148 |
|
|
Distributions to joint ventures |
|
|
(5,481 |
) |
|
|
(3,583 |
) |
|
|
(8,130 |
) |
|
|
(5,760 |
) |
|
Non-Controlling Interest |
|
$ |
22,612 |
|
|
$ |
24,106 |
|
|
$ |
22,612 |
|
|
$ |
24,106 |
|
|
Total Stockholders' Deficit |
|
$ |
(123,440 |
) |
|
$ |
(94,303 |
) |
|
$ |
(123,440 |
) |
|
$ |
(94,303 |
) |
|
See Notes to Unaudited Condensed Consolidated Financial Statements.
5
Iconix Brand Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
|
For the Six Months Ended June 30, |
|
||||||
|
|
2019 |
|
|
2018 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
24,751 |
|
|
$ |
(44,522 |
) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation of property and equipment |
|
|
934 |
|
|
|
1,135 |
|
Amortization of trademarks and other intangibles |
|
|
40 |
|
|
|
151 |
|
Amortization of deferred financing costs and debt discount |
|
|
6,044 |
|
|
|
1,587 |
|
Amortization of convertible note discount |
|
|
— |
|
|
|
5,411 |
|
Third party fees associated with the issuance of 5.75% Convertible Notes |
|
|
— |
|
|
|
4,958 |
|
Stock-based compensation (benefit) expense |
|
|
398 |
|
|
|
1,518 |
|
Provision for doubtful accounts |
|
|
(244 |
) |
|
|
1,744 |
|
Writeoff of contract assets |
|
|
573 |
|
|
|
417 |
|
Periodic lease cost |
|
|
1,101 |
|
|
|
— |
|
Earnings on equity investments in joint ventures |
|
|
(2,137 |
) |
|
|
(1,245 |
) |
Distributions from equity investments |
|
|
— |
|
|
|
1,913 |
|
Gain on sale of trademarks, net |
|
|
— |
|
|
|
(1,268 |
) |
Trademark impairment |
|
|
— |
|
|
|
73,335 |
|
Goodwill impairment |
|
|
— |
|
|
|
37,812 |
|
Settlement of note receivable related to formation of Buffalo joint venture |
|
|
— |
|
|
|
1,141 |
|
Mark to market adjustment on convertible note |
|
|
(20,275 |
) |
|
|
(56,496 |
) |
Loss (gain) on debt to equity conversions |
|
|
1,572 |
|
|
|
(1,057 |
) |
Gain on sale of Complex Media |
|
|
— |
|
|
|
(958 |
) |
Gain on sale of interest in Ningbo Material Girl |
|
|
(209 |
) |
|
|
— |
|
Gain on extinguishment of debt |
|
|
— |
|
|
|
(4,473 |
) |
Income on other equity investment |
|
|
117 |
|
|
|
296 |
|
Deferred income tax benefit |
|
|
999 |
|
|
|
(5,253 |
) |
Loss on foreign currency translation |
|
|
369 |
|
|
|
152 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
8,130 |
|
|
|
18,668 |
|
Other assets – current |
|
|
(2,447 |
) |
|
|
2,779 |
|
Other assets |
|
|
(1,635 |
) |
|
|
(2,481 |
) |
Deferred revenue |
|
|
2,198 |
|
|
|
3,715 |
|
Accounts payable and accrued expenses |
|
|
(9,227 |
) |
|
|
(457 |
) |
Other tax liabilities |
|
|
— |
|
|
|
(531 |
) |
Other liabilities |
|
|
(1,100 |
) |
|
|
1,357 |
|
Net cash provided by operating activities |
|
|
9,952 |
|
|
|
39,348 |
|
Cash flows provided by (used in) investing activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(367 |
) |
|
|
(571 |
) |
Acquisition of trademarks from Iconix Southeast Asia |
|
|
(2,067 |
) |
|
|
(2,120 |
) |
Acquisition of remaining interest in Iconix Canada |
|
|
— |
|
|
|
(4,875 |
) |
Acquisition of Badgley Mischka and Sharper Image trademarks in certain international joint ventures |
|
|
— |
|
|
|
(1,289 |
) |
Proceeds from sale of interest in Badgley Mischka in certain international joint ventures |
|
|
— |
|
|
|
2,500 |
|
Proceeds from sale of interest in Ningbo Material Girl |
|
|
3,000 |
|
|
|
— |
|
Proceeds from sale of Complex Media |
|
|
— |
|
|
|
958 |
|
Proceeds from note receivable from formation of Buffalo joint venture |
|
|
— |
|
|
|
1,409 |
|
Additions to trademarks |
|
|
(3,825 |
) |
|
|
(256 |
) |
Net cash used in investing activities |
|
|
(3,259 |
) |
|
|
(4,244 |
) |
Cash flows provided by (used in) financing activities: |
|
|
|
|
|
|
|
|
Prepaid financing costs |
|
|
— |
|
|
|
(5,423 |
) |
Proceeds from long-term debt, net of discount and fees |
|
|
— |
|
|
|
95,700 |
|
Payment of long-term debt |
|
|
(14,246 |
) |
|
|
(134,018 |
) |
Proceeds from sale of trademarks and related notes receivable from consolidated JVs |
|
|
— |
|
|
|
195 |
|
Distributions to non-controlling interests |
|
|
(8,130 |
) |
|
|
(10,168 |
) |
Tax benefit related to amortization of convertible notes' discount |
|
|
— |
|
|
|
35 |
|
Cost of shares repurchased on vesting of restricted stock |
|
|
(81 |
) |
|
|
(146 |
) |
Net cash used in financing activities |
|
|
(22,457 |
) |
|
|
(53,825 |
) |
Effect of exchange rate changes on cash and restricted cash |
|
|
187 |
|
|
|
(411 |
) |
Net decrease in cash and cash equivalents, and restricted cash |
|
|
(15,577 |
) |
|
|
(19,132 |
) |
Cash, cash equivalents, and restricted cash, beginning of period |
|
|
82,635 |
|
|
|
114,693 |
|
Cash, cash equivalents, and restricted cash, end of period |
|
$ |
67,058 |
|
|
$ |
95,561 |
|
6
Supplemental disclosure of cash flow information:
|
For the Six Months Ended June 30, |
|
||||||
|
|
2019 |
|
|
2018 |
|
||
Cash paid during the period: |
|
|
|
|
|
|
|
|
Income taxes (net of refunds received) |
|
$ |
3,997 |
|
|
$ |
5,031 |
|
Interest |
|
$ |
19,941 |
|
|
$ |
20,246 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Non-cash additions to operating lease assets |
|
$ |
10,462 |
|
|
$ |
— |
|
Shares issued upon conversion of debt to equity |
|
$ |
6,183 |
|
|
$ |
12,694 |
|
See Notes to Unaudited Condensed Consolidated Financial Statements.
7
Iconix Brand Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2019
(dollars in thousands (unless otherwise noted) except per share data)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management of Iconix Brand Group, Inc. (the “Company,” “we,” “us,” or “our”), all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended June 30, 2019 (“Current Quarter”) and the six months ended June 30, 2019 (“Current Six Months”) are not necessarily indicative of the results that may be expected for a full fiscal year. The interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
During the Current Six Months, the Company adopted one new accounting pronouncement. Refer to Note 20 for further details.
Correction of an Immaterial Error
During the Current Six Months, the Company determined that the impact of the accretion of redeemable noncontrolling interest to the Company’s earnings per share calculation had been incorrectly recorded in the Company’s condensed consolidated statement of operations for the Prior Year Quarter, the Prior Year Six Months, the quarter ended September 30, 2018 and the nine months ended September 30, 2018. Basic and diluted earnings per share for the Prior Year Quarter and Prior Year Six Months have been corrected in this Form 10-Q. Management evaluated the materiality of this error from a quantitative and qualitative perspective and concluded that the adjustments to earnings per share were not material to the Company’s presentation and disclosures, and has no material impact on the Company’s financial position, results of operations and cash flows. Accordingly, no amendments to previously filed reports are deemed necessary. After taking into effect this adjustment, for the quarter ended September 30, 2018 and the nine months ended September 30, 2018, basic earnings per share would have been income of $2.81 and a loss of $4.87, respectively, and diluted earnings per share would have been income of $0.26 and a loss of $7.35, respectively.
Certain reclassifications, which were immaterial, have been made to conform prior year data to the current presentation. During the Current Six Months, the Company also made a reclassification between redeemable noncontrolling interest and noncontrolling interest.
Liquidity
These consolidated financial statements are prepared on a going concern basis that contemplates the realization of cash flows from assets and discharge of liabilities, in each case, in the ordinary course of business consistent with the Company’s prior periods. The Company considered, among other things, the Sears Holdings Corporation’s bankruptcy filing on October 15, 2018, and determined that the bankruptcy filing is not expected to have a material adverse impact on the Company’s ability to continue as a going concern. Based on the Company’s financial plans and projections for 2019, which assumes the realization of significant cost savings, among other things, from the successful implementation of the Company’s current strategic initiatives, the Company does not expect the occurrence of any payment defaults on its outstanding debt facilities in the next twelve months, and otherwise expects to generate sufficient cash to meet its operating cash flow needs and maintain compliance with the financial covenants set forth in its various debt facilities during such period. In particular, management believes the allocation of residual royalty collections to a restricted reserve account (as is discussed in Note 9) is not expected to have a material adverse impact on the Company’s ability to meet such cash flow needs.
For additional information, please refer to Note 1 of Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
Reverse Stock Split
On March 14, 2019, the Company effected a 1-for-10 reverse stock split (the “Reverse Stock Split”) of its common stock. Unless the context otherwise requires, all share and per share amounts in this quarterly report on Form 10-Q have been adjusted to reflect the Reverse Stock Split. Refer to Note 9 for further details.
8
Licensing Revenue
The Company licenses its brands across a broad range of product categories, including fashion apparel, footwear, accessories, sportswear, home furnishings and décor, and beauty and fragrance. The Company seeks licensees with the ability to produce and sell quality products in their licensed categories and to meet and exceed minimum sales and royalty payment thresholds.
The Company maintains direct-to-retail and traditional wholesale licenses. Typically, in a direct-to-retail license, the Company grants exclusive rights to one of its brands to a national retailer for a broad range of product categories. Direct-to-retail licenses provide retailers with proprietary rights to national brands at favorable economics. In a traditional wholesale license, the Company grants the right to a specific brand to a single or small group of related product categories to a wholesale supplier, who is permitted to sell licensed products to multiple retailers within an approved distribution channel.
The Company’s license agreements typically require the licensee to pay the Company royalties based upon net sales with guaranteed minimum royalties in the event that net sales do not reach certain specified targets. The Company’s licenses also typically require the licensees to pay to the Company certain minimum amounts for the advertising and marketing of the respective licensed brands.
Licensing revenue is comprised of revenue related to the Company’s entry into various trade name license agreements that provide revenues based on minimum royalties and advertising/marketing fees and additional revenues based on a percentage of defined sales. In accordance with ASC Topic 606 – Revenue from Contracts with Customers (“Topic 606”), the Company recognizes the minimum royalty revenue on a straight-line basis over the entire contract term and royalties exceeding the defined minimum amounts in a specific contract year (sales-based royalties), as defined in each license agreement, are recognized only in the subsequent periods to when the minimum guarantee for the contract year has been achieved and when the later of the following events occur: (i) the subsequent sale occurs, or (ii) the performance obligation to which some or all of the sales-based royalty has been allocated has been satisfied (or partially satisfied).
Within the Company's International segment, the Umbro business purchases replica soccer jerseys for resale to certain licensees. The Company generally does this as an accommodation to its licensees to consolidate ordering from the manufacturers. The revenue associated with such activity is included in licensing revenue and was approximately $0.2 million and $0.6 million in the Current Quarter and the three months ended June 30, 2018 (the “Prior Year Quarter”), respectively. The associated cost of goods sold is included in selling general and administrative expenses and was approximately $0.2 million and $0.6 million in the Current Quarter and Prior Year Quarter, respectively. The revenue associated with such activity is included in licensing revenue and was approximately $0.6 million and $2.6 million in the Current Six Months and the six months ended June 30, 2018 (the “Prior Year Six Months”), respectively. The associated cost of goods sold is included in selling general and administrative expenses and was approximately $0.6 million and $2.5 million in the Current Six Months and Prior Year Six Months, respectively. Revenue for these sales are recognized upon the transfer of control of the promised product to the customer or licensee in an amount that reflects the consideration that we expect to receive in exchange for these products.
The following table presents our revenues disaggregated by license type:
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|||||||||||
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|||||
Licensing revenue by license type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct-to-retail license |
|
$ |
10,364 |
|
|
$ |
20,094 |
|
|
$ |
20,117 |
|
|
$ |
41,307 |
|
Wholesale licenses |
|
|
23,746 |
|
|
|
29,418 |
|
|
|
49,551 |
|
|
|
54,557 |
|
Other licenses(1) |
|
|
284 |
|
|
|
700 |
|
|
|
668 |
|
|
|
2,897 |
|
|
|
$ |
34,394 |
|
|
$ |
50,212 |
|
|
$ |
70,336 |
|
|
$ |
98,761 |
|
9
The following table represents our revenues disaggregated by geography:
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|||||||||||
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|||||
Total licensing revenue by geographic region: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
18,988 |
|
|
$ |
34,225 |
|
|
$ |
41,607 |
|
|
$ |
67,102 |
|
Other (1) |
|
|
15,406 |
|
|
|
15,987 |
|
|
|
28,729 |
|
|
|
31,659 |
|
|
|
$ |
34,394 |
|
|
$ |
50,212 |
|
|
$ |
70,336 |
|
|
$ |
98,761 |
|
(1) |
No single country outside of the United States represented 10% or more of the Company’s revenues in the periods presented. |
Remaining Performance Obligation
We enter into long-term license agreements with our licensees across all operating segments. Revenues are recognized on a straight line basis consistent with the nature, timing and extent of our services, which primarily relate to the ongoing brand management and maintenance of the intellectual property. As of July 1, 2019, the Company and its joint ventures had a contractual right to receive over $384.0 million of aggregate minimum licensing revenue over the balance and the terms of their current licenses, excluding any renewals.
As of June 30, 2019, future minimum license revenue to be recognized under our existing licenses is as follows: $51.2 million, $82.2 million, $64.2 million, $54.1 million, $47.2 million and $85.1 million for the remainder of FY 2019, FY 2020, FY 2021, FY 2022, FY 2023 and thereafter, respectively.
Contract Balances
Timing of revenue recognition may differ from the timing of invoicing to licensees. We record a receivable when amounts are contractually due or when revenue is recognized prior to invoicing. Deferred revenue is recorded when amounts are contractually due prior to satisfying the performance obligations of the contracts. For multi-year license agreements, as the performance obligation is providing the licensee with the right of access to the Company’s intellectual property for the contractual term, the Company uses a time-lapse measure of progress and straight lines the guaranteed minimum royalties over the contract term.
Contract Asset
We record contract assets when revenue is recognized in advance of cash payment being due from our licensees. As of June 30, 2019, our contract assets – current and long term contract assets were $4.9 million and $16.0 million, respectively, as compared to our contract assets – current and long term contract assets as of December 31, 2018 which were $4.8 million and $14.6 million, respectively. For the Current Quarter, the Company incurred an impairment loss of its contract assets of $0.1 million as a result of certain contract modifications as compared to $0.4 million for the Prior Year Quarter. For the Current Six Months, the Company incurred an impairment loss of $0.6 million as a result of certain contract modifications as compared to $0.4 million for the Prior Year Six Months.
Deferred Revenue
We record deferred revenue when cash payment is received or due in advance of our performance, including amounts which are refundable. Advanced royalty payments are recognized ratably over the period indicated by the terms of the license and are reflected in the Company’s consolidated balance sheet in deferred revenue at the time the payment is received. The increase in deferred revenues for the Current Six Months is primarily driven by cash payments received or due in advance of satisfying our performance obligations, offset by $3.8 million of revenues recognized that were included in the deferred revenue balance at the beginning of the period.
3. Goodwill and Trademarks and Other Intangibles, net
Goodwill
10
There were no changes and no impairment of the Company’s goodwill during the Current Six Months as compared to a non-cash impairment charge of $37.8 million recorded in the Prior Year Six Months, which was due to the projected decline in royalties associated with the license agreements for the Mossimo brand. The annual evaluation of the Company’s goodwill, by segment, is typically performed as of October 1, the beginning of the Company’s fourth fiscal quarter.
Trademarks and Other Intangibles, net
Trademarks and other intangibles, net, consist of the following:
|
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
|||||||||||
|
|
Estimated Lives in Years |
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
||||
Indefinite-lived trademarks |
|
Indefinite |
|
$ |
340,814 |
|
|
$ |
— |
|
|
$ |
337,631 |
|
|
$ |
— |
|
Definite-lived trademarks |
|
10-15 |
|
|
8,958 |
|
|
|
8,958 |
|
|
|
8,958 |
|
|
|
8,958 |
|
Licensing contracts |
|
1-9 |
|
|
973 |
|
|
|
944 |
|
|
|
978 |
|
|
|
909 |
|
|
|
|
|
$ |
350,745 |
|
|
$ |
9,902 |
|
|
$ |
347,567 |
|
|
$ |
9,867 |
|
Trademarks and other intangibles, net |
|
|
|
|
|
|
|
$ |
340,843 |
|
|
|
|
|
|
$ |
337,700 |
|
The trademarks of Candie’s, Bongo, Joe Boxer, Rampage, Mudd, London Fog, Mossimo, Ocean Pacific, Danskin, Rocawear, Cannon, Royal Velvet, Fieldcrest, Charisma, Starter, Waverly, Ecko, Zoo York, Ed Hardy, Umbro, Modern Amusement, Buffalo, Lee Cooper, Hydraulic and Pony have been determined to have an indefinite useful life. Each of these intangible assets are tested for impairment annually and as needed on an individual basis and territorial basis as separate single units of accounting, with any related impairment charge recorded to the income statement at the time of determining such impairment. The annual evaluation of the Company’s indefinite-lived trademarks is typically performed as of October 1, the beginning of the Company’s fourth fiscal quarter, or as deemed necessary due to the identification of a triggering event.
In April 2019, the Company bought back a revenue stream in the Ecko brand from a previous joint venture partner which resulted in an increase of $3.4 million to the Ecko trademark.
In accordance with ASC 350, there was no impairment of the indefinite-lived trademarks during the Current Quarter or the Current Six Months. In the Prior Year Quarter, as a result of the Company revising its forecasted future earnings for the Mossimo brand, the Company conducted an indefinite-lived intangible asset impairment test in accordance with ASC 350. Consequently, the Company recorded a non-cash impairment charge of $73.3 million in the Prior Year Quarter in the women’s segment to reduce the Mossimo trademark to fair value. Further, in accordance with ASC 360, there were no impairment charges to the Company’s definite-lived trademarks during the Current Quarter or Prior Year Quarter.
During the Prior Year Six Months, the Company completed the sale of the Badgley Mischka and Sharper Image intellectual property and related assets from the Iconix Southeast Asia, Iconix MENA, Iconix Europe and Iconix Australia joint ventures. Refer to Note 6 for further details.
Other amortizable intangibles represents licensing contracts, which are amortized on a straight-line basis over their estimated useful lives of 1 to 9 years. Certain trademarks are amortized using estimated useful lives of 10 to 15 years with no residual values.
Amortization expense for intangible assets for both the Current Quarter and Prior Year Quarter was less than $0.1 million. Amortization expense for intangible assets for the Current Six Months was less than $0.1 million as compared to amortization expense for intangible assets of approximately $0.2 million for the Prior Year Six Months.
11
4. Joint Ventures and Investments
Joint Ventures
As of June 30, 2019, the following joint ventures are consolidated with the Company:
|
Date of Original Formation / Investment |
|
Iconix's Ownership % as of June 30, 2019 |
|
|
Joint Venture Partner |
|
Put / Call Options, as applicable(2) |
|
||
Lee Cooper China Limited |
|
June 2018 |
|
100% |
|
|
POS Lee Cooper HK Co. Ltd. |
|
|
— |
|
Starter China Limited |
|
March 2018 |
|
100% |
|
|
Photosynthesis Holdings Co. Ltd. |
|
|
— |
|
Danskin China Limited |
|
October 2016 |
|
100% |
|
|
Li-Ning (China) Sports Goods Co. Ltd. |
|
|
— |
|
Umbro China Limited |
|
July 2016 |
|
95% |
|
|
Hong Kong MH Umbro International Co. Ltd. |
|
Call Options |
|
|
US Pony Holdings, LLC |
|
February 2015 |
|
75% |
|
|
Anthony L&S Athletics, LLC |
|
|
— |
|
Iconix MENA Ltd.(1) |
|
December 2014 |
|
55% |
|
|
Global Brands Group Asia Limited |
|
Put / Call Options |
|
|
Iconix Israel, LLC(1) |
|
November 2013 |
|
50% |
|
|
MGS |
|
|
— |
|
Iconix Europe LLC(1)(3) |
|
December 2009 |
|
51% |
|
|
Global Brands Group Asia Limited |
|
Put / Call Options |
|
|
Iconix Australia(1) |
|
September 2013 |
|
55% |
|
|
Pac Brands USA, Inc. |
|
Put / Call Options |
|
|
Diamond Icon(1) |
|
March 2013 |
|
51% |
|
|
Albion Agencies Ltd. |
|
|
|
|
Buffalo brand joint venture(1) |
|
February 2013 |
|
51% |
|
|
Buffalo International |
|
|
— |
|
Icon Modern Amusement, LLC(1) |
|
December 2012 |
|
51% |
|
|
Dirty Bird Productions |
|
|
— |
|
Hardy Way, LLC |
|
May 2009 |
|
85% |
|
|
Donald Edward Hardy |
|
|
— |
|
(1) |
The Company determined, in accordance with ASC 810, based on the corporate structure, voting rights and contributions of the Company and its respective joint venture partner, the entity is a variable interest entity (VIE) and, as the Company has been determined to be the primary beneficiary, is subject to consolidation. The Company has consolidated this joint venture within its consolidated financial statements since inception. The liabilities of the VIE are not material and none of the VIE assets are encumbered by any obligation of the VIE or other entity. |
(2) |
Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for material terms of the put and call options associated with certain of the Company’s joint ventures. |
(3) |
In March 2019, the Company entered into amendment to the Iconix Europe LLC Operating Agreement to extend the five-year put/call options from the six month period commencing January 13, 2019 (as stipulated in the agreement) to a period commencing January 13, 2019 and ending on September 30, 2019. |
Investments
Equity Method Investments
|
Date of Original Formation / Investment |
|
Partner |
|
Put / Call Options, as applicable(2) |
|
||
|
June 2012 |
|
Reliance Brands Ltd. |
|
|
— |
|
|
Iconix SE Asia, Ltd.(1)(3) |
|
October 2013 |
|
Global Brands Group Asia Limited |
|
Put / Call Options |
|
|
MG Icon(1) |
|
March 2010 |
|
Purim LLC |
|
|
— |
|
(1) |
The Company determined, in accordance with ASC 810, based on the corporate structure, voting rights and contributions of the Company and its respective joint venture partner, that the joint venture is not a VIE and not subject to consolidation. The Company records its investment under the equity method of accounting. |
(2) |
Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for material terms of the put and call options associated with the Company’s joint venture. |
(3) |
In March 2019, the Company entered into amendment to the Iconix SE Asia, Ltd. Operating Agreement to extend the five-year put/call options from the six month period commencing October 1, 2018 (as stipulated in the agreement) to a period commencing October 1, 2018 and ending on September 30, 2019. |
12
Additionally, through its ownership of Iconix China Holdings Limited, the Company has equity interests in the following private companies which are accounted for as equity method investments:
|
|
|
Ownership by |
|
|
Value of Investment as of |
|
|||||||
Brands Placed |
|
Partner |
|
Iconix China |
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
|||
Candie’s |
|
Candies Shanghai Fashion Co. Ltd. |
|
20% |
|
|
$ |
10,612 |
|
|
$ |
10,529 |
|
|
Marc Ecko |
|
Shanghai MuXiang Apparel & Accessory Co. Limited |
|
15% |
|
|
|
2,270 |
|
|
|
2,270 |
|
|
Material Girl |
|
Ningbo Material Girl Fashion Co. Ltd.(1) |
|
20% |
|
|
|
— |
|
|
|
2,129 |
|
|
Ecko Unltd |
|
Ai Xi Enterprise (Shanghai) Co. Limited |
|
20% |
|
|
|
10,283 |
|
|
|
10,400 |
|
|
|
|
|
|
|
|
|
|
$ |
23,165 |
|
|
$ |
25,328 |
|
(1) |
In March 2019, the Company sold its 20% interest in Ningbo Material Girl Fashion Co. Ltd. (“Material Girl China”) to Ningbo Peacebird Fashion & Accessories Co. Ltd. for $3.0 million in cash. Pursuant to the agreement, the sale price is further reduced by the initial cash investment of $0.2 million as well as $0.6 million on brand management expenses incurred since the inception of the Material Girl China entity, to total net proceeds of $2.2 million. Additionally, Purim LLC, our MG Icon partner, is entitled to 33.3% of the net proceeds (or approximately $0.7 million) resulting in the Company’s portion of the net proceeds from the transaction to be approximately $1.5 million. As a result of this transaction, the Company recognized a gain of $0.2 million which has been recorded within Other Income in the Company’s condensed consolidated statement of operations for the Current Six Months. |
Other Equity Investments
|
Date of Original Formation / Investment |
|
|
September 2008 |
|
Marcy Media Holdings, LLC(1) |
|
July 2013 |
(1) |
In accordance with ASC 825, given that these investments do not have readily determinable fair values and the Company does not have significant influence over the entity, the Company assesses these investments for potential impairment on a quarterly basis. As of March 31, 2019, there were no indicators of impairment for these investments. |
(2) |
As part of the 2015 purchase of our joint venture partners’ interest in Iconix China, the Company acquired an equity investment in China Outfitters Holdings Ltd. As of June 30, 2019 and December 31, 2018, the fair value of this investment was approximately $1.0 million and $1.0 million, respectively, with the decrease in fair value of less than $0.1 million recorded within Other Income on the Company’s condensed consolidated statement of operations. |
13
5. Gains on Sale of Trademarks, Net
The following table details transactions comprising gains on sale of trademarks, net in the condensed consolidated statement of operations:
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Interest in Sharper Image trademark in Iconix Southeast Asia(1) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
236 |
|
Interest in Sharper Image trademark in Iconix Europe(1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
352 |
|
Interest in Sharper Image trademark in Iconix MENA(1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
250 |
|
Interest in Sharper Image trademark in Iconix Australia(1) |
|
|
— |
|
|
|
125 |
|
|
|
— |
|
|
|
125 |
|
Interest in Badgley Mischka trademark in Iconix Southeast Asia(2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
478 |
|
Interest in Badgley Mischka trademark in Iconix Europe(2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(244 |
) |
Interest in Badgley Mischka trademark in Iconix MENA(2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
71 |
|
Net gains on sale of trademarks |
|
$ |
— |
|
|
$ |
125 |
|
|
$ |
— |
|
|
$ |
1,268 |
|
(1) |
In December 2016, the Company sold its rights to the Sharper Image intellectual property and related assets to 360 Holdings, Inc. The Sharper Image intellectual property and related assets within other foreign territories, which was owned by certain of the Company’s joint venture entities, required the Company to negotiate and finalize the sale of the intellectual property with its respective joint venture partners. As a result, in the Prior Year Six Months, the Company recognized an additional combined gain of approximately $1.0 million upon final execution of the agreement for the sale of the Sharper Image intellectual property and related assets which were previously owned by the Iconix Southeast Asia, Iconix Europe, Iconix MENA and Iconix Australia joint ventures. |
(2) |
In February 2016, the Company sold its rights to the Badgley Mischka intellectual property and related assets to Titan Industries, Inc. in partnership with the founders, Mark Badgley and James Mischka, and the apparel license MJCLK LLC. The Badgley Mischka intellectual property and related assets within other foreign territories, which was owned by certain of the Company’s joint venture entities, required the Company to negotiate and finalize the sale of the intellectual property with its respective joint venture partners. As a result, in the Prior Year Six Months, the Company recognized an additional combined net gain of approximately $0.3 million upon final execution of the agreement for the sale of the Badgley Mischka intellectual property and related assets which were previously owned by the Iconix Southeast Asia, Iconix Europe and Iconix MENA joint ventures. |
14
ASC 820 “Fair Value Measurements” (“ASC 820”), establishes a framework for measuring fair value and requires expanded disclosures about fair value measurement. While ASC 820 does not require any new fair value measurements in its application to other accounting pronouncements, it does emphasize that a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 established the following fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs):
Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets
Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities or market-corroborated inputs
Level 3: Unobservable inputs for which there is little or no market data and which requires the owner of the assets or liabilities to develop its own assumptions about how market participants would price these assets or liabilities
The valuation techniques that may be used to measure fair value are as follows:
(A) Market approach - Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities
(B) Income approach - Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts, including present value techniques, option-pricing models and excess earnings method
(C) Cost approach - Based on the amount that would currently be required to replace the service capacity of an asset (replacement cost)
To determine the fair value of certain financial instruments, the Company relies on Level 2 inputs generated by market transactions of similar instruments where available, and Level 3 inputs using an income approach when Level 1 and Level 2 inputs are not available. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy.
Financial Instruments
As of June 30, 2019 and December 31, 2018, the fair values of cash, receivables and accounts payable approximated their carrying values due to the short-term nature of these instruments. The fair value of notes receivable and notes payable from and to our joint venture partners approximate their carrying values. The fair value of our other equity investments is not readily determinable, and it is not practical to obtain the information needed to determine the value. However, there has been no indication of an impairment of these other equity investments as of June 30, 2019 or December 31, 2018. The estimated fair values of other financial instruments subject to fair value disclosures, determined based on Level One inputs including broker quotes or quoted market prices or rates for the same or similar instruments and the related carrying amounts are as follows:
|
June 30, 2019 |
|
|
December 31, 2018 |
|
|||||||||||
|
|
Carrying Amount |
|
|
Fair Value |
|
|
Carrying Amount |
|
|
Fair Value |
|
||||
Long-term debt, including current portion(1) |
|
$ |
642,141 |
|
|
$ |
547,301 |
|
|
$ |
675,229 |
|
|
$ |
582,370 |
|
(1) |
Carrying amounts include aggregate unamortized debt discount and debt issuance costs. |
Additionally, the fair value of the other equity investments acquired as part of the 2015 purchase of our joint venture partners’ interest in Iconix China was approximately $1.0 million as of June 30, 2019 with the changes in the fair value of the investment recorded in Other Income in the Company’s condensed consolidated statement of operations.
Financial instruments expose the Company to counterparty credit risk for nonperformance and to market risk for changes in interest. The Company manages exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties and procedures to monitor the amount of credit exposure. The Company’s financial instrument counterparties are investment or commercial banks with significant experience with such instruments as well as certain of our joint venture partners – see Note 5.
15
Non-Financial Assets and Liabilities
The Company accounts for non-recurring adjustments to the fair values of its non-financial assets and liabilities under ASC 820 using a market participant approach. The Company uses a discounted cash flow model with Level 3 inputs to measure the fair value of its non-financial assets and liabilities. The Company also adopted the provisions of ASC 820 as it relates to purchase accounting for its acquisitions. The Company has goodwill, which is tested for impairment at least annually, as required by ASC 350- “Intangibles- Goodwill and Other” (“ASC 350”). Further, in accordance with ASC 350, the Company’s indefinite-lived trademarks are tested for impairment at least annually, on an individual basis as separate single units of accounting. Similarly, consistent with ASC 360- “Property, Plant and Equipment” (“ASC 360”), as it relates to accounting for the impairment or disposal of long-lived assets, the Company assesses whether or not there is impairment of the Company’s definite-lived trademarks. There was no impairment, and therefore no write-down, of any of the Company’s long-lived assets during the Current Quarter or the Current Six Months. The Company recorded impairment charges on the Mossimo indefinite-lived trademark and women’s segment goodwill during the Prior Year Quarter.
7. Fair Value Option
The Company accounts for its 5.75% Convertible Notes under the fair value option. The fair value carrying amount of the 5.75% Convertible Notes as of June 30, 2019 and December 31, 2018 is $23.2 million and $48.1 million, respectively, as compared to the contractual principal outstanding balance which is $94.6 million and $109.7 million as of June 30, 2019 and December 31, 2018, respectively. The change of $20.3 million and $56.5 million in the fair value of the 5.75% Convertible Notes accounted for under the fair value option are included in the Company’s condensed consolidated statement of operations for the Current Six Months and Prior Year Six Months, respectively, within Other Income. The change of $0.3 million and $32.1 million in the fair value of the 5.75% Convertible Notes accounted for under the fair value option are included Other Income in the Company’s condensed consolidated statement of operations for the Current Quarter and Prior Year Quarter, respectively.
The primary reason for electing the fair value option is for simplification and cost-benefit considerations of accounting for the 5.75% Convertible Notes (the hybrid financial instrument) at fair value in its entirety versus bifurcation of the embedded derivatives. The 5.75% Convertible Notes contain bifurcatable embedded derivatives and do not require settlement by physical delivery of non-financial assets.
The significant inputs to the valuation of the 5.75% Convertible Notes at fair value are Level 1 inputs as they are based on the quoted prices of the notes in the active market.
8. Debt Arrangements
The Company’s debt obligations consist of the following:
|
June 30, 2019 |
|
|
December 31, 2018 |
|
|||
Senior Secured Notes |
|
$ |
353,163 |
|
|
$ |
365,481 |
|
Variable Funding Note, net of original issue discount |
|
|
97,364 |
|
|
|
95,273 |
|
Senior Secured Term Loan, net of original issue discount |
|
|
171,648 |
|
|
|
171,137 |
|
5.75% Convertible Notes(1) |
|
|
23,190 |
|
|
|
48,076 |
|
Unamortized debt issuance costs |
|
|
(3,224 |
) |
|
|
(4,738 |
) |
Total debt |
|
|
642,141 |
|
|
|
675,229 |
|
Less current maturities |
|
|
67,163 |
|
|
|
54,263 |
|
Total long-term debt |
|
$ |
574,978 |
|
|
$ |
620,966 |
|
(1) |
Reflects the debt carrying amount which is accounted for under the Fair Value Option in the unaudited condensed consolidated balance sheet as of June 30, 2019 and December 31, 2018. The actual principal outstanding balance of the 5.75% Convertible Notes is $94.6 million and $109.7 million as of June 30, 2019 and December 31, 2018, respectively. |
16
Senior Secured Notes and Variable Funding Note
On November 29, 2012, Icon Brand Holdings, 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, (collectively, the “Co-Issuers”) issued $600.0 million aggregate principal amount of Series 2012-1 4.229% Senior Secured Notes, Class A-2 (the “2012 Senior Secured Notes”) in an offering exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”).
Simultaneously with the issuance of the 2012 Senior Secured Notes, the Co-Issuers also entered into a revolving financing facility of Series 2012-1 Variable Funding Senior Notes, Class A-1 (the “Variable Funding Notes”), which allowed for the funding of up to $100 million of Variable Funding Notes and certain other credit instruments, including letters of credit. The Variable Funding Notes allow for drawings on a revolving basis. Drawings and certain additional terms related to the Variable Funding Notes are governed by the Class A-1 Note Purchase Agreement dated November 29, 2012 (the “Variable Funding Note Purchase Agreement”), among the Co-Issuers, Iconix, as manager, certain conduit investors, financial institutions and funding agents, and Barclays Bank PLC, as provider of letters of credit, as swingline lender and as administrative agent. The Variable Funding Notes are governed, in part, by the Variable Funding Note Purchase Agreement and by certain generally applicable terms contained in the Securitization Notes Indenture. Interest on the Variable Funding Notes is payable at per annum rates equal to the CP Rate, Base Rate or Eurodollar Rate, each as defined in the Variable Funding Note Purchase Agreement. In February 2015, the Company fully drew down the $100.0 million of available funding under the Variable Funding Notes, which remains outstanding as of June 30, 2019.
On June 21, 2013, the Co-Issuers issued $275.0 million aggregate principal amount of 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 an offering exempt from registration under the Securities Act.
The Senior Secured Notes and the Variable Funding Notes are referred to collectively as the “Securitization Notes.”
The Securitization Notes were issued under a base indenture (the “Securitization Notes Base Indenture”) and related supplemental indentures (the “Securitization Notes Supplemental Indentures” and, collectively with the Securitization Notes Base Indenture, the “Securitization Notes Indenture”) among the Co-Issuers and Citibank, N.A., as trustee and securities intermediary. The Securitization Notes Indenture allows the Co-Issuers to issue additional series of notes in the future subject to certain conditions.
On August 18, 2017, the Company entered into an amendment to the Securitization Notes Supplemental Indenture to, among other things, (i) extend the anticipated repayment date for the Variable Funding Notes from January 2018 to January 2020, (ii) decrease the L/C Commitment and the Swingline Commitment (as such terms are defined in the amendment) available under the Variable Funding Notes to $0 as of the closing date, (iii) replace Barclays Bank PLC with Guggenheim Securities Credit Partners, LLC, as provider of letters of credit, as swingline lender and as administrative agent under the purchase agreement and (iv) provide that, upon the disposition of intellectual property assets by the Co-Issuers as permitted by the Securitization Notes Base Indenture, (x) the holders of the Variable Funding Notes will receive a mandatory prepayment, pro rata based on the amount of Variable Funding Notes held by such holder, and (y) the maximum commitment will be permanently reduced by the amount of the mandatory prepayment.
While the Securitization Notes are outstanding, payments of interest are required to be made on the 2012 Senior Secured Notes and the 2013 Senior Secured Notes, in each case, on a quarterly basis. Initially, principal payments in the amount of $10.5 million and $4.8 million were required to be made on the 2012 Senior Secured Notes and 2013 Senior Secured Notes, respectively, on a quarterly basis. The amount of quarterly principal payments has since changed in subsequent periods due to the prepayments made under the Securitization Notes Indenture. See below for further discussion.
The legal final maturity date of the Securitization Notes is in January of 2043. If the Co-Issuers have not repaid or refinanced the Securitization Notes prior to January 2020 (the “anticipated repayment date”), additional interest will accrue on amounts outstanding under the Securitization Notes at a rate equal to (A) in respect of the Variable Funding Notes, 5% per annum, (B) in respect of the 2012 Senior Secured Notes and the 2013 Senior Secured Notes, the greater of (1) 5% per annum and (2) a per annum interest rate equal to the excess, if any, by which the sum of (x) the yield to maturity (adjusted to a quarterly bond-equivalent basis), on the anticipated repayment date of the United States treasury security having a term closest to 10 years plus (y) 5% per annum plus (z) with respect to the 2012 Senior Secured Notes, 3.4% per annum, or with respect to the 2013 Senior Secured Notes, 3.14% per annum, exceeds the original interest rate. Pursuant to the Securitization Notes Indenture, such additional interest is not due to be paid by the Company until January 2043 (the legal maturity date) and does not compound annually. The Securitization Notes rank pari passu with each other.
17
Pursuant to the Securitization Notes Indenture, the Securitization Notes are the joint and several obligations of the Co-Issuers only. The Securitization Notes are secured under the Securitization Notes Indenture by a security interest in certain of the assets of the Co-Issuers (the “Securitized Assets”), which includes, among other things, (i) intellectual property assets, including the U.S. and Canadian registered and applied for trademarks for the following brands and other related IP assets: Candie’s, Bongo, Joe Boxer (excluding Canadian trademarks, none of which are owned by Iconix), Rampage, Mudd, London Fog (other than the trademark for outerwear products sold in the United States), Mossimo, Ocean Pacific and OP, Danskin and Danskin Now, Rocawear, Starter, Waverly, Fieldcrest, Royal Velvet, Cannon, and Charisma; (ii) the rights (including the rights to receive payments) and obligations under all license agreements for use of those trademarks in such territories; (iii) the following equity interests in the following joint ventures: an 85% interest in Hardy Way LLC which owns the Ed Hardy brand, a 50% interest in MG Icon LLC which owns the Material Girl and Truth or Dare brands, and a 100% interest in ZY Holdings LLC which owns the Zoo York brand; and (iv) certain cash accounts established under the Securitization Notes Indenture. The Securitized Assets do not include revenue generating assets of (x) the Iconix subsidiaries that own the Ecko Unltd trademarks, the Mark Ecko trademarks, the Artful Dodger trademarks, the Umbro trademarks, and the Lee Cooper trademarks, (y) the Iconix subsidiaries that own Iconix’s other brands outside of the United States and Canada or (z) the joint ventures in which Iconix and certain of its subsidiaries have investments and which own the Modern Amusement trademarks and the Buffalo trademarks, the Pony trademarks, and the Hydraulic trademarks.
If the Company contributes an Additional IP Holder to Icon Brand Holdings LLC or Icon DE Intermediate Holdings LLC, that Additional IP Holder will enter into a guarantee and collateral agreement in a form provided for in the Securitization Notes Indenture pursuant to which such Additional IP Holder will guarantee the obligations of the Co-Issuers in respect of any Securitization Notes issued under the Securitization Notes Indenture and the other related documents and pledge substantially all of its assets to secure those guarantee obligations pursuant to a guarantee and collateral agreement.
Neither the Company nor any subsidiary of the Company, other than the Securitization Entities, will guarantee or in any way be liable for the obligations of the Co-Issuers under the Securitization Notes Indenture or the Securitization Notes.
The Securitization Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Co-Issuers maintain specified reserve accounts to be used to make required payments in respect of the Securitization Notes, (ii) provisions relating to optional and mandatory prepayments, including mandatory prepayments in the event of a change of control (as defined in the Securitization Notes Supplemental Indentures) and the related payment of specified amounts, including specified make-whole payments in the case of the Senior Secured Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the transfers of the assets pledged as collateral for the Securitization Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters. As of June 30, 2019, the Company is in compliance with all covenants under the Securitization Notes.
The Company’s 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 March 31, 2019, the DSCR fell below 1.10x as of March 31, 2019. Beginning April 1, 2019, the Senior Secured Notes experienced a Rapid Amortization Event pursuant to the Securitization Notes Indenture. Upon a Rapid Amortization Event, any residual amounts available will immediately be used to pay down the principal.
The Securitization Notes are subject to customary rapid amortization events provided for in the Securitization Notes Indenture, including events tied to (i) the failure to maintain a stated DSCR, (ii) certain manager termination events, (iii) the occurrence of an event of default and (iv) the failure to repay or refinance the Securitization Notes on the anticipated repayment date. If a rapid amortization event were to occur, including as a result of not paying or redeeming the Securitization Notes in full prior to the anticipated repayment date, the management fee payable to the Company would remain payable pursuant to the priority of payments set forth under the Securitization Indenture, but no residual amounts would be payable to the Company thereafter. As noted above, a Rapid Amortization Event occurred beginning April 1, 2019.
In June 2014, the Company sold the “sharperimage.com” domain name and the exclusive right to use the Sharper Image trademark in connection with the operation of a branded website and catalog distribution in specified jurisdictions, in which the Senior Secured Notes had a security interest pursuant to the Indenture. As a result of this permitted disposition, the Company paid an additional $1.6 million in principal in July 2014.
In January 2017, in connection with the sale of the Sharper Image intellectual property and related assets, the Company made a mandatory principal prepayment on its Senior Secured Notes of $36.7 million. The Company wrote off a pro-rata portion of the Senior Secured Notes’ deferred financing costs of $0.5 million. As a result of this transaction, the quarterly principal payments on the 2012 Senior Secured notes and 2013 Senior Secured Notes were reduced to $9.9 million and $4.5 million, respectively.
18
In July 2017, in connection with the sale of the businesses underlying the Entertainment segment, the Company made a mandatory principal prepayment on its Senior Secured Notes of $152.2 million. The Company wrote off a pro-rata portion of the Senior Secured Notes’ deferred financing costs of $2.0 million as well as paid a prepayment penalty of $0.3 million. As a result of this transaction, the quarterly principal payments on the 2012 Senior Secured Notes and 2013 Senior Secured Notes were reduced to $7.3 million and $3.4 million, respectively.
As of June 30, 2019 and December 31, 2018, the total outstanding principal balance of the Securitization Notes was $453.2 million and $465.5 million, respectively, of which $47.9 million and $46.0 million, respectively, is included in the current portion of long-term debt on the consolidated balance sheet. As of June 30, 2019 and December 31, 2018, $13.7 million and $15.2 million, respectively, is included in restricted cash on the consolidated balance sheet and represents short-term restricted cash consisting of collections on behalf of the Securitized Assets, restricted to the payment of principal, interest and other fees on a quarterly basis under the Senior Secured Notes.
For the Current Quarter and Prior Year Quarter, cash interest expense relating to the Securitization Notes was approximately $5.3 million and $5.6 million, respectively. For the Current Six Months and the Prior Year Six Months, cash interest expense relating to the Securitization Notes was approximately $10.8 million and $11.2 million, respectively. For the Current Quarter and Prior Year Quarter, the Company recorded an expense for the amortization of original issue discount relating to the Variable Funding Notes of $1.1 million and $1.0 million, respectively. For the Current Six Months and Prior Year Six Months, the Company recorded an expense for the amortization of original issue discount relating to the Variable Funding Notes of $2.1 million and $1.9 million, respectively.
Senior Secured Term Loan
On August 2, 2017, the Company entered into a credit agreement (as amended or otherwise modified, unless context provides otherwise the “Senior Secured Term Loan”), among IBG Borrower, the Company’s wholly-owned direct subsidiary, as borrower, the Company and certain wholly-owned subsidiaries of IBG Borrower, as guarantors (the “Guarantors”), Cortland Capital Market Services LLC, as administrative agent and collateral agent (“Cortland”) and the lenders party thereto from time to time, including Deutsche Bank AG, New York Branch. Pursuant to the Senior Secured Term Loan, the lenders provided to IBG Borrower a senior secured term loan (the “Senior Secured Term Loan”), scheduled to mature on August 2, 2022 in an aggregate principal amount of $300 million and bearing interest at LIBOR plus an applicable margin of 7% per annum (the “Interest Rate”).
On August 2, 2017, the net cash proceeds of the Senior Secured Term Loan were deposited into an escrow account and subject to release to IBG Borrower from time to time, subject to the satisfaction of customary conditions precedent upon each withdrawal, to finance repurchases of, or at the maturity date thereof to repay in full, the 1.50% Convertible Notes (as defined below). Prior to the First Amendment (as discussed below), the Company had the ability to make these repurchases in the open market or privately negotiated transactions, depending on prevailing market conditions and other factors.
Prior to the First Amendment, borrowings under the Senior Secured Term Loan were to amortize quarterly at 0.5% of principal, commencing on September 30, 2017. IBG Borrower was obligated to make mandatory prepayments annually from excess cash flow and periodically from net proceeds of certain asset dispositions and from net proceeds of certain indebtedness, if incurred (in each case, subject to certain exceptions and limitations provided for in the Senior Secured Term Loan).
IBG Borrower’s obligations under the Senior Secured Term Loan are guaranteed jointly and severally by the Company and the other Guarantors pursuant to a separate facility guaranty. IBG Borrower’s and the Guarantors’ obligations under the Senior Secured Term Loan are secured by first priority liens on and security interests in substantially all assets of IBG Borrower, the Company and the other Guarantors and a pledge of substantially all equity interests of the Company’s subsidiaries (subject to certain limits including with respect to foreign subsidiaries) owned by the Company, IBG Borrower or any other Guarantor. However, the security interests will not cover certain intellectual property and licenses owned, directly or indirectly by the Company’s subsidiary Iconix Luxembourg Holdings SÀRL or those subject to the Company’s securitization facility. In addition, the pledges exclude certain equity interests of Marcy Media Holdings, LLC and the subsidiaries of Iconix China Holdings Limited.
In connection with the Senior Secured Term Loan, IBG Borrower, the Company and the other Guarantors made customary representations and warranties and have agreed to adhere to certain customary affirmative covenants. Additionally, the Senior Secured Term Loan mandates that IBG Borrower, the Company and the other Guarantors enter into account control agreements on certain deposit accounts, maintain and allow appraisals of their intellectual property, perform under the terms of certain licenses and other agreements scheduled in the Senior Secured Term Loan and report significant changes to or terminations of licenses generating guaranteed minimum royalties of more than $0.5 million. Prior to the First Amendment (as discussed below), IBG Borrower was required to satisfy a minimum asset coverage ratio of 1.25:1.00 and maintain a leverage ratio of no greater than 4.50:1.00.
19
Amendments to Senior Secured Term Loan
First Amendment
On October 27, 2017, the Company entered into the First Amendment to the Senior Secured Term Loan (the “First Amendment”) pursuant to which, among other things, the remaining escrow balance of approximately $231 million (after taking into account approximately $59.2 million that was used to buy back 1.50% Convertible Notes in open market purchases in the third quarter of 2017) was returned to the lenders.
The First Amendment also provided for, among other things, (a) a reduction in the existing $300 million term loan to the then-current term loan balance of approximately $57.8 million, (b) a new senior secured delayed draw term loan facility in the aggregate amount of up to $165.7 million, consisting of (i) a $25 million First Delayed Draw Term Loan (the “First Delayed Draw Term Loan”), and (ii) a $140.7 million Second Delayed Draw Term Loan (the “Second Delayed Draw Term Loan” and, together, with the First Delayed Draw Term Loan, the “Delayed Draw Term Loan Facility”) for the purpose of repaying the 1.50% Convertible Notes; (c) an increase of the Total Leverage Ratio permitted under the Senior Secured Term Loan from 4.50:1.00 to 5.75:1.00; (d) a reduction in the debt service coverage ratio multiplier in the Company’s asset coverage ratio under the Senior Secured Term Loan; (e) an increase in the existing amortization rate from 2 percent per annum to 10 percent per annum commencing July 2019; and (f) amendments to the mandatory prepayment provisions to (i) permit the Company not to prepay borrowings under the Senior Secured Term Loan from the first $100 million of net proceeds resulting from Permitted Capital Raising Transactions (as defined in the Senior Secured Term Loan) effected prior to March 15, 2018, and (ii) eliminate the requirement that the Company pay a Prepayment Premium (as defined in the Senior Secured Term Loan) on any payments or prepayments made prior to December 31, 2018. Indebtedness issued under the Delayed Draw Term Loan Facility was issued with original issue discount.
As a result of the First Amendment, on October 27, 2017, the Company repaid $231.0 million on the Senior Secured Term Loan which represented $240.7 million of outstanding principal balance. As this transaction was accounted for as a debt modification in accordance with ASC 470-50-40, and based on the Company’s accounting policy for debt modifications, the Company wrote-off a pro-rata portion of the original issue discount and deferred financing costs of $9.3 million and $5.4 million, respectively. As a result of this transaction, the Company’s outstanding principal balance of the Senior Secured Term Loan was reduced to $57.8 million as of such date.
On November 2, 2017, the Company drew down the full amount of $25.0 million on the First Delayed Draw Term Loan, of which the Company received $24.0 million in cash, net of the $1.0 million of original issue discount.
Second Amendment
Given that the Company was unable to timely file its quarterly financial statements for the quarter ended September 30, 2017 with the SEC by November 14, 2017 and became in default under the terms of the Senior Secured Term Loan, as amended, on November 24, 2017, the Company entered into the Second Amendment to the Senior Secured Term Loan. Pursuant to the Second Amendment, among other things, the lenders under the Senior Secured Term Loan agreed, subject to the Company’s compliance with the requirements set forth in the Second Amendment, to waive until December 22, 2017, certain potential defaults and events of default arising under the Senior Secured Term Loan.
In connection with the Second Amendment, Deutsche Bank was granted additional pricing flex in the form of price protection upon syndication of the Senior Secured Term Loan (“Flex”) and ticking fees on the unfunded portion of the loan. The Second Amendment allows, among other things, for cash payments on account of the Flex and ticking fees to be paid from the proceeds of the First Delayed Draw Term Loan, which was previously fully funded in accordance with the terms of the Senior Secured Term Loan. After giving effect to the additional Flex provided in the Second Amendment, the Company estimated that it could be responsible for payments on account of Flex in an aggregate total amount of up to $12.0 million. As of March 31, 2019, the Company has paid a total of approximately $5.0 million in Flex. The Company has recorded this amount against the outstanding principal balance of Senior Secured Term Loan on the Company’s consolidated balance sheet and is being amortized over the remaining term of Senior Secured Term Loan.
Third Amendment
20
On February 12, 2018, the Company, through IBG Borrower, entered into the Third Amendment to the Senior Secured Term Loan. The Third Amendment provides for, among other things, amendments to certain restrictive covenants and other terms set forth in the Senior Secured Term Loan, as amended, to permit (i) IBG Borrower to enter into the 5.75% Notes Indenture (as defined below) and a related intercreditor agreement and (ii) the Note Exchange (as defined below). In connection with the Third Amendment, Deutsche Bank was granted additional pricing flex in the form of price protection upon syndication of the loan (“Third Amendment Flex”). After giving effect to the additional Third Amendment Flex, the Company estimates that it could be responsible for payments on account of the Third Amendment Flex in an aggregate total amount of up to $6.1 million.
Fourth Amendment
The Company, through IBG Borrower, entered into the Fourth Amendment to the Senior Secured Term Loan on March 12, 2018. The Fourth Amendment provided, among other things, that the funding date for the Second Delayed Draw Term Loan would be March 14, 2018 instead of March 15, 2018. The conditions to the availability of the Second Delayed Draw Term Loan were satisfied as of March 14, 2018 due, in part, to the transactions contemplated by the Note Exchange, and the Company was able to draw on the Second Delayed Draw Term Loan. On March 14, 2018, the Company drew down $110 million under the Second Delayed Draw Term Loan and used those proceeds, along with cash on hand, to make a payment to the trustee under the indenture governing the 1.50% Convertible Notes to repay the remaining 1.50% Convertible Notes at maturity on March 15, 2018.
The Senior Secured Term Loan, as amended, contains customary negative covenants and events of default. The Senior Secured Term Loan limits the ability of IBG Borrower, the Company and the other Guarantors, with respect to themselves, their subsidiaries and certain joint ventures, from, among other things, incurring and prepaying certain indebtedness, granting liens on certain assets, consummating certain types of acquisitions, making fundamental changes (including mergers and consolidations), engaging in substantially different lines of business than those in which they are currently engaged, making restricted payments and amending or terminating certain licenses scheduled in the Senior Secured Term Loan. Such restrictions, failure to comply with which may result in an event of default under the terms of the Senior Secured Term Loan, are subject to certain customary and specifically negotiated exceptions, as set forth in the Senior Secured Term Loan.
If an event of default occurs, in addition to the Interest Rate increasing by an additional 3% per annum, Cortland shall, at the request of lenders holding more than 50% of the then-outstanding principal of the Senior Secured Term Loan, declare payable all unpaid principal and accrued interest and take action to enforce payment in favor of the lenders. An event of default includes, among other events: (i) a change of control by which a person or group becomes the beneficial owner of 35% of the voting stock of the Company or IBG Borrower; (ii) the failure to extend of the Series 2012-1 Class A-1 Senior Notes Renewal Date (as defined in the Senior Secured Term Loan); (iii) the failure of any of Icon Brand Holdings LLC, Icon NY Holdings LLC, Icon DE Intermediate Holdings LLC, Icon DE Holdings LLC and their respective subsidiaries (the “Securitization Entities”) to perform certain covenants; and (iv) the entry into amendments to the securitization facility that would be materially adverse to the lenders or Cortland without consent. Subject to the terms of the Senior Secured Term Loan, both voluntary and certain mandatory prepayments will trigger a premium of 5% of the aggregate principal amount during the first year of the loan and a premium of 3% of the aggregate principal amount during the second year of the loan, with no premiums payable in subsequent periods.
As of June 30, 2019 and December 31, 2018, the outstanding principal balance of the Senior Secured Term Loan was $171.6 million (which is net of $15.8 million of original issue discount) and $171.1 million (which is net of $18.3 million of original issue discount), respectively, of which $19.3 million and $11.6 million is recorded in current portion of long term debt on the Company’s consolidated balance sheet, respectively.
The Company recorded cash interest expense of approximately $4.6 million relating to the Senior Secured Term Loan in the Current Quarter as compared to $4.6 million in the Prior Year Quarter. The Company recorded cash interest expense of approximately $9.1 million relating to the Senior Secured Term Loan in the Current Six Months as compared to $8.0 million (which included a commitment fee) in the Prior Year Six Months.
The Company recorded an expense for the amortization of original issue discount and deferred financing fees of approximately $1.4 million relating to the Senior Secured Term Loan, included in interest expense on the consolidated statement of operations, during the Current Quarter as compared to $1.2 million during the Prior Year Quarter. The Company recorded an expense for the amortization of original issue discount and deferred financing fees of approximately $2.6 million relating to the Senior Secured Term Loan, included in interest expense on the unaudited condensed consolidated statement of operations, during the Current Six Months as compared to approximately $1.8 million during the Prior Year Six Months.
21
On February 22, 2018, the Company consummated an exchange (the “Note Exchange”) of approximately $125 million previously outstanding 1.50% Convertible Senior Subordinated Notes due 2018 (the “1.50% Convertible Notes”), pursuant to which it issued approximately $125 million of new 5.75% Convertible Notes due 2023 (the 5.75% Convertible Notes”). The 5.75% Convertible Notes were issued pursuant to an indenture, dated February 22, 2018, by and among the Company, each of the guarantors thereto and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent (the “Indenture”).
The 5.75% Convertible Notes mature on August 15, 2023. Interest on the 5.75% Convertible Notes may be paid in cash, shares of the Company’s common stock, or a combination of both, at the Company’s election. If the Company elects to pay all or a portion of an interest payment in shares of common stock, the number of shares of common stock payable will be equal to the applicable interest payment divided by the average of the 10 individual volume-weighted average prices for the 10-trading day period ending on and including the trading day immediately preceding the relevant interest payment date.
The 5.75% Convertible Notes are (i) secured by a second lien on the same assets that secure the obligations of IBG Borrower under the Senior Secured Term Loan and (ii) guaranteed by IBG Borrower and same guarantors as those under the Senior Secured Term Loan, other than the Company.
Subject to certain conditions and limitations, the Company may cause all or part of the 5.75% Convertible Notes to be automatically converted into common stock of the Company. The 5.75% Convertible Notes are convertible into shares of the Company’s common stock based on a conversion rate of 52.1919 shares of the Company’s common stock, per $1,000 principal amount of the 5.75% Convertible Notes (which is equal to an initial conversion price of approximately $19.16 per share), subject to adjustment from time to time pursuant to the 5.75% Convertible Note Indenture.
Holders converting their 5.75% Convertible Notes (including in connection with a mandatory conversion) shall also be entitled to receive a payment from the Company equal to the Conversion Make-Whole Payment (as defined in the Indenture) if such conversion occurs after a regular record date and on or before the next succeeding interest payment date, through and including the maturity date (determined as if such conversion did not occur).
If the Company elects to pay all or a portion of a Conversion Make-Whole Payment in shares of common stock, the number of shares of common stock payable will be equal to the applicable Conversion Make-Whole Payment divided by the average of the 10 individual volume-weighted average prices for the 10-trading day period immediately preceding the applicable conversion date.
Subject to certain limitations pursuant to the Senior Secured Term Loan, from and after the February 22, 2019, the Company may redeem for cash all or part of the 5.75% Convertible Notes at 100% of the principal amount of the 5.75% Convertible Notes, plus accrued and unpaid interest, if any, at any time by providing at least 30 days’ prior written notice to holders of the 5.75% Convertible Notes.
If the Company undergoes a fundamental change (which would occur if the Company experiences a change of control or is delisted from NASDAQ) prior to maturity, each holder will have the right, at its option, to require the Company to repurchase for cash all or a portion of such holder’s 5.75% Convertible Notes at a fundamental change purchase price equal to 100% of the principal amount of the 5.75% Convertible Notes to be repurchased, together with interest accrued and unpaid to, but excluding, the fundamental change purchase date.
The Company is subject to certain restrictive covenants pursuant to the 5.75% Convertible Note Indenture, including limitations on (i) liens, (ii) indebtedness, (iii) asset sales, (iv) restricted payments and investments, (v) prepayments of indebtedness and (vi) transactions with affiliates.
During the Current Quarter and Current Six Months, certain noteholders converted an aggregate outstanding principal balance of $11.2 million and $15.1 million, respectively, of their 5.75% Convertible Notes into approximately 0.6 million and 0.8 million shares, respectively, of the Company’s common stock. Pursuant to the Indenture, the Company also made Conversion Make-Whole Payments of approximately 2.1 million and 2.9 million shares of the Company’s common stock to those converting noteholders during the Current Quarter and Current Six Months, respectively. As a result of the difference in the fair market value versus the carrying value of the 5.75% Convertible Notes that were converted during the Current Quarter and Current Six Months, an aggregate $1.4 million loss and an aggregate $1.6 million loss was recorded within Other Income in the Company’s condensed consolidated statement of operations in the Current Quarter and Current Six Months, respectively.
22
The Company has elected to account for the 5.75% Convertible Notes based on the Fair Value Option accounting as outlined in ASC 825. Refer to Note 8 for further details. As of June 30, 2019 and December 31, 2018, while the debt balance recorded at fair value on the Company’s consolidated balance sheet is $23.2 million and $48.1 million, respectively, the actual outstanding principal balance of the 5.75% Convertible Notes is $94.6 million and $109.7 million, respectively.
The Company recorded interest expense of approximately $1.4 million relating to the 5.75% Convertible Notes in the Current Quarter as compared to $1.6 million in the Prior Year Quarter. The Company recorded interest expense of approximately $2.9 million relating to the 5.75% Convertible Notes in the Current Six Months as compared to $2.3 million for the Prior Year Six Months.
1.50% Convertible Notes
On March 18, 2013, the Company completed the issuance of $400.0 million principal amount of the Company’s 1.50% Convertible Notes issued pursuant to that certain Indenture, dated as of March 15, 2013, by and between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the “1.50% Notes Indenture”), in a private offering to certain institutional investors with net proceeds of approximately $390.6 million.
During FY 2016, the Company repurchased $104.9 million par value of the 1.50% Convertible Notes with a combination of $36.7 million in cash (including interest and trading fees) and the issuance of approximately 0.7 million shares of the Company’s common stock. During FY 2017, the Company repurchased $58.9 million par value of the 1.50% Convertible Notes for $59.3 million in cash (including interest and trading fees).
On February 22, 2018, the Company completed the Note Exchange. On March 15, 2018, the Company repaid the remaining outstanding principal balance of $111.2 million of the 1.50% Convertible Notes with the proceeds of the Second Delayed Draw Term Loan of $110 million plus cash on hand, and no further 1.50% Convertible Notes remained outstanding. The exchange of the 1.50% Convertible Notes for the 5.75% Convertible Notes was accounted for as a debt extinguishment in accordance with ASC 470 and resulted in the Company recording a gain on extinguishment of debt of $4.5 million, which is recorded in the Company’s condensed consolidated statement of operations in the Prior Year Six Months.
For the Prior Year Quarter and the Prior Year Six Months, the Company recorded none (refer to the extinguishment of the debt as is discussed above) and approximately $2.4 million, respectively, of additional non-cash interest expense representing the difference between the stated interest rate on the 1.50% Convertible Notes and the rate for a similar instrument that does not have a conversion feature. For the Prior Year Quarter and the Prior Year Six Months, the Company recorded none (refer to the extinguishment of the debt as discussed above) and approximately $0.7 million, respectively, of cash interest expense relating to the 1.50% Convertible Notes.
Debt Maturities
As of June 30, 2019, the Company’s debt maturities on a calendar year basis are as follows:
|
Total |
|
|
July 1 through December 31, 2019 |
|
|
2020 |
|
|
2021 |
|
|
2022 |
|
|
2023 |
|
|
Thereafter |
|
||||||||
|
$ |
353,163 |
|
|
$ |
30,375 |
|
|
$ |
38,851 |
|
|
$ |
42,693 |
|
|
$ |
42,693 |
|
|
$ |
42,693 |
|
|
$ |
155,858 |
|
|
Variable Funding Notes(1) |
|
$ |
97,364 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
97,364 |
|
Senior Secured Term Loan(2) |
|
$ |
171,648 |
|
|
|
9,642 |
|
|
|
19,284 |
|
|
|
19,284 |
|
|
|
123,438 |
|
|
|
— |
|
|
|
— |
|
5.75% Convertible Notes(3) |
|
$ |
23,190 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23,190 |
|
|
|
— |
|
Total |
|
$ |
645,365 |
|
|
$ |
40,017 |
|
|
$ |
58,135 |
|
|
$ |
61,977 |
|
|
$ |
166,131 |
|
|
$ |
65,883 |
|
|
$ |
253,222 |
|
(1) |
Reflects the net debt carrying amount, effected by the outstanding balance of the original issue discount, in the unaudited condensed consolidated balance sheet as of June 30, 2019. The actual principal outstanding balance of the Variable Funding Notes is $100.0 million as of June 30, 2019. |
(2) |
Reflects the net debt carrying amount, effected by the outstanding balance of the original issue discount, in the unaudited condensed consolidated balance sheet as of June 30, 2019. The actual principal outstanding balance of the Senior Secured Term Loan is $187.5 million as of June 30, 2019. |
(3) |
Reflects the debt carrying amount which is accounted for under the Fair Value Option in the unaudited condensed consolidated balance sheet as of June 30, 2019. The actual principal outstanding balance of the 5.75% Convertible Notes is $94.6 million as of June 30, 2019. |
23
9. Stockholders’ Equity
2016 Omnibus Incentive Plan
On November 4, 2016, the Company’s stockholders approved the Company’s 2016 Omnibus Incentive Plan (“2016 Plan”). The 2016 Plan replaced and superseded the Amended and Restated 2009 Plan. Under the 2016 Plan, all employees, directors, officers, consultants and advisors of the Company, including those of the Company’s subsidiaries, are eligible to be granted common stock, options or other stock-based awards. At inception, there were 0.2 million shares of the Company’s common stock available for issuance under the 2016 Plan. The 2016 Plan was amended at the 2017 Annual Meeting of Stockholders to increase the number of shares available under the plan by 0.19 million shares.
Shares Reserved for Issuance
As of June 30, 2019, there were approximately 0.1 million common shares available for issuance under the 2016 Plan.
Reverse Stock Split
On March 14, 2019, the Company effected a 1-for-10 reverse stock split (the “Reverse Stock Split”) of its common stock. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who otherwise would have been entitled to receive fractional shares of common stock had their holdings rounded up to the next whole share. Proportional adjustments were made to the Company’s outstanding stock options and other equity securities and to the Company’s incentive plans, and the conversion ratio of the 5.75% Convertible Notes, to reflect the Reverse Stock Split, in each case, in accordance with the terms thereof. Unless the context otherwise requires, all share and per share amounts in this quarterly report on Form 10-Q have been adjusted to reflect the Reverse Stock Split.
Stock Options
Stock options outstanding and exercisable as of June 30, 2019 were issued under previous equity incentive plans of the Company. There was no grants of stock options or warrants and no compensation expense related to stock option grants or warrant grants during the Current Six Months or Prior Year Six Months as all prior awards have been fully expensed.
As of June 30, 2019, there was a total of 1,500 stock options outstanding and exercisable at a weighted average exercise price of $171.60. During the Current Six Months, there were no canceled, exercised or expired/forfeited stock options. The weighted average contractual term (in years) of options outstanding and exercisable as of June 30, 2019 was 0.23.
Restricted stock
Compensation cost for restricted stock is measured as the excess, if any, of the quoted market price of the Company’s stock at the date the common stock is issued over the amount the employee must pay to acquire the stock (which is generally zero). The compensation cost, net of projected forfeitures, is recognized over the period between the issue date and the date any restrictions lapse, with compensation cost for grants with a graded vesting schedule recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. The restrictions do not affect voting and dividend rights.
The following table summarizes information about unvested restricted stock transactions:
|
Shares |
|
|
Weighted Average Grant Date Fair Value |
|
|||
Non-vested, January 1, 2019 |
|
|
315,396 |
|
|
$ |
108.63 |
|
Granted |
|
|
329,145 |
|
|
|
1.70 |
|
Vested |
|
|
(86,975 |
) |
|
|
8.65 |
|
Forfeited/Canceled |
|
|
(296 |
) |
|
|
75.20 |
|
Non-vested, June 30, 2019 |
|
|
557,270 |
|
|
$ |
63.79 |
|
24
The Company has awarded time-based restricted shares of common stock to certain employees. The awards have restriction periods tied to employment and vest over a maximum period of approximately 3 years. The cost of the time-based restricted stock awards, which is the fair market value on the date of grant net of estimated forfeitures, is expensed ratably over the vesting period.
The Company has awarded performance-based restricted shares of common stock to certain employees. The awards have restriction periods tied to certain performance measures. The cost of the performance-based restricted stock awards, which is the fair market value on the date of grant net of estimated forfeitures, is expensed when the likelihood of those shares being earned is deemed probable.
Compensation expense related to restricted stock grants (inclusive of the restricted stock grants awarded as part of the long-term incentive plans discussed below) for the Current Quarter and Prior Year Quarter was approximately $0.2 million and $1.2 million, respectively. Compensation expense related to restricted stock grants (inclusive of the restricted stock grants awarded as part of the long-term incentive plans discussed below) for the Current Six Months and Prior Year Six Months was approximately $0.4 million and $1.7 million, respectively.
An additional amount of $0.7 million of expense of compensation expense related to restricted stock grants (inclusive of the restricted stock grants awarded as part of the long-term incentive plans discussed below) is expected to be expensed evenly over a period of approximately three years.
For both the Current Quarter and Prior Year Quarter, the Company repurchased shares valued at less than $0.1 million of its common stock in connection with net share settlement of restricted stock grants. For the both the Current Six Months and Prior Year Six Months, the Company repurchased shares valued at approximately $0.1 million of its common stock in connection with the net share settlement of restricted stock grants.
Retention Stock
On January 7, 2016, the Company awarded to certain employees a retention stock grant of approximately 1.3 million shares in the aggregate with a then current value of approximately $7.5 million. The awards cliff vest in three years based on the Company’s total shareholder return measured against a peer group, as described in the Company’s Form 10-K/A filed on April 29, 2016. The grant date fair value of the awards issued on January 7, 2016 was $42.50. As of December 31, 2018, pursuant to the terms of the awards and based upon the Company’s performance over the vesting period, no shares were issued upon expiration of the grant.
Mr. John Haugh, the Company’s former Chief Executive Officer, was issued an employment inducement award pursuant to his employment agreement. The terms of the Employment Inducement Award are similar to the retention stock awards provided to all other employees as described above. The grant date fair value of Mr. Haugh’s award issued on February 23, 2016 was $57.50. As of June 15, 2018, Mr. Haugh, the Company’s former Chief Executive Officer and President, was no longer an employee of the Company or member of the Company’s board of directors. As of Mr. Haugh’s termination date, given that the retention stock awards were not earning out, the vesting of shares associated with Mr. Haugh’s awards resulted in zero shares issuable.
On October 15, 2018, the Company hired Robert C. Galvin as its Chief Executive Officer and President and was appointed to the Company’s board of directors. Mr. Galvin was issued an Employment Inducement Award pursuant to his employment agreement. The terms of the Employment Inducement Award are similar to the retention stock awards provided to other employees as described above. The grant date fair value of Mr. Galvin’s award issued on October 15, 2018 was $1.80.
Compensation expense related to the retention stock awards was less than $0.1 million and $0.2 million for the Current Quarter and Prior Year Quarter, respectively. Compensation expense related to the retention stock awards was approximately $0.1 million and $0.5 million for the Current Six Months and Prior Year Six Months, respectively. An additional amount of $0.3 million of expense of compensation expense related to Mr. Galvin’s retention stock awards is expected to be expensed evenly over a period of approximately 2.5 years.
Long-Term Incentive Compensation
On March 31, 2016, the Company approved a new grant for long-term incentive compensation (the “2016 LTIP”) for key employees and granted equity awards under the 2016 LTIP in the aggregate amount of approximately 0.1 million shares at a weighted average share price of $73.10 with a then current value of approximately $5.2 million. The awards granted were a combination of restricted stock units (“RSUs”) and target level performance stock units (“PSUs”). Pursuant to the terms of the awards and based upon the Company’s performance over the vesting period, less than 0.1 million were issued upon expiration of the grant on March 31, 2019.
25
On March 7, 2017, the Company approved a new grant for long-term incentive compensation (the “2017 LTIP”) for certain employees and granted equity awards under the 2017 LTIP in the aggregate amount of approximately 0.1 million shares at a weighted average share price of $75.20 with a then current value of $6.6 million. The awards granted were a combination of RSUs and target level PSUs. The material terms of the PSUs and RSUs are substantially similar to those set forth in the 2016 LTIP. Specifically, the RSUs vest one third annually on each of March 30, 2018, March 30, 2019 and March 30, 2020. The PSUs vest based on performance metrics approved by the Compensation Committee, which, for the performance period commencing January 1, 2017 and ending on December 31, 2019, are based on the Company’s achievement of an aggregate adjusted operating income performance target as set forth in the applicable award agreements, and continued employment through December 31, 2019. For the Current Six Months, less than 0.1 million shares were forfeited in respect of the 2017 LTIP. The weighted average remaining contractual term (in years) of the PSUs is one year.
On March 15, 2018, the Company approved a new grant for long-term incentive compensation (the “2018 LTIP”) for certain employees which consisted of (i) PSU equity awards in the aggregate amount of approximately 0.2 million shares at a weighted average share price of $13.80 with a then current value of $3.1 million and (ii) cash awards in the aggregate amount of approximately $3.1 million (the “2018 Cash Grant”). The Cash Grants comprising the 2018 LTIP vest in 48 equal semi-monthly installments on the 15th and last days of each month, beginning March 31, 2018 and ending March 15, 2020, subject in each case to continued employment through the applicable vesting date. Each installment is paid within 15 days of the applicable vesting date. Upon the end of an employee’s employment with the Company, any remaining unpaid portion of the 2018 Cash Grant is forfeited. The PSUs vest based on performance metrics approved by the Compensation Committee over three separate performance periods, commencing on January 1 of each of 2018, 2019 and 2020 and ending on December 31 of each of 2018, 2019 and 2020, which, for each such performance period, are based on the Company’s achievement of an aggregated adjusted operating income performance target to be set by the Compensation Committee prior to March 30 of each applicable performance period, and continued employment through the settlement date. For the Current Six Months, less than 0.1 million shares were forfeited in respect of the 2018 LTIP. The weighted average remaining contractual term (in years) of the PSUs is two years.
On March 15, 2019, the Company approved a new grant for long-term incentive compensation (the “2019 LTIP”) for certain employees which consisted of (i) PSU equity awards in the aggregate amount of approximately 0.4 million shares at a weighted average share price of $2.02 with a then current value of $0.8 million and (ii) cash awards in the aggregate amount of approximately $1.0 million (the “2019 Cash Grant”). As part of the 2019 LTIP, pursuant to his employment agreement, the Company’s Chief Executive Officer and President was granted 0.3 million shares of the Company’s common stock with an aggregate fair market value of $0.3 million upon final execution of the RSU agreement in April 2019. The 2019 Cash Grant and the PSUs vest based on performance metrics approved by the Compensation Committee over two separate performance periods, commencing on January 1 of each of 2019 and 2020 and ending on December 31 of each of 2019 and 2020, which, for each such performance period, are based on the Company’s achievement of an aggregated adjusted EBITDA performance target to be set by the Compensation Committee prior to March 30 of each applicable performance period, and continued employment through the settlement date. The weighted average remaining contractual term (in years) of the PSUs is approximately two years.
In the Current Quarter, the Company recognized compensation benefit related to the PSUs granted as part of the long-term incentive plans of less than $0.1 million as compared to a compensation benefit of $0.9 million in the Prior Year Quarter. In the Current Six Months, the Company recognized compensation expense related to the PSUs granted as part of the long-term incentive plans of $0.1 million as compared to compensation benefit of $0.6 million in the Prior Year Six Months. An additional amount of $0.4 million of expense of compensation expense related to the PSUs granted is expected to be expensed evenly over a period of approximately two years.
10. Earnings Per Share
Basic earnings per share includes no dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects, in periods in which they have a dilutive effect, the effect of restricted stock-based awards, common shares issuable upon exercise of stock options and warrants and shares underlying convertible notes potentially issuable upon conversion. The difference between basic and diluted weighted-average common shares results from the assumption that all dilutive stock options outstanding were exercised, and all convertible notes have been converted into common stock.
For the Current Quarter, of the total potentially dilutive shares related to restricted stock-based awards and stock options, approximately 0.5 million shares were anti-dilutive, as compared to approximately 0.2 million shares that were anti-dilutive for the Prior Year Quarter.
26
For the Current Quarter, approximately 0.2 million of the performance related restricted stock-based awards issued to the Company’s named executive officers were anti-dilutive as compared to approximately 0.3 million of the performance related restricted stock-based awards issued to the Company’s named executive officers were anti-dilutive in the Prior Year Quarter.
A reconciliation of weighted average shares used in calculating basic and diluted earnings per share follows:
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|||||||||||
(in thousands) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Basic |
|
|
10,377 |
|
|
|
6,598 |
|
|
|
9,426 |
|
|
|
6,257 |
|
Effect of convertible notes subject to conversion |
|
|
— |
|
|
|
— |
|
|
|
35,327 |
|
|
|
— |
|
Effect of assumed vesting of dilutive shares |
|
|
— |
|
|
|
— |
|
|
|
26 |
|
|
|
— |
|
Diluted |
|
|
10,377 |
|
|
|
6,598 |
|
|
|
44,779 |
|
|
|
6,257 |
|
In accordance with ASC 480, the Company considers its redeemable non-controlling interest in its computation of both basic and diluted earnings per share. In addition, in accordance with ASC 260, the Company considers its 5.75% Convertible Notes in its computation of diluted earnings per share. For the Current Quarter, Prior Year Quarter, Current Six Months, and Prior Year Six Months, adjustments to the Company’s redeemable non-controlling interest and effects of potential conversion on the 5.75% Convertible Notes had impacts on the Company’s earnings per share calculations as follows:
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|||||
For earnings (loss) per share - basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Iconix Brand Group, Inc. |
|
$ |
1,271 |
|
|
$ |
(79,429 |
) |
|
$ |
19,216 |
|
|
$ |
(51,670 |
) |
Accretion of redeemable non-controlling interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income attributable to Iconix Brand Group, Inc. after the effect of accretion of redeemable non-controlling interest for basic earnings (loss) per share |
|
$ |
1,271 |
|
|
$ |
(79,429 |
) |
|
$ |
19,216 |
|
|
$ |
(51,670 |
) |
For earnings (loss) per share - diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Iconix Brand Group, Inc. |
|
$ |
1,271 |
|
|
$ |
(79,429 |
) |
|
$ |
19,216 |
|
|
$ |
(51,670 |
) |
Effect of potential conversion of 5.75% Convertible Notes |
|
|
— |
|
|
|
— |
|
|
|
(15,762 |
) |
|
|
— |
|
Net income attributable to Iconix Brand Group, Inc. after the effect of potential conversion of 5.75% Convertible Notes for diluted earnings (loss) per share |
|
$ |
1,271 |
|
|
$ |
(79,429 |
) |
|
$ |
3,454 |
|
|
$ |
(51,670 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.12 |
|
|
$ |
(12.04 |
) |
|
$ |
2.04 |
|
|
$ |
(8.26 |
) |
Diluted |
|
$ |
0.12 |
|
|
$ |
(12.04 |
) |
|
$ |
0.08 |
|
|
$ |
(8.26 |
) |
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
10,377 |
|
|
|
6,598 |
|
|
|
9,426 |
|
|
|
6,257 |
|
Diluted |
|
|
10,377 |
|
|
|
6,598 |
|
|
|
44,779 |
|
|
|
6,257 |
|
11. Contingencies
In May 2016, Supply Company, LLC, (“Supply”), a former licensee of the Ed Hardy trademark, commenced the action against the Company and its affiliate, Hardy Way, LLC, (“Hardy Way”, and, together with the Company, the “Iconix Defendants”) seeking damages of $50 million, including punitive damages, attorneys’ fees and costs. Supply alleges that Hardy Way breached the parties’
27
license agreement by failing to reimburse Supply for markdown reimbursement requests that Supply received from a certain retailer. Supply also alleges that the Company is liable for fraud because it made purported misstatements about the Company’s financials and the viability of the Ed Hardy trademark in order to induce Supply to enter into the license agreement and to induce Supply to enter into a separate agreement with a certain retailer. The Iconix Defendants are vigorously defending against the claims, and have filed a motion to dismiss the Complaint, which is awaiting Court decision. At this time, the Company is unable to estimate the ultimate outcome of this matter.
Two shareholder derivative complaints captioned James v. Cuneo et al, Docket No. 1:16-cv-02212 and Ruthazer v. Cuneo et al, Docket No. 1:16-cv-04208 have been consolidated in the United States District Court for the Southern District of New York, and three shareholder derivative complaints captioned De Filippis v. Cuneo et al. Index No. 650711/2016, Gold v. Cole et al, Index No. 53724/2016 and Rosenfeld v. Cuneo et al., Index No. 510427/2016 have been consolidated in the Supreme Court of the State of New York, New York County. The complaints name the Company as a nominal defendant and assert claims for breach of fiduciary duty, insider trading and unjust enrichment against certain of the Company's current and former directors and officers arising out of the Company's restatement of financial reports and certain employee departures. At this time, the Company is unable to estimate the ultimate outcome of these matters.
The Company continues to cooperate in the previously disclosed SEC and Southern District of New York (“SDNY”) investigations.
Three securities class actions have been consolidated in the United States District Court for the Southern District of New York, under the caption In re Iconix Brand Group, Inc., et al., Docket No. 1:15-cv-4860, against the Company and certain former officers and one current officer (the “Class Action”). The plaintiffs in the Class Action purport to represent a class of purchasers of the Company’s securities from February 22, 2012 to November 5, 2015, inclusive, and claim that the Company and individual defendants violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, by making allegedly false and misleading statements regarding certain aspects of the Company’s business operations and prospects. On October 25, 2017, the Court granted the motion to dismiss the consolidated amended complaint filed by the Company and the individual defendants with leave to amend. On November 14, 2017, the plaintiffs filed a second consolidated amended complaint. On February 2, 2018, the defendants moved to dismiss the second consolidated amended complaint. The Company and the individual defendants intend to vigorously defend against such claims. At this time, the Company is unable to estimate the ultimate outcome of these matters, but has recorded a preliminary estimate of a settlement, which the Company believes will fully be covered by insurance.
From time to time, the Company is also made a party to litigation incurred in the normal course of business. In addition, in connection with litigation commenced against licensees for non-payment of royalties, certain licensees have asserted unsubstantiated counterclaims against the Company. While any litigation has an element of uncertainty, the Company believes that the final outcome of any of these routine matters will not, individually or in the aggregate, have a material effect on the Company’s financial position or future liquidity.
28
12. Related Party Transactions
The Company has entered into certain license agreements in which the core licensee is also one of our joint venture partners. In the case of Sports Direct International plc (“Sports Direct”), the Company maintains license agreements with Sports Direct, but in addition, during the Prior Year Six Months, the Company entered into a cooperation agreement with Sports Direct that allowed Sports Direct to appoint two members to the Company’s Board of Directors. For the Current Quarter, Prior Year Quarter, Current Six Months, and Prior Year Six Months, the Company recognized the following royalty revenue amounts:
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|||||||||||
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|||||
Joint Venture Partner |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Brands Group Asia Limited(1) |
|
$ |
— |
|
|
$ |
6,138 |
|
|
$ |
— |
|
|
$ |
11,767 |
|
Rise Partners, LLC / Top On International Group Limited |
|
|
— |
|
|
|
242 |
|
|
|
— |
|
|
|
483 |
|
M.G.S. Sports Trading Limited |
|
|
103 |
|
|
|
182 |
|
|
|
218 |
|
|
|
336 |
|
Pac Brands USA, Inc. |
|
|
79 |
|
|
|
23 |
|
|
|
108 |
|
|
|
124 |
|
Albion Equity Partners LLC / GL Damek |
|
|
568 |
|
|
|
633 |
|
|
|
1,162 |
|
|
|
1,218 |
|
Anthony L&S |
|
|
— |
|
|
|
600 |
|
|
|
— |
|
|
|
617 |
|
MHMC |
|
|
— |
|
|
|
732 |
|
|
|
7 |
|
|
|
1,463 |
|
Sports Direct International plc |
|
|
448 |
|
|
|
— |
|
|
|
574 |
|
|
|
— |
|
|
|
$ |
1,198 |
|
|
$ |
8,550 |
|
|
$ |
2,069 |
|
|
$ |
16,008 |
|
(1) |
Prior to 2019, Global Brand Group Asia Limited maintained the Buffalo and Zoo York license agreements. However, in October 2018, Centric Brands Inc. acquired a significant portion of Global Brands Group Asia Limited’s North American licensing business. The Company’s license agreement for the Buffalo and Zoo York brands in the United States are now maintained with Centric Brands Inc. which is not a related party or affiliated entity to the Company. |
The Company computes its expected annual effective income tax rate in accordance with ASC 740 and makes changes on a quarterly basis, as necessary, based on certain factors such as changes in forecasted annual pre-tax income; changes to actual or forecasted permanent book to tax differences; impacts from tax audits with state, federal or foreign tax authorities; impacts from tax law changes; or change in judgment as to the realizability of deferred tax assets. The Company identifies items which are unusual and non-recurring in nature and treats these as discrete events. The tax effect of discrete items is recorded in the quarter in which the discrete events occur. Due to the volatility of these factors, the Company's consolidated effective income tax rate can change significantly on a quarterly basis.
With the exception of the Buffalo brand joint venture, Iconix Middle East joint venture, Diamond Icon joint venture and Umbro China joint venture, the Company is not responsible for the income taxes related to the non-controlling interest’s share of the joint venture’s earnings. Therefore, the tax liability associated with the non-controlling interest share of the joint venture’s earnings is not reported in the Company’s income tax expense, despite the joint venture’s entire income being consolidated in the Company’s reported income before income tax expense. As such, the joint venture’s earnings have the effect of lowering our effective tax rate. This effect is more pronounced in periods in which joint venture earnings are higher relative to our other earnings. Since the Buffalo brand joint venture is a taxable entity in Canada, the Iconix Middle East joint venture and Diamond Icon joint venture are taxable entities in the United Kingdom, the Company is required to report its tax liability, including taxes attributable to the non-controlling interest, in its statement of operations. All other consolidated joint ventures are partnerships and treated as pass-through entities not subject to taxation in their local tax jurisdiction, and therefore the Company includes only the tax attributable to its proportionate share of income from the joint venture in income tax expense.
The Company files income tax returns in the U.S. federal and various state and local jurisdictions. For federal income tax purposes, during the fourth quarter of 2016, the Internal Revenue Service initiated an audit of the 2014 federal tax return which is ongoing. The Company also files returns in numerous foreign jurisdictions that have varied years remaining open for examination, but generally the statute of limitations is three to four years from when the return is filed.
29
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the recorded deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on these items and the consecutive years of pretax losses (resulting from impairment), management determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance for all taxing jurisdictions as of December 31, 2018. In addition, the Company continues to have deferred tax liabilities related to indefinite lived intangibles on the condensed consolidated balance sheet a portion of which cannot be considered to be a source of taxable income to offset deferred tax assets.
The Company’s consolidated effective tax rate for the Current Quarter was -4% which resulted in a $0.1 million income tax benefit as compared to the consolidated effective tax rate for the Prior Year Quarter of 4% which resulted in a $2.8 million income tax benefit. The decrease in the effective tax rate was due to trademark impairment recorded in the Prior Year Quarter, for which the Company recognized a tax benefit against a pretax loss.
The Company’s consolidated effective tax rate for Current Six Months was 7% which resulted in a $1.8 million income tax provision as compared to the consolidated effective tax rate for the Prior Year Six Months of 3% which resulted in a $1.2 million income tax benefit. The increase in tax expense is due to trademark impairment recorded in the Prior Year Six Months, for which the Company recognized a tax benefit.
Management has not recorded a tax provision for current ongoing tax examinations; however, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company's tax audits are resolved in a manner not consistent with management's expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs.
The Company has net operating loss (“NOL”) carryforwards for federal and state income tax purposes which, generally, can be used to reduce future taxable income. Use of the NOL carryforwards is limited under Section 382 of the Internal Revenue Code, as we have had a change in ownership of more than 50% of our capital stock over a three-year period as measured under Section 382 of the Internal Revenue Code. These complex changes of ownership rules generally focus on ownership changes involving shareholders owning directly or indirectly 5% or more of our stock, including certain public “groups” of shareholders as set forth under Section 382 of the Internal Revenue Code, including those arising from new stock issuances and other equity transactions. Some of these NOL carryforwards will expire if they are not used within certain periods. At this time, we consider it more likely than not that we will not have sufficient taxable income in the future that will allow us to realize these NOL carryforwards.
14. Accumulated Other Comprehensive Income
The following table sets forth the activity in accumulated other comprehensive income for the Current Six Months and Prior Year Six Months:
|
Foreign currency translation adjustments |
|
|
Unrealized losses of available for sale securities |
|
|
Total |
|
||||
Balance at December 31, 2018 |
|
$ |
(53,068 |
) |
|
$ |
— |
|
|
$ |
(53,068 |
) |
Changes before reclassifications |
|
|
(603 |
) |
|
|
— |
|
|
|
(603 |
) |
Current period other comprehensive income |
|
|
(603 |
) |
|
|
— |
|
|
|
(603 |
) |
Balance at June 30, 2019 |
|
$ |
(53,671 |
) |
|
$ |
— |
|
|
$ |
(53,671 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
Unrealized losses of available for sale securities |
|
|
Total |
|
|||
Balance at December 31, 2017 |
|
$ |
(48,103 |
) |
|
$ |
(3,177 |
) |
|
$ |
(51,280 |
) |
Changes before reclassifications |
|
|
(2,780 |
) |
|
|
— |
|
|
|
(2,780 |
) |
Cumulative adjustment for adoption of ASU 2016-01 |
|
|
— |
|
|
|
3,177 |
|
|
|
3,177 |
|
Current period other comprehensive income |
|
|
(2,780 |
) |
|
|
3,177 |
|
|
|
397 |
|
Balance at June 30, 2018 |
|
$ |
(50,883 |
) |
|
$ |
— |
|
|
$ |
(50,883 |
) |
30
15. Segment and Geographic Data
The Company identifies its operating segments for which separate financial information is available and for which segment results are evaluated regularly by the Chief Executive Officer, the Company’s chief operating decision maker, in deciding how to allocate resources and in assessing performance. The Company has disclosed the following operating segments: men’s, women’s, home, and international. Since the Company does not track, manage and analyze its assets by segments, no disclosure of segmented assets is reported.
The geographic regions consist of the United States and Other (which principally represent Latin America and Europe). Revenues attributable to each region are based on the location in which licensees are located and where they principally do business.
Reportable data for the Company’s operating segments is as follows:
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|||||||||||
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|||||
Licensing revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Women's |
|
$ |
8,171 |
|
|
$ |
16,871 |
|
|
$ |
16,538 |
|
|
$ |
33,469 |
|
Men's |
|
|
6,614 |
|
|
|
10,526 |
|
|
|
17,550 |
|
|
|
20,470 |
|
Home |
|
|
4,285 |
|
|
|
6,961 |
|
|
|
7,775 |
|
|
|
13,473 |
|
International |
|
|
15,324 |
|
|
|
15,854 |
|
|
|
28,473 |
|
|
|
31,349 |
|
|
|
$ |
34,394 |
|
|
$ |
50,212 |
|
|
$ |
70,336 |
|
|
$ |
98,761 |
|
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Women's |
|
$ |
8,622 |
|
|
$ |
(95,694 |
) |
|
$ |
16,249 |
|
|
$ |
(81,066 |
) |
Men's |
|
|
4,952 |
|
|
|
664 |
|
|
|
12,498 |
|
|
|
6,538 |
|
Home |
|
|
3,782 |
|
|
|
6,589 |
|
|
|
6,787 |
|
|
|
12,332 |
|
International |
|
|
10,766 |
|
|
|
8,082 |
|
|
|
19,189 |
|
|
|
14,569 |
|
Corporate |
|
|
(9,550 |
) |
|
|
(14,227 |
) |
|
|
(17,752 |
) |
|
|
(31,423 |
) |
|
|
$ |
18,572 |
|
|
$ |
(94,586 |
) |
|
$ |
36,971 |
|
|
$ |
(79,050 |
) |
16. Other Assets - Current and Long-Term
Other Assets - Current
|
June 30, 2019 |
|
|
December 31, 2018 |
|
|||
Other assets - current consisted of the following: |
|
|
|
|
|
|
|
|
US federal tax receivables |
|
$ |
15,855 |
|
|
$ |
16,757 |
|
Insurance receivable(1) |
|
|
12,876 |
|
|
|
— |
|
Prepaid advertising |
|
|
914 |
|
|
|
1,100 |
|
Prepaid expenses |
|
|
1,643 |
|
|
|
2,451 |
|
Prepaid taxes |
|
|
6,171 |
|
|
|
1,755 |
|
Prepaid insurance |
|
|
822 |
|
|
|
1,446 |
|
Due from related parties |
|
|
3,885 |
|
|
|
3,903 |
|
Other current assets |
|
|
634 |
|
|
|
645 |
|
Other current assets |
|
$ |
42,800 |
|
|
$ |
28,057 |
|
31
|
|
|
|
|
|
|
|
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
|||
Other noncurrent assets consisted of the following: |
|
|
|
|
|
|
|
|
Prepaid interest |
|
$ |
5,148 |
|
|
$ |
5,496 |
|
Deposits |
|
|
482 |
|
|
|
482 |
|
Other noncurrent assets |
|
|
4 |
|
|
|
1 |
|
Other noncurrent assets |
|
$ |
5,634 |
|
|
$ |
5,979 |
|
The Company is a lessee in several noncancelable operating leases, primarily for its corporate office, additional office space and certain office equipment. Beginning January 1, 2019, the Company accounts for leases in accordance with ASC Topic 842, Leases. Refer to Note 20. The Company determines if an arrangement is or contains a lease at contract inception. The Company recognizes a right of use (ROU) asset and a lease liability at the lease commencement date.
For operating leases, the ROU asset is initially measured at the initial measurement amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the lease incentive received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense is recognized on a straight-line basis over the lease term.
Variable lease payments associated with the Company’s leases are recognized in the period in which the obligation for those payments is incurred. Variable lease payments are presented as operating expense in the Company’s condensed consolidated statement of operations in the same line item as expense arising from fixed lease payments.
Operating lease ROU assets are presented as operating lease right of use assets within non-current assets on the consolidated balance sheet. The current portion of operating lease liabilities is included in other current liabilities and the long-term portion is included in other liabilities on the consolidated balance sheet.
The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less. The Company recognizes the lease payments associated with its short-term leases of office space and office equipment as an expense on a straight-line basis over the lease term. The Company’s leases may include nonlease components such as common area maintenance. The Company has elected the practical expedient to account for the lease and nonlease components as a single lease component, therefore, for all of our operating leases, the lease payments used to measure the lease liability include all of the fixed consideration in the contract.
The Company’s operating leases expire over the next five years. The Company’s operating leases may contain renewal options however, because the Company is not reasonably certain to exercise these renewal options, the options are not included in the lease term and associated potential option payments are excluded from lease payments. Payments due under the lease contracts include fixed payments and in certain of the Company’s leases, variable payments. Variable lease payments consist of the Company’s proportionate share of the building’s property taxes, insurance, electricity and other common area maintenance costs.
For the Current Quarter and Current Six Months, components of lease cost were as follows:
|
For the Three Months Ended June 30, 2019 |
|
|
For the Six Months Ended June 30, 2019 |
|
|||
Operating lease cost |
|
$ |
552 |
|
|
$ |
1,101 |
|
Short-term lease cost |
|
|
70 |
|
|
|
197 |
|
Variable lease cost |
|
|
52 |
|
|
|
211 |
|
|
|
$ |
674 |
|
|
$ |
1,509 |
|
For the Prior Year Quarter and Prior Year Six Months, minimum rental payments under operating leases are recognized on a straight-line basis over the term of the lease including any periods of free rent. Rental expense for operating leases during the Prior Year Quarter and Prior Year Six Months amounted to $1.1 million and $2.0 million, respectively.
32
As of June 30, 2019, the operating lease ROU assets and operating lease liabilities were $7.4 million and $9.6 million, respectively.
For the Current Six Months, cash paid for lease liabilities for operating leases was $0.6 million. Additionally, for the Current Six Months, the Company obtained a ROU asset of $0.1 million exchanged for operating lease obligations of $0.1 million. There were no ROU assets exchanged and no operating lease obligations assumed during the Current Quarter. In the Current Six Months, there were no reductions to ROU assets resulting from reductions to lease obligations.
Because we generally do not have access to the rate implicit in the lease, the Company utilizes our incremental borrowing rate as the discount rate. As of June 30, 2019, the weighted average remaining operating lease term is 4.66 years and the weighted average discount rate for the operating leases is 8.61%.
Maturities of lease liabilities under non-cancellable leases as of June 30, 2019 are as follows:
|
Operating Leases |
|
||
Remainder of 2019 |
|
$ |
1,254 |
|
2020 |
|
|
2,590 |
|
2021 |
|
|
2,447 |
|
2022 |
|
|
2,164 |
|
2023 |
|
|
2,109 |
|
Thereafter |
|
|
1,078 |
|
Total undiscounted lease payments |
|
$ |
11,642 |
|
Less: Imputed interest |
|
|
2,037 |
|
Total lease liabilities |
|
$ |
9,605 |
|
As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, future minimum lease payments under non-cancellable leases were as follows:
18. Other Liabilities – Current
As of June 30, 2019, other current liabilities of $12.8 million relates to amounts due to certain joint ventures that are not consolidated with the Company as well as the current portion of the lease liabilities (refer to Note 17 for further details) as compared to $9.8 million as of December 31, 2018 which relates solely to amounts due to certain joint ventures that are not consolidated with the Company.
19. Foreign Currency Translation
The functional currency of Iconix Luxembourg and Red Diamond Holdings, which are wholly owned subsidiaries of the Company located in Luxembourg, is the Euro. However, the companies have certain dollar denominated assets, in particular cash and notes receivable, that are maintained in U.S. Dollars, which are required to be revalued each quarter. Due to fluctuations in currency in the Current Quarter and the Prior Year Quarter, the Company recorded a $0.3 million currency translation gain and a $0.7 million currency translation loss, respectively, that is included in the condensed consolidated statement of operations. Due to fluctuations in currency in the Current Six Months and the Prior Year Six Months, the Company recorded a $0.4 million currency translation loss and a $0.2 million currency translation loss, respectively, that is included in the condensed consolidated statement of operations.
33
Comprehensive income includes certain gains and losses that, under U.S. GAAP, are excluded from net income as such amounts are recorded directly as an adjustment to stockholders’ equity. The Company’s comprehensive income is primarily comprised of net income and foreign currency translation gain or loss. During the Current Quarter and the Prior Year Quarter, the Company recognized as a component of its comprehensive income, a foreign currency translation gain of $1.1 million and foreign currency translation loss of $5.5 million, respectively, due to changes in foreign exchange rates during the Current Quarter and the Prior Year Quarter, respectively. During the Current Six Months and the Prior Year Six Months, the Company recognized as a component of its comprehensive income, a foreign currency translation loss of $0.6 million and foreign currency translation loss of $2.8 million, respectively, due to changes in foreign exchange rates during the Current Six Months and the Prior Year Six Months, respectively.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.
Additionally, FASB issued ASU No. 2018-11, Targeted Improvements, which allows companies to adopt Topic 842 without revising comparative period reporting or disclosures. ASU 2016-02 and ASU 2018-11 are effective for the Company and the Company adopted the new standard on January 1, 2019. The Company adopted ASU 2016-02 using the optional transition approach as of the effective date. As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption (ie. January 1, 2019). The Company has elected to adopt the package of transition practical expedients and therefore, has not reassessed (1) whether existing or expired contracts contain a lease, (2) lease classification of existing or expired leases or (3) the accounting for initial direct costs that were previously capitalized. The Company did not elect the practical expedient to use hindsight for leases existing at the adoption date.
The adoption of ASU 2016-02 had a material impact to the Company’s condensed consolidated balance sheet, but did not materially impact the consolidated statement of operations. The most significant changes to the condensed consolidated balance sheet relate to the recognition of new ROU assets and lease liabilities for operating leases. The adoption of ASU 2016-02 also had no material impact on operating, investing or financing cash flows in the consolidated statement of cash flows. See Note 17 for further details.
As a result of adopting ASU 2016-02, the Company recognized operating lease liabilities of $10.4 million (of which $1.7 million was current and $8.7 million was noncurrent) with corresponding ROU assets of $8.0 million as of January 1, 2019.
In February 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test and eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. The ASU is effective for public business entities for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. This ASU should be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We will adopt this accounting guidance in future periods.
21. Other Matters
During the Current Quarter and the Prior Year Quarter, the Company included in its selling, general and administrative expenses approximately $3.2 million and $2.7 million, respectively, of charges related to professional fees associated with the continuing correspondence with the Staff of the SEC, the SEC and related SDNY investigations and the class action and derivative litigations. During the Current Six Months and the Prior Year Six Months, the Company included in its selling, general and administrative expenses approximately $6.0 million and $5.4 million, respectively, of charges related to professional fees associated with the continuing correspondence with the Staff of the SEC, the SEC and related SDNY investigations and the class action and derivative litigations.
22. Subsequent Events
In July 2019, pursuant to the operating agreement, the Company reacquired the remaining 5% ownership interest in Umbro China from MHMC, its joint venture partner, for approximately $1.3 million in cash. As a result of this transaction, the Company maintains 100% ownership interest in Umbro China.
34
As previously disclosed, on July 8, 2019, the Company received a letter from the Listing Qualifications Department of The Nasdaq Stock Market notifying the Company that the minimum bid price per share for its common stock fell below $1.00 for a period of 30 consecutive business days (from May 23, 2019 to July 5, 2019) and that therefore the Company did not meet the minimum bid price requirement set forth in the Nasdaq Listing Rules.
The letter also states that pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company will be provided 180 calendar days, or until January 6, 2020, to regain compliance with the minimum bid price requirement. In accordance with Rule 5810(c)(3)(A), the Company can regain compliance with the minimum bid price requirement, if, at any time during such 180-day period, the closing bid price of the Company’s common stock is at least $1.00 for a minimum period of 10 consecutive business days. If by January 6, 2020, the Company does not regain compliance with the Nasdaq Listing Rules, the Company may be eligible for additional time to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(ii). To qualify, the Company would need to submit a Transfer Application and a $5,000 application fee. In addition, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the minimum bid price requirement. In addition, the Company would need to provide written notice to Nasdaq of its intention to cure the minimum bid price deficiency during the second compliance period by effecting a reverse stock split, if necessary. As part of its review process, the Nasdaq staff will make a determination of whether it believes the Company will be able to cure this deficiency. Should the Nasdaq staff conclude that the Company will not be able to cure the deficiency, or should the Company determine not to submit a Transfer Application or make the required representation, Nasdaq will provide notice that the Company’s shares of common stock will be subject to delisting.
If the Company does not regain compliance within the allotted compliance period(s), including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Company’s shares of common stock will be subject to delisting. At such time, the Company may appeal the delisting determination to a Hearings Panel.
The Company intends to monitor its closing bid price for its common stock between now and January 6, 2020, and will consider available options to resolve the Company’s noncompliance with the minimum bid price requirement, as may be necessary. There can be no assurance that the Company will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with other Nasdaq listing criteria.
35
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary. Iconix Brand Group is 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. The Company’s business strategy is to maximize the value of its 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 June 30, 2019, the Company’s brand portfolio includes Candie’s ®, Bongo ®, Joe Boxer ® , Rampage ® , Mudd ® , London Fog ® , Mossimo ® , Ocean Pacific/OP ® , Danskin /Danskin Now ® , Rocawear ® /Roc Nation ® , Artful Dodger ® , Cannon ® , Royal Velvet ® , Fieldcrest ® , Charisma ® , Starter ® , Waverly ® , Ecko Unltd ® /Mark Ecko Cut & Sew ® , Zoo York ® , Umbro ® and Lee Cooper ®; and interests in Material Girl ® , Ed Hardy ® , Truth or Dare ® , Modern Amusement ® , Buffalo ® , Hydraulic ® and Pony ® .
The Company principally looks to monetize the Intellectual Property (herein referred to as “IP”) related to its brands throughout the world and in all relevant categories by licensing directly with leading retailers (herein referred to as “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 the Company’s brands are sold across a variety of distribution channels. The licensees are generally responsible for designing, manufacturing and distributing the licensed products. The Company supports its brands with marketing, advertising and promotional campaigns designed to increase brand awareness. Additionally, the Company provides its licensees with coordinated trend direction to enhance product appeal and help build and maintain brand integrity.
Globally, the Company has over 50 DTR licenses and over 400 total licenses. Licensees are selected based upon the Company’s 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 the Company generally requires for each brand. This licensing strategy is designed to permit the Company to operate its licensing business, leverage its 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 vast majority of the Company’s licensing agreements include minimum guaranteed royalty revenue which provides the Company with greater visibility into future cash flows. As of July 1, 2019, the Company and its joint ventures had a contractual right to receive over $384.0 million of minimum licensing revenue over the balance and the terms of their current licenses, excluding any renewals.
The Company’s OP DTR license agreement at Walmart was not renewed upon expiration in June 2017. The Company’s Starter DTR license agreement at Walmart was not renewed upon expiration in December 2017. In October 2017, the Company also announced that Starter is now available on Amazon exclusively to Amazon Prime members. Additionally, the Danskin Now license agreement with Walmart was not renewed upon its expiration in January 2019. The Company’s Mossimo DTR license agreement at Target was not renewed upon expiration in October 2018. The Company’s Material Girl license agreement with Macy’s will not be renewed upon its expiration in January 2020. The Company‘s Royal Velvet license agreement with JC Penney was not renewed upon its expiration in January 2019. The Company is actively seeking to place OP, Danskin, Mossimo, Material Girl and Royal Velvet with new or existing licensees. At this time, the Company is uncertain how the terms and conditions of any potential replacement licensing arrangements could affect its future revenues and cash flows.
A key initiative in the Company’s global brand expansion plans has been the formation of international joint ventures. The strategy in forming international joint ventures is to partner with best-in-class, local partners to bring the Company’s brands to market more quickly and efficiently, generating greater short- and long-term value from its IP, than the Company believes is possible if it were to build-out wholly-owned operations ourselves across a multitude of regional or local offices. Since September 2008, the Company has established the following international joint ventures: Iconix China, Iconix Latin America, Iconix Europe, Iconix India, Iconix Canada, Iconix Australia, Iconix Southeast Asia, Iconix Israel, Iconix Middle East, Umbro China, Danskin China, Starter China and Lee Cooper China.
The Company’s primary goal of maximizing the value of its IP also includes, in certain instances, the sale to third parties of a brand’s trademark in specific territories or categories. As such, the Company evaluates potential offers to acquire some or all of a brand’s IP by comparing whether the offer is more valuable than the Company’s estimate of the current and potential revenue streams to be earned via the Company’s traditional licensing model. Further, as part of the Company’s evaluation process, it also considers whether or not the buyer’s future development of the brand may help to expand the brand’s overall recognition and global revenue potential.
The Company identifies its 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.
36
Therefore, the Company has disclosed these reportable segments for the periods shown below.
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Licensing revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Women's |
|
$ |
8,171 |
|
|
$ |
16,871 |
|
|
$ |
16,538 |
|
|
$ |
33,469 |
|
Men's |
|
|
6,614 |
|
|
|
10,526 |
|
|
|
17,550 |
|
|
|
20,470 |
|
Home |
|
|
4,285 |
|
|
|
6,961 |
|
|
|
7,775 |
|
|
|
13,473 |
|
International |
|
|
15,324 |
|
|
|
15,854 |
|
|
|
28,473 |
|
|
|
31,349 |
|
|
|
$ |
34,394 |
|
|
$ |
50,212 |
|
|
$ |
70,336 |
|
|
$ |
98,761 |
|
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Women's |
|
$ |
8,622 |
|
|
$ |
(95,694 |
) |
|
$ |
16,249 |
|
|
$ |
(81,066 |
) |
Men's |
|
|
4,952 |
|
|
|
664 |
|
|
|
12,498 |
|
|
|
6,538 |
|
Home |
|
|
3,782 |
|
|
|
6,589 |
|
|
|
6,787 |
|
|
|
12,332 |
|
International |
|
|
10,766 |
|
|
|
8,082 |
|
|
|
19,189 |
|
|
|
14,569 |
|
Corporate |
|
|
(9,550 |
) |
|
|
(14,227 |
) |
|
|
(17,752 |
) |
|
|
(31,423 |
) |
|
|
$ |
18,572 |
|
|
$ |
(94,586 |
) |
|
$ |
36,971 |
|
|
$ |
(79,050 |
) |
Results of Operations
Current Quarter compared to Prior Year Quarter
Licensing Revenue. Total revenue for the Current Quarter was $34.4 million, a 32% decrease as compared to $50.2 million for the Prior Year Quarter. Revenue from the women’s segment decreased 52% from $16.9 million in the Prior Year Quarter to $8.2 million in the Current Quarter primarily due to a decrease in licensing revenue from our Mossimo, Danskin and Joe Boxer brands as the brands transition from their historical DTR relationships. Revenue from the men’s segment decreased 37% from $10.5 million in the Prior Year Quarter to $6.6 million in the Current Quarter mainly due to a decrease in licensing revenue from our Buffalo brand. Revenue from the home segment decreased 38% from $7.0 million in the Prior Year Quarter to $4.3 million in the Current Quarter mainly due to the transition of our Royal Velvet brand from a DTR relationship. The international segment decreased 3% from $15.9 million in the Prior Year Quarter to $15.3 million in the Current Quarter mainly due from weakness in China.
Selling, General and Administrative Expenses. Total selling, general and administrative expenses (“SG&A”) were $16.4 million for the Current Quarter as compared to $28.6 million for the Prior Year Quarter, a decrease of $12.2 million or 43%. SG&A from the women’s segment decreased 97% from $1.9 million in the Prior Year Quarter to $0.1 million in the Current Quarter mainly due to a $0.8 million decrease in advertising costs. SG&A from the men’s segment decreased 61% from $4.2 million in the Prior Year Quarter to $1.6 million in the Current Quarter primarily due to a $1.5 million decrease in advertising costs. SG&A from the home segment increased 36% from $0.4 million in the Prior Year Quarter to $0.5 million in the Current Quarter primarily due to a $0.1 million increase in advertising costs. SG&A from the international segment decreased 39% from $8.4 million in the Prior Year Quarter to $5.1 million in the Current Quarter mainly due to a $0.7 million decrease in compensation costs and collection of $0.8 million of previously written off accounts receivable balances. Corporate SG&A decreased 34% from $13.8 million in the Prior Year Quarter to $9.2 million in the Current Quarter primarily due to $3.5 million decrease in compensation costs.
Loss on Termination of Licenses. Loss on termination of licenses was zero for the Current Quarter as compared to $5.7 in the Prior Year Quarter. The charge in the Prior Year Quarter was related to a litigation settlement with a previous licensee for the Rocawear brand in the men’s segment.
Depreciation and Amortization. Depreciation and amortization decreased to $0.5 million for the Current Quarter, compared to $0.6 million in the Prior Year Quarter primarily due to a $0.1 million decrease in depreciation costs.
Equity earnings on joint ventures. Equity earnings on joint ventures was $1.1 million for the Current Quarter, compared to $1.1 million for the Prior Year Quarter.
Gain on Sale of Trademarks. Gain on Sale of Trademarks was zero for the Current Quarter, compared to a gain of $0.1 million in the Prior Year Quarter. The gain in the Prior Year Quarter was related to the completion of the sale of the Sharper Image trademarks in Australia.
37
Trademark & Goodwill Impairment. Trademark & Goodwill Impairment loss was zero for the Current Quarter, as compared to a loss of approximately $111.1 million in the Prior Year Quarter. The impairment in the Prior Year Quarter was a trademark impairment of $73.3 million related to a write-down in the Mossimo trademark and a goodwill impairment of $37.8 million related to a write-down in our women’s segment.
Operating Income (loss). Total operating income for the Current Quarter increased to $18.6 million or 54% of total revenue, compared to loss of approximately $94.6 million in the Prior Year Quarter. Excluding trademark and goodwill impairment, total operating income in the Prior Year Quarter was $16.6 million or 33% of total revenue. Operating income from the women’s segment was $8.6 million in the Current Quarter as compared to a loss of $95.7 million in the Prior Year Quarter. Excluding trademark and goodwill impairment, operating income from the women’s segment was $15.5 million in the Prior Year Quarter. Operating income from the men’s operating segment was $5.0 million in the Current Quarter compared to $0.7 million in the Prior Year Quarter. Operating income from the home segment was $3.8 million in the Current Quarter compared to $6.6 million in the Prior Year Quarter. Operating income from the international segment was $10.8 million in the Current Quarter compared to $8.1 million in the Prior Year Quarter. Corporate operating loss was $9.5 million in the Current Quarter compared to an operating loss of $14.2 million in the Prior Year Quarter.
Other Expenses (income)-Net. Other expenses (income)- net was an expense of approximately $15.3 million for the Current Quarter as compared to income of $16.6 million for the Prior Year Quarter, an increase of $31.9 million. The increase was primarily related to a gain of $0.3 million in the Current Quarter as compared to a gain of $32.1 million in the Prior Year Quarter related to the mark-to-market adjustment from the Company’s 5.75% Convertible Notes based on the Company’s accounting treatment which requires the fair value of the debt at the end of each period.
Provision for Income Taxes. The effective income tax rate for the Current Quarter is approximately -4%, which resulted in a $0.1 million income tax benefit, as compared to an effective income tax rate of 4% in the Prior Year Quarter, which resulted in a $2.8 million income tax benefit. The decrease in the effective tax rate was due to trademark impairment recorded in the Prior Year Quarter, for which the Company recognized a tax benefit against a pretax loss.
Net Income. Our net income was approximately $3.4 million in the Current Quarter, compared to a net loss of approximately $75.1 million in the Prior Year Quarter, as a result of the factors discussed above.
Current Six Months compared to Prior Year Six Months
Licensing Revenue. Total revenue for the Current Six Months was $70.3 million, a 29% decrease as compared to $98.8 million for the Prior Year Six Months. Revenue from the women’s segment decreased 51% from $33.5 million in the Prior Year Six Months to $16.5 million in the Current Six Months primarily due to a decrease in licensing revenue from our Mossimo, Danskin and Joe Boxer brands as the brands transition from their historical DTR relationships. Revenue from the men’s segment decreased 14% from $20.5 million in the Prior Year Six Months to $17.5 million in the Current Six Months mainly due to a decrease in licensing revenue from our Buffalo brand. Revenue from the home segment decreased 42% from $13.5 million in the Prior Year Six Months to $7.8 million in the Current Six Months mainly due to the transition of our Royal Velvet brand from a DTR relationship. The international segment decreased 9% from $31.3 million in the Prior Year Six Months to $28.5 million in the Current Six Months, mainly due to $2.0 million decrease of replica jersey sales from our Diamond Icon joint venture related to World Cup sales. The Company generally does this as an accommodation to its licensees to consolidate ordering from the manufacturers. Refer to Note 4 of Unaudited Condensed Consolidated Financial Statements for details. Excluding this increase in licensing revenue for Diamond, Licensing Revenue from our international segment decreased 3% due to weakness in our business in China.
Selling, General and Administrative Expenses. Total selling, general and administrative expenses (“SG&A”) were $34.5 million for the Current Six Months as compared to $62.2 million for the Prior Year Six Months, an decrease of $27.7 million or 45%. SG&A from the women’s segment decreased 68% from $4.2 million in the Prior Year Six Months to $1.4 million in the Current Six Months mainly due to a $1.6 million decrease in advertising costs. SG&A from the men’s segment decreased 39% from $8.2 million in the Prior Year Six Months to $5.0 million in the Current Six Months primarily due to a $1.9 million decrease in advertising costs. SG&A from the home segment decreased 13% from $1.1 million in the Prior Year Six Months to $1.0 million in the Current Six Months mainly due to a $0.1 million decrease in professional fees. SG&A from the international segment decreased 40% from $17.0 million in the Prior Year Six Months to $10.2 million in the Current Six Months mainly due to a $1.9 million decrease in cost of goods sold due to replica jersey sales by our Diamond Icon joint venture. Refer to Note 4 of Unaudited Condensed Consolidated Financial Statements for details. Corporate SG&A decreased 47% from $31.7 million in the Prior Year Six Months to $17.0 in the Current Six Months million primarily due to (i) a $7.3 million decrease in compensation costs and a $7.2 million decrease in professional fees.
38
Loss on Termination of Licenses. Loss on termination of licenses was zero for the Current Six Months, compared to $5.7 million Prior Year Six Months. The charge in the Prior Year Six Months was related to a litigation settlement with a previous licensee for the Rocawear in the men’s segment.
Depreciation and Amortization. Depreciation and amortization was $1.0 million for the Current Six Months, compared to $1.3 million in the Prior Year Six Months. The decrease was mainly due to a decrease in depreciation costs.
Equity Earnings on Joint Ventures. Equity earnings on joint ventures was $2.1 million for the Current Six Months, compared to $1.2 million for the Prior Year Six Months. The increase was mainly due to a $0.5 million increase in income in our SE Asia joint venture.
Gain on Sale of Trademarks. Gain on Sale of Trademarks was zero for the Current Six Months, compared to $1.3 million in the Prior Year Six Months. The gain in the Prior Year Six Months was related to the completion of the sale of the Sharper Image and Badgley Mischka trademarks in certain of the Company’s international joint ventures.
Trademark & Goodwill Impairment. Trademark & Goodwill Impairment loss was zero for the Current Six Months, as compared to a loss of approximately $111.1 million in the Prior Year Six Months. The impairment in the Prior Year Six Months was a trademark impairment of $73.3 million related to a write-down in the Mossimo trademark and a goodwill impairment of $37.8 million related to a write-down in our women’s segment.
Operating Income (loss). Total operating income for the Current Six Months increased to $37.0 million or 53% of total revenue, compared to a loss of approximately $79.1 million in the Prior Year Six Months. Excluding trademark and goodwill impairment, total operating income in the Prior Year Six Months was $32.1 million or 33% of total revenue. Operating income from the women’s segment was $16.2 million in the Current Six Months compared to a loss of $81.1 million in the Prior Year Six Months. Excluding trademark and goodwill impairment, operating income from the women’s segment in the Prior Year Six Months was $30.1 million. Operating income from the men’s operating segment was $12.5 million in the Current Six Months compared to $6.5 million in the Prior Year Six Months. Operating income from the home segment was $6.8 million in the Current Six Months compared to $12.3 million in the Prior Year Six Months. Operating income from the international segment was $19.2 million in the Current Six Months compared to $14.6 million in the Prior Year Six Months. Corporate operating loss was $17.8 million in the Current Six Months compared to operating loss of $31.4 million in the Prior Year Six Months.
Other Expenses (income)-Net. Other expenses (income)- net was approximately $10.4 million for the Current Six Months as compared to income of $33.4 million for the Prior Year Six Months, an increase of $43.8 million. The increase was primarily related to (i) a gain of $20.3 million in the Current Six Months as compared to a gain of $56.5 million in the Prior Year Six Months related to the mark-to-market adjustment from the Company’s 5.75% Convertible Notes based on the Company’s accounting treatment which requires the fair value of the debt at the end of each period and (ii) a gain on the extinguishment of debt of $4.5 million in the Prior Year Six Months as compared to zero in the Current Six Months.
Provision for Income Taxes. The effective income tax rate for the Current Six Months is approximately 7%, which resulted in a $1.8 million income tax provision, as compared to an effective income tax rate of 3% in the Prior Year Six Months, which resulted in a $1.2 million income tax benefit. The increase in tax expense is due to trademark impairment recorded in the Prior Year Six Months, for which the Company recognized a tax benefit.
Net Income. Our net income was approximately $24.8 million in the Current Six Months, compared to a net loss of approximately $44.5 million in the Prior Year Six Months, as a result of the factors discussed above.
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 June 30, 2019 and December 31, 2018, our cash totaled $52.4 million and $66.6 million, respectively, not including short-term restricted cash of $14.6 million and $16.0 million, respectively. Our short term restricted cash primarily consists of collection and investment accounts related to our Securitization Notes.
39
The Company’s 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 March 31, 2019, the DSCR fell below 1.10x as of March 31, 2019. Beginning April 1, 2019, the Senior Secured Notes experienced a Rapid Amortization Event pursuant to the Securitization Notes Indenture. Upon a Rapid Amortization Event, any residual amounts available will immediately be used to pay down the principal. The Company will continue to receive its management fee from the Securitization Notes and the Company does not believe the loss of our residual, if any, will have a significant impact on our operations.
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.
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 decreased $29.4 million from net cash provided by operating activities of $39.3 million in the Prior Year Six Months to net cash provided by operating activities of $10.0 million in the Current Six Months. The decrease is primarily due to the decrease in revenues from $98.8 million in the Prior Year Six Months to $70.3 million in the Current Six Months.
Investing Activities
Net cash used in investing activities decreased approximately $1.0 million, from net cash used in investing activities of $4.2 million in the Prior Year Six Months to net cash used in investing activities of $3.3 million in the Current Six Months. The difference between both periods is primarily due $4.9 million of cash used in the Prior Year Six Months related to the Company’s acquisition of the remaining interest in Iconix Canada of which there was no corresponding amount in the Current Six Months and the Company’s receipt of $3.0 million in cash from the sale of its interest in Ningbo Material Girl during the Current Six Months offset by cash used in the acquisition of a perpetual royalty agreement for Ecko which was recorded to trademarks in the Current Six Months.
Financing Activities
Net cash used in financing activities decreased approximately $31.4 million, from cash used in financing activities of $53.8 million in the Prior Year Six Months to cash used in financing activities of $22.5 million in the Current Six Months. The decrease between both periods is primarily due to the debt financings that occurred in the Prior Year Six Months in which the Company exchanged its outstanding principal balance of its 1.50% Convertible Notes for its 5.75% Convertible Notes in the Prior Year Six Months of which there was no similar transaction in the Current Six Months.
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 2018 Annual Report on Form 10-K filed with the SEC on March 28, 2019.
Recent Accounting Pronouncements
See Note 20 of the notes to unaudited condensed consolidated financial statements for recent accounting pronouncements.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995. 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 December 31, 2018 and other SEC filings. The words “believe,” “anticipate,” “expect,” “confident,” “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.
40
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4. Controls and Procedures
The Company, under the supervision and with the participation of its management, including its principal executive officer and principal financial and accounting officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, herein referred to as the Exchange Act) as of the end of the period covered by this Quarterly Report. The purpose of disclosure controls is to ensure that information required to be disclosed in our reports filed with or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. In 2017 and 2018, material weaknesses were identified in certain of the Company’s review and other controls, which have been enumerated in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
Addressing the Material Weaknesses
The material weaknesses not remediated at December 31, 2018 were in the areas of financial reporting for the modification of our debt, and implementation of the new revenue recognition standard, ASC 606. During 2018 and continuing in 2019, the Company made changes to its internal controls in these areas which included more robust review procedures and seeking accounting consultation from third party advisors proactively, as well as changes in personnel. No additional internal control issues have been identified in these areas; however, the material weaknesses cannot be considered completely remediated until the applicable additional controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. As a result of the foregoing, the principal executive officer and the principal financial and accounting officer concluded that as of June 30, 2019, certain of the Company’s internal controls related to the financial reporting for the modification of our debt, financial reporting for the new revenue recognition standard, ASC 606, and financial reporting for the earnings per share impact of redeemable non-controlling interest, were not effective.
Notwithstanding the discussion above, our principal executive officer and principal financial and accounting officer have concluded that the financial statements included in this Quarterly Report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.
The principal executive officer and principal financial officer also conducted an evaluation of internal control over financial reporting, herein referred to as internal control, to determine whether any changes in internal control occurred during the three months ended June 30, 2019, that may have materially affected, or which are reasonably likely to materially affect internal control. Based on that evaluation, there has been no change in the Company’s internal control during the three months ended June 30, 2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control, except for the matters discussed above.
The foregoing has been approved by our management team, including our Chief Executive Officer and Chief Financial Officer, who have been involved with the reassessment and analysis of our internal control over financial reporting.
The Audit Committee, which consists of independent, non-executive directors, will continue to meet regularly with management, the Director of Internal Audit, and the independent accountants to review accounting, reporting, auditing and internal control matters. The Audit Committee has direct and private access to the Director of Internal Audit and the external auditors, and will meet with each, separately, in executive sessions. The Company reviewed the results of management’s assessment of its internal control over financial reporting with the Audit Committee of the Board of Directors and they agreed with the conclusions.
41
Item 1. Legal Proceedings.
In May 2016, Supply Company, LLC (“ Supply), a former licensee of the Ed Hardy trademark, commenced the action against the Company and its affiliate, Hardy Way, LLC (“Hardy Way” and together with the Company, the “Iconix Defandants”) seeking damages of $50 million, including punitive damages, attorneys’ fees and costs. Supply alleges that Hardy Way breached the parties’ license agreement by failing to reimburse Supply for markdown reimbursement requests that Supply received from a certain retailer. Supply also alleges that the Company is liable for fraud because it made purported misstatements about the Company’s financials and the viability of the Ed Hardy trademark in order to induce Supply to enter into the license agreement and to induce Supply to enter into a separate agreement with a certain retailer. The Iconix Defendants are vigorously defending against the claims, and have filed a motion to dismiss the Complaint, which is awaiting Court decision. At this time, the Company is unable to estimate the ultimate outcome of this matter.
Two shareholder derivative complaints captioned James v. Cuneo et al, Docket No. 1:16-cv-02212 and Ruthazer v. Cuneo et al, Docket No. 1:16-cv-04208 have been consolidated in the United States District Court for the Southern District of New York, and three shareholder derivative complaints captioned De Filippis v. Cuneo et al. Index No. 650711/2016, Gold v. Cole et al, Index No. 53724/2016 and Rosenfeld v. Cuneo et al., Index No. 510427/2016 have been consolidated in the Supreme Court of the State of New York, New York County. The complaints name the Company as a nominal defendant and assert claims for breach of fiduciary duty, insider trading and unjust enrichment against certain of the Company's current and former directors and officers arising out of the Company's restatement of financial reports and certain employee departures. At this time, the Company is unable to estimate the ultimate outcome of these matters.
The Company continues to cooperate in the previously disclosed SEC and Southern District of New York (“SDNY”) investigations.
Three securities class actions have been consolidated in the United States District Court for the Southern District of New York, under the caption In re Iconix Brand Group, Inc., et al., Docket No. 1:15-cv-4860, against the Company and certain former officers and one current officer (the “Class Action”). The plaintiffs in the Class Action purport to represent a class of purchasers of the Company’s securities from February 22, 2012 to November 5, 2015, inclusive, and claim that the Company and individual defendants violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, by making allegedly false and misleading statements regarding certain aspects of the Company’s business operations and prospects. On October 25, 2017, the Court granted the motion to dismiss the consolidated amended complaint filed by the Company and the individual defendants with leave to amend. On November 14, 2017, the plaintiffs filed a second consolidated amended complaint. On February 2, 2018, the defendants moved to dismiss the second consolidated amended complaint. The Company and the individual defendants intend to vigorously defend against the claims. At this time, the Company is unable to estimate the ultimate outcome of these matters.
From time to time, the Company is also made a party to litigation incurred in the normal course of business. In addition, in connection with litigation commenced against licensees for non-payment of royalties, certain licensees have asserted unsubstantiated counterclaims against the Company. While any litigation has an element of uncertainty, the Company believes that the final outcome of any of these routine matters will not, individually or in the aggregate, have a material effect on the Company’s financial position or future liquidity.
Item 1A. Risk Factors.
In addition to the risk factors disclosed in Part 1, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2018, set forth below are certain factors that have affected, and in the future could affect, our operations or financial condition. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could impact our operations. The risks described below and in our Annual Report on Form 10-K for the year ended December 31, 2018, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our financial condition and/or operating results.
42
Our existing and future debt obligations could impair our liquidity and financial condition, and in the event we are unable to meet our debt obligations we could lose title to certain trademarks.
As of June 30, 2019, the Company’s consolidated balance sheet reflects debt of approximately $642.1 million (which is net of $3.2 million of debt issuance costs), including (i) securitization debt of $450.5 million (net of original issue discount of $2.6 million) under our Series 2012-1 4.229% Senior Secured Notes, Class A-2, Series 2013-1 4.352% Senior Secured Notes, Class A-2 (collectively, the “Senior Secured Notes”), and the Variable Funding Notes, (ii) senior secured debt of $171.6 million (net of original issue discount of $15.8 million) under our Senior Secured Term Loan, and (iii) subordinated secured debt of $94.6 million (which is recorded in our consolidated balance sheet as of June 30, 2019 at a fair value of $23.2 million) under our 5.75% convertible senior subordinated secured second lien notes due 2023 (the “5.75% Convertible Notes”). We may also assume or incur additional debt, including secured debt, in the future in connection with, or to fund, future acquisitions or refinance our existing debt obligations. Our outstanding debt obligations:
|
• |
could make it more difficult for the Company to satisfy its other obligations; |
|
• |
require us to dedicate a substantial portion of our cash flow to payments on our debt obligations, which reduces the availability of our cash flow to fund working capital, capital expenditures and other corporate requirements; |
|
• |
could impede us from obtaining additional financing in the future for working capital, capital expenditures, acquisitions and general corporate purposes; |
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• |
impose restrictions on us with respect to the use of our available cash; |
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• |
make us more vulnerable in the event of a downturn in our business prospects and could limit our flexibility to plan for, or react to, changes in our licensing markets; and |
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• |
could place us at a competitive disadvantage when compared to our competitors who have less debt and/or less leverage. |
In the event that we fail to make any required payment under any current or future agreements governing our indebtedness or fail to comply with the financial and operating covenants contained in those agreements, we would be in default regarding that indebtedness. A debt default could significantly diminish the market value and marketability of our common stock, result in the acceleration of the payment obligations under all or a portion of our consolidated indebtedness and impact the Company’s ability to continue as a going concern.
A substantial portion of our licensing revenue is concentrated with a limited number of licensees, such that the loss of any of such licensees or their renewal on terms less favorable than today, could slow our growth plans, decrease our revenue and impair our cash flows.
Our licenses with Kohls and Global Brands Group represent, each in the aggregate, our two largest licensees during the three months ended June 30, 2019, representing approximately 13% and 8%, respectively, of our total revenue for such period.
Because we are dependent on these licensees for a significant portion of our licensing revenue, if any of them were to have financial difficulties affecting their ability to make payments, cease operations, or if any of these licensees decides not to renew or extend any existing agreement with us, or to significantly reduce its sales of licensed products under any of the agreement(s), our revenue and cash flows could be reduced substantially.
As previously disclosed, the Company was notified of the following non-renewals of license agreements: (i) the OP, Starter and Danskin Now DTR license agreements with Walmart, (ii) the Mossimo DTR license agreement with Target, (iii) the Royal Velvet license agreement with J.C. Penney’s and (iv) the Material Girl DTR license agreement with Macy’s. Also, Kmart/Sears filed for Chapter 11 bankruptcy in October 2018 and subsequently rejected the existing license agreements for Joe Boxer, Cannon and Bongo. While the Company is actively working to place these brands with other licensees, and is in negotiations with Kmart/Sears related to its existing license agreements, the failure to enter into replacement license agreements for these brands on economic terms similar to such DTR arrangements may adversely affect our future revenues and cash flows.
In addition, we may face increasing competition in the future for direct-to-retail licenses as other companies owning established brands may decide to enter into licensing arrangements with retailers similar to those we currently have in place. Furthermore, our current or potential direct-to-retail licensees may decide to more prominently promote and market competing brands, or develop or purchase other or establish their own brands, rather than continue their licensing arrangements with us. In addition, increased competition could result in lower sales of products offered by our direct-to-retail licensees under our brands. If our competition for retail licenses increases, it may take us longer to procure additional retail licenses.
43
We have a material amount of goodwill and other intangible assets, including our trademarks, recorded on our balance sheet. As a result of changes in market conditions and declines in the estimated fair value of these assets, we may, in the future, be required to further write down a portion of this goodwill and other intangible assets and such write-down would, as applicable, either decrease our net income or increase our net loss.
As of June 30, 2019, goodwill represented approximately $26.1 million, or approximately 4% of the Company’s total consolidated assets, and trademarks and other intangible assets represented approximately $340.8 million, or approximately 54% of our total consolidated assets. Under current U.S. GAAP accounting standards, goodwill and indefinite life intangible assets, including most of our trademarks, are no longer amortized, but instead are subject to impairment evaluation based on related estimated fair values, with such testing to be done at least annually.
There can be no assurance that any future downturn in the business of any of the Company’s segments, or a continued decrease in our market capitalization, will not result in a further write-down of goodwill or trademarks, which would either decrease the Company’s net income or increase the Company’s net loss, which may or may not have a material impact to the Company’s consolidated statement of operations.
The risks described herein and in the Company’s Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company, or that are currently deemed to be immaterial, also may materially adversely affect the Company’s business, financial condition and/or future operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There have been no sales of unregistered equity securities in the Current Quarter.
The following table presents information with respect to purchases of common stock made by the Company during the Current Quarter (share count in thousands):
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Total number of shares purchased* |
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Average price paid per share |
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Total number of shares purchased as part of publicly announced plans or programs |
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Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs |
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April 1 - April 30 |
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|
3 |
|
|
$ |
1.84 |
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|
|
— |
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|
$ |
— |
|
May 1 - May 31 |
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|
— |
|
|
$ |
— |
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|
|
— |
|
|
$ |
— |
|
June 1 - June 30 |
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|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
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Total |
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|
3 |
|
|
$ |
1.84 |
|
|
|
— |
|
|
$ |
— |
|
* |
Amounts purchased represent shares surrendered to the Company to pay withholding taxes due upon the vesting of restricted stock. |
44
EXHIBIT NO. |
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DESCRIPTION OF EXHIBIT |
Exhibit 31.1 |
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Exhibit 31.2 |
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Exhibit 32.1 |
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Exhibit 32.2 |
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Exhibit 101.INS |
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XBRL Instance Document* |
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Exhibit 101.SCH |
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XBRL Schema Document* |
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Exhibit 101.CAL |
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XBRL Calculation Linkbase Document* |
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Exhibit 101.DEF |
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XBRL Definition Linkbase Document* |
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Exhibit 101.LAB |
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XBRL Label Linkbase Document* |
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Exhibit 101.PRE |
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XBRL Presentation Linkbase Document* |
* |
Filed herewith. |
** |
Furnished herewith. |
45
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, thereunto duly authorized.
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Iconix Brand Group, Inc. |
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(Registrant) |
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Date: August 13, 2019 |
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/s/ Robert C. Galvin |
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Robert Galvin |
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President and Chief Executive Officer (Principal Executive Officer) |
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Date: August 13, 2019 |
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/s/ John T. McClain |
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John T. McClain |
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Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
46
Exhibit 31.1
ICONIX BRAND GROUP, INC.
CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert C. Galvin, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2019 of Iconix Brand Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 13, 2019
/s/ Robert C. Galvin |
Robert C. Galvin |
President and Chief Executive Officer |
|
Exhibit 31.2
ICONIX BRAND GROUP, INC.
CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John T. McClain, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2019 of Iconix Brand Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 13, 2019
/s/ John T. McClain |
John T. McClain |
Executive Vice President and Chief Financial Officer |
(Principal Financial and Accounting Officer) |
Exhibit 32.1
ICONIX BRAND GROUP, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Iconix Brand Group, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2019 (the “Report”), I, Robert C. Galvin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Robert C. Galvin |
Robert C. Galvin |
President and Chief Executive Officer |
Date: August 13, 2019
Exhibit 32.2
ICONIX BRAND GROUP, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Iconix Brand Group, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2019 (the “Report”), I, John T. McClain, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ John T McClain |
John T. McClain |
Executive Vice President and Chief Financial Officer |
Date: August 13, 2019
Document and Entity Information - shares |
6 Months Ended | |
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Jun. 30, 2019 |
Aug. 07, 2019 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | ICON | |
Entity Registrant Name | ICONIX BRAND GROUP, INC. | |
Entity Central Index Key | 0000857737 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Current Reporting Status | Yes | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity File Number | 1-10593 | |
Entity Tax Identification Number | 112481903 | |
Entity Address, Address Line One | 1450 Broadway | |
Entity Address, City or Town | New York | |
Entity Address, State or Province | NY | |
Entity Address, Postal Zip Code | 10018 | |
City Area Code | 212 | |
Local Phone Number | 730-0030 | |
Entity Common Stock, Shares Outstanding | 11,630,515 |
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement Of Financial Position [Abstract] | ||
Long-term debt, fair value | $ 23,190 | $ 48,076 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 260,000,000 | 260,000,000 |
Common stock, shares issued | 14,928,000 | 11,162,000 |
Treasury stock, shares | 3,369,000 | 3,323,000 |
Unaudited Condensed Consolidated Statements of Operations - USD ($) shares in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
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Income Statement [Abstract] | ||||
Licensing revenue | $ 34,394,000 | $ 50,212,000 | $ 70,336,000 | $ 98,761,000 |
Type of Revenue [Extensible List] | us-gaap:LicenseMember | us-gaap:LicenseMember | us-gaap:LicenseMember | us-gaap:LicenseMember |
Selling, general and administrative expenses | $ 16,435,000 | $ 28,643,000 | $ 34,528,000 | $ 62,241,000 |
Loss on termination of licenses | 5,650,000 | 5,650,000 | ||
Depreciation and amortization | 482,000 | 632,000 | 974,000 | 1,286,000 |
Equity earnings on joint ventures | (1,095,000) | (1,149,000) | (2,137,000) | (1,245,000) |
Gain on sale of trademarks | (125,000) | (1,268,000) | ||
Goodwill impairment | 37,812,000 | 0 | 37,812,000 | |
Trademark impairment | 73,335,000 | 73,335,000 | ||
Operating income (loss) | 18,572,000 | (94,586,000) | 36,971,000 | (79,050,000) |
Other expenses (income): | ||||
Interest expense | 14,465,000 | 14,827,000 | 28,970,000 | 29,376,000 |
Interest income | (90,000) | (92,000) | (162,000) | (214,000) |
Other income, net | 1,140,000 | (32,083,000) | (18,795,000) | (58,215,000) |
Gain on extinguishment of debt | 4,473,000 | |||
Foreign currency translation (gain) loss | (258,000) | 704,000 | 369,000 | 152,000 |
Other expenses (income) – net | 15,257,000 | (16,644,000) | 10,382,000 | (33,374,000) |
Income (loss) before income taxes | 3,315,000 | (77,942,000) | 26,589,000 | (45,676,000) |
(Benefit) provision for income taxes | (130,000) | (2,804,000) | 1,838,000 | (1,154,000) |
Net income (loss) | 3,445,000 | (75,138,000) | 24,751,000 | (44,522,000) |
Less: Net income attributable to non-controlling interest | 2,174,000 | 4,291,000 | 5,535,000 | 7,148,000 |
Net income (loss) attributable to Iconix Brand Group, Inc. | $ 1,271,000 | $ (79,429,000) | $ 19,216,000 | $ (51,670,000) |
Earnings (loss) per share: | ||||
Basic | $ 0.12 | $ (12.04) | $ 2.04 | $ (8.26) |
Diluted | $ 0.12 | $ (12.04) | $ 0.08 | $ (8.26) |
Weighted average number of common shares outstanding: | ||||
Basic | 10,377 | 6,598 | 9,426 | 6,257 |
Diluted | 10,377 | 6,598 | 44,779 | 6,257 |
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
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Statement Of Income And Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 3,445 | $ (75,138) | $ 24,751 | $ (44,522) |
Other comprehensive (loss) income: | ||||
Foreign currency translation (loss) gain | 1,121 | (5,541) | (603) | (2,780) |
Total other comprehensive (loss) income | 1,121 | (5,541) | (603) | (2,780) |
Comprehensive income (loss) | 4,566 | (80,679) | 24,148 | (47,302) |
Less: comprehensive income attributable to non-controlling interest | 2,174 | 4,291 | 5,535 | 7,148 |
Comprehensive income (loss) attributable to Iconix Brand Group, Inc. | $ 2,392 | $ (84,970) | $ 18,613 | $ (54,450) |
Unaudited Condensed Consolidated Statements of Stockholders' Deficit (Parenthetical) |
Jun. 30, 2019 |
Mar. 14, 2019 |
Jun. 30, 2018 |
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Percentage of conversion of convertible notes | 5.75% | ||
5.75% Convertible Notes | |||
Percentage of conversion of convertible notes | 5.75% | 5.75% | 5.75% |
1.50% Convertible Notes | |||
Percentage of conversion of convertible notes | 1.50% |
Unaudited Condensed Consolidated Statements of Cash Flows (Parenthetical) |
Jun. 30, 2018 |
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Statement Of Cash Flows [Abstract] | |
Percentage of conversion of convertible notes | 5.75% |
Basis of Presentation |
6 Months Ended |
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Jun. 30, 2019 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Basis of Presentation |
1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management of Iconix Brand Group, Inc. (the “Company,” “we,” “us,” or “our”), all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended June 30, 2019 (“Current Quarter”) and the six months ended June 30, 2019 (“Current Six Months”) are not necessarily indicative of the results that may be expected for a full fiscal year. The interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. During the Current Six Months, the Company adopted one new accounting pronouncement. Refer to Note 20 for further details. Correction of an Immaterial Error During the Current Six Months, the Company determined that the impact of the accretion of redeemable noncontrolling interest to the Company’s earnings per share calculation had been incorrectly recorded in the Company’s condensed consolidated statement of operations for the Prior Year Quarter, the Prior Year Six Months, the quarter ended September 30, 2018 and the nine months ended September 30, 2018. Basic and diluted earnings per share for the Prior Year Quarter and Prior Year Six Months have been corrected in this Form 10-Q. Management evaluated the materiality of this error from a quantitative and qualitative perspective and concluded that the adjustments to earnings per share were not material to the Company’s presentation and disclosures, and has no material impact on the Company’s financial position, results of operations and cash flows. Accordingly, no amendments to previously filed reports are deemed necessary. After taking into effect this adjustment, for the quarter ended September 30, 2018 and the nine months ended September 30, 2018, basic earnings per share would have been income of $2.81 and a loss of $4.87, respectively, and diluted earnings per share would have been income of $0.26 and a loss of $7.35, respectively. Certain reclassifications, which were immaterial, have been made to conform prior year data to the current presentation. During the Current Six Months, the Company also made a reclassification between redeemable noncontrolling interest and noncontrolling interest. Liquidity These consolidated financial statements are prepared on a going concern basis that contemplates the realization of cash flows from assets and discharge of liabilities, in each case, in the ordinary course of business consistent with the Company’s prior periods. The Company considered, among other things, the Sears Holdings Corporation’s bankruptcy filing on October 15, 2018, and determined that the bankruptcy filing is not expected to have a material adverse impact on the Company’s ability to continue as a going concern. Based on the Company’s financial plans and projections for 2019, which assumes the realization of significant cost savings, among other things, from the successful implementation of the Company’s current strategic initiatives, the Company does not expect the occurrence of any payment defaults on its outstanding debt facilities in the next twelve months, and otherwise expects to generate sufficient cash to meet its operating cash flow needs and maintain compliance with the financial covenants set forth in its various debt facilities during such period. In particular, management believes the allocation of residual royalty collections to a restricted reserve account (as is discussed in Note 9) is not expected to have a material adverse impact on the Company’s ability to meet such cash flow needs. For additional information, please refer to Note 1 of Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Reverse Stock Split On March 14, 2019, the Company effected a 1-for-10 reverse stock split (the “Reverse Stock Split”) of its common stock. Unless the context otherwise requires, all share and per share amounts in this quarterly report on Form 10-Q have been adjusted to reflect the Reverse Stock Split. Refer to Note 9 for further details. |
Revenue Recognition |
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Revenue From Contract With Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition |
2. Revenue Recognition Licensing Revenue The Company licenses its brands across a broad range of product categories, including fashion apparel, footwear, accessories, sportswear, home furnishings and décor, and beauty and fragrance. The Company seeks licensees with the ability to produce and sell quality products in their licensed categories and to meet and exceed minimum sales and royalty payment thresholds. The Company maintains direct-to-retail and traditional wholesale licenses. Typically, in a direct-to-retail license, the Company grants exclusive rights to one of its brands to a national retailer for a broad range of product categories. Direct-to-retail licenses provide retailers with proprietary rights to national brands at favorable economics. In a traditional wholesale license, the Company grants the right to a specific brand to a single or small group of related product categories to a wholesale supplier, who is permitted to sell licensed products to multiple retailers within an approved distribution channel. The Company’s license agreements typically require the licensee to pay the Company royalties based upon net sales with guaranteed minimum royalties in the event that net sales do not reach certain specified targets. The Company’s licenses also typically require the licensees to pay to the Company certain minimum amounts for the advertising and marketing of the respective licensed brands. Licensing revenue is comprised of revenue related to the Company’s entry into various trade name license agreements that provide revenues based on minimum royalties and advertising/marketing fees and additional revenues based on a percentage of defined sales. In accordance with ASC Topic 606 – Revenue from Contracts with Customers (“Topic 606”), the Company recognizes the minimum royalty revenue on a straight-line basis over the entire contract term and royalties exceeding the defined minimum amounts in a specific contract year (sales-based royalties), as defined in each license agreement, are recognized only in the subsequent periods to when the minimum guarantee for the contract year has been achieved and when the later of the following events occur: (i) the subsequent sale occurs, or (ii) the performance obligation to which some or all of the sales-based royalty has been allocated has been satisfied (or partially satisfied). Within the Company's International segment, the Umbro business purchases replica soccer jerseys for resale to certain licensees. The Company generally does this as an accommodation to its licensees to consolidate ordering from the manufacturers. The revenue associated with such activity is included in licensing revenue and was approximately $0.2 million and $0.6 million in the Current Quarter and the three months ended June 30, 2018 (the “Prior Year Quarter”), respectively. The associated cost of goods sold is included in selling general and administrative expenses and was approximately $0.2 million and $0.6 million in the Current Quarter and Prior Year Quarter, respectively. The revenue associated with such activity is included in licensing revenue and was approximately $0.6 million and $2.6 million in the Current Six Months and the six months ended June 30, 2018 (the “Prior Year Six Months”), respectively. The associated cost of goods sold is included in selling general and administrative expenses and was approximately $0.6 million and $2.5 million in the Current Six Months and Prior Year Six Months, respectively. Revenue for these sales are recognized upon the transfer of control of the promised product to the customer or licensee in an amount that reflects the consideration that we expect to receive in exchange for these products. The following table presents our revenues disaggregated by license type:
The following table represents our revenues disaggregated by geography:
Remaining Performance Obligation We enter into long-term license agreements with our licensees across all operating segments. Revenues are recognized on a straight line basis consistent with the nature, timing and extent of our services, which primarily relate to the ongoing brand management and maintenance of the intellectual property. As of July 1, 2019, the Company and its joint ventures had a contractual right to receive over $384.0 million of aggregate minimum licensing revenue over the balance and the terms of their current licenses, excluding any renewals. As of June 30, 2019, future minimum license revenue to be recognized under our existing licenses is as follows: $51.2 million, $82.2 million, $64.2 million, $54.1 million, $47.2 million and $85.1 million for the remainder of FY 2019, FY 2020, FY 2021, FY 2022, FY 2023 and thereafter, respectively. Contract Balances Timing of revenue recognition may differ from the timing of invoicing to licensees. We record a receivable when amounts are contractually due or when revenue is recognized prior to invoicing. Deferred revenue is recorded when amounts are contractually due prior to satisfying the performance obligations of the contracts. For multi-year license agreements, as the performance obligation is providing the licensee with the right of access to the Company’s intellectual property for the contractual term, the Company uses a time-lapse measure of progress and straight lines the guaranteed minimum royalties over the contract term. Contract Asset We record contract assets when revenue is recognized in advance of cash payment being due from our licensees. As of June 30, 2019, our contract assets – current and long term contract assets were $4.9 million and $16.0 million, respectively, as compared to our contract assets – current and long term contract assets as of December 31, 2018 which were $4.8 million and $14.6 million, respectively. For the Current Quarter, the Company incurred an impairment loss of its contract assets of $0.1 million as a result of certain contract modifications as compared to $0.4 million for the Prior Year Quarter. For the Current Six Months, the Company incurred an impairment loss of $0.6 million as a result of certain contract modifications as compared to $0.4 million for the Prior Year Six Months. Deferred Revenue We record deferred revenue when cash payment is received or due in advance of our performance, including amounts which are refundable. Advanced royalty payments are recognized ratably over the period indicated by the terms of the license and are reflected in the Company’s consolidated balance sheet in deferred revenue at the time the payment is received. The increase in deferred revenues for the Current Six Months is primarily driven by cash payments received or due in advance of satisfying our performance obligations, offset by $3.8 million of revenues recognized that were included in the deferred revenue balance at the beginning of the period. |
Goodwill and Trademarks and Other Intangibles, net |
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Goodwill And Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Trademarks and Other Intangibles, net |
3. Goodwill and Trademarks and Other Intangibles, net
Goodwill There were no changes and no impairment of the Company’s goodwill during the Current Six Months as compared to a non-cash impairment charge of $37.8 million recorded in the Prior Year Six Months, which was due to the projected decline in royalties associated with the license agreements for the Mossimo brand. The annual evaluation of the Company’s goodwill, by segment, is typically performed as of October 1, the beginning of the Company’s fourth fiscal quarter. Trademarks and Other Intangibles, net Trademarks and other intangibles, net, consist of the following:
The trademarks of Candie’s, Bongo, Joe Boxer, Rampage, Mudd, London Fog, Mossimo, Ocean Pacific, Danskin, Rocawear, Cannon, Royal Velvet, Fieldcrest, Charisma, Starter, Waverly, Ecko, Zoo York, Ed Hardy, Umbro, Modern Amusement, Buffalo, Lee Cooper, Hydraulic and Pony have been determined to have an indefinite useful life. Each of these intangible assets are tested for impairment annually and as needed on an individual basis and territorial basis as separate single units of accounting, with any related impairment charge recorded to the income statement at the time of determining such impairment. The annual evaluation of the Company’s indefinite-lived trademarks is typically performed as of October 1, the beginning of the Company’s fourth fiscal quarter, or as deemed necessary due to the identification of a triggering event.
In April 2019, the Company bought back a revenue stream in the Ecko brand from a previous joint venture partner which resulted in an increase of $3.4 million to the Ecko trademark.
In accordance with ASC 350, there was no impairment of the indefinite-lived trademarks during the Current Quarter or the Current Six Months. In the Prior Year Quarter, as a result of the Company revising its forecasted future earnings for the Mossimo brand, the Company conducted an indefinite-lived intangible asset impairment test in accordance with ASC 350. Consequently, the Company recorded a non-cash impairment charge of $73.3 million in the Prior Year Quarter in the women’s segment to reduce the Mossimo trademark to fair value. Further, in accordance with ASC 360, there were no impairment charges to the Company’s definite-lived trademarks during the Current Quarter or Prior Year Quarter.
During the Prior Year Six Months, the Company completed the sale of the Badgley Mischka and Sharper Image intellectual property and related assets from the Iconix Southeast Asia, Iconix MENA, Iconix Europe and Iconix Australia joint ventures. Refer to Note 6 for further details. Other amortizable intangibles represents licensing contracts, which are amortized on a straight-line basis over their estimated useful lives of 1 to 9 years. Certain trademarks are amortized using estimated useful lives of 10 to 15 years with no residual values. Amortization expense for intangible assets for both the Current Quarter and Prior Year Quarter was less than $0.1 million. Amortization expense for intangible assets for the Current Six Months was less than $0.1 million as compared to amortization expense for intangible assets of approximately $0.2 million for the Prior Year Six Months. |
Joint Ventures and Investments |
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Investments In And Advances To Affiliates Schedule Of Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Joint Ventures and Investments |
4. Joint Ventures and Investments Joint Ventures As of June 30, 2019, the following joint ventures are consolidated with the Company:
Investments Equity Method Investments
Additionally, through its ownership of Iconix China Holdings Limited, the Company has equity interests in the following private companies which are accounted for as equity method investments:
Other Equity Investments
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Gains on Sale of Trademarks, Net |
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Investments Debt And Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gains on Sales of Trademarks, Net |
5. Gains on Sale of Trademarks, Net The following table details transactions comprising gains on sale of trademarks, net in the condensed consolidated statement of operations:
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements |
6. Fair Value Measurements ASC 820 “Fair Value Measurements” (“ASC 820”), establishes a framework for measuring fair value and requires expanded disclosures about fair value measurement. While ASC 820 does not require any new fair value measurements in its application to other accounting pronouncements, it does emphasize that a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 established the following fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs): Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities or market-corroborated inputs Level 3: Unobservable inputs for which there is little or no market data and which requires the owner of the assets or liabilities to develop its own assumptions about how market participants would price these assets or liabilities The valuation techniques that may be used to measure fair value are as follows: (A) Market approach - Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (B) Income approach - Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts, including present value techniques, option-pricing models and excess earnings method (C) Cost approach - Based on the amount that would currently be required to replace the service capacity of an asset (replacement cost) To determine the fair value of certain financial instruments, the Company relies on Level 2 inputs generated by market transactions of similar instruments where available, and Level 3 inputs using an income approach when Level 1 and Level 2 inputs are not available. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy. Financial Instruments As of June 30, 2019 and December 31, 2018, the fair values of cash, receivables and accounts payable approximated their carrying values due to the short-term nature of these instruments. The fair value of notes receivable and notes payable from and to our joint venture partners approximate their carrying values. The fair value of our other equity investments is not readily determinable, and it is not practical to obtain the information needed to determine the value. However, there has been no indication of an impairment of these other equity investments as of June 30, 2019 or December 31, 2018. The estimated fair values of other financial instruments subject to fair value disclosures, determined based on Level One inputs including broker quotes or quoted market prices or rates for the same or similar instruments and the related carrying amounts are as follows:
Additionally, the fair value of the other equity investments acquired as part of the 2015 purchase of our joint venture partners’ interest in Iconix China was approximately $1.0 million as of June 30, 2019 with the changes in the fair value of the investment recorded in Other Income in the Company’s condensed consolidated statement of operations. Financial instruments expose the Company to counterparty credit risk for nonperformance and to market risk for changes in interest. The Company manages exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties and procedures to monitor the amount of credit exposure. The Company’s financial instrument counterparties are investment or commercial banks with significant experience with such instruments as well as certain of our joint venture partners – see Note 5. Non-Financial Assets and Liabilities The Company accounts for non-recurring adjustments to the fair values of its non-financial assets and liabilities under ASC 820 using a market participant approach. The Company uses a discounted cash flow model with Level 3 inputs to measure the fair value of its non-financial assets and liabilities. The Company also adopted the provisions of ASC 820 as it relates to purchase accounting for its acquisitions. The Company has goodwill, which is tested for impairment at least annually, as required by ASC 350- “Intangibles- Goodwill and Other” (“ASC 350”). Further, in accordance with ASC 350, the Company’s indefinite-lived trademarks are tested for impairment at least annually, on an individual basis as separate single units of accounting. Similarly, consistent with ASC 360- “Property, Plant and Equipment” (“ASC 360”), as it relates to accounting for the impairment or disposal of long-lived assets, the Company assesses whether or not there is impairment of the Company’s definite-lived trademarks. There was no impairment, and therefore no write-down, of any of the Company’s long-lived assets during the Current Quarter or the Current Six Months. The Company recorded impairment charges on the Mossimo indefinite-lived trademark and women’s segment goodwill during the Prior Year Quarter.
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Fair Value Option |
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Fair Value Disclosures [Abstract] | |
Fair Value Option |
7. Fair Value Option The Company accounts for its 5.75% Convertible Notes under the fair value option. The fair value carrying amount of the 5.75% Convertible Notes as of June 30, 2019 and December 31, 2018 is $23.2 million and $48.1 million, respectively, as compared to the contractual principal outstanding balance which is $94.6 million and $109.7 million as of June 30, 2019 and December 31, 2018, respectively. The change of $20.3 million and $56.5 million in the fair value of the 5.75% Convertible Notes accounted for under the fair value option are included in the Company’s condensed consolidated statement of operations for the Current Six Months and Prior Year Six Months, respectively, within Other Income. The change of $0.3 million and $32.1 million in the fair value of the 5.75% Convertible Notes accounted for under the fair value option are included Other Income in the Company’s condensed consolidated statement of operations for the Current Quarter and Prior Year Quarter, respectively. The primary reason for electing the fair value option is for simplification and cost-benefit considerations of accounting for the 5.75% Convertible Notes (the hybrid financial instrument) at fair value in its entirety versus bifurcation of the embedded derivatives. The 5.75% Convertible Notes contain bifurcatable embedded derivatives and do not require settlement by physical delivery of non-financial assets. The significant inputs to the valuation of the 5.75% Convertible Notes at fair value are Level 1 inputs as they are based on the quoted prices of the notes in the active market. |
Debt Arrangements |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Arrangements |
8. Debt Arrangements The Company’s debt obligations consist of the following:
Senior Secured Notes and Variable Funding Note On November 29, 2012, Icon Brand Holdings, 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, (collectively, the “Co-Issuers”) issued $600.0 million aggregate principal amount of Series 2012-1 4.229% Senior Secured Notes, Class A-2 (the “2012 Senior Secured Notes”) in an offering exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). Simultaneously with the issuance of the 2012 Senior Secured Notes, the Co-Issuers also entered into a revolving financing facility of Series 2012-1 Variable Funding Senior Notes, Class A-1 (the “Variable Funding Notes”), which allowed for the funding of up to $100 million of Variable Funding Notes and certain other credit instruments, including letters of credit. The Variable Funding Notes allow for drawings on a revolving basis. Drawings and certain additional terms related to the Variable Funding Notes are governed by the Class A-1 Note Purchase Agreement dated November 29, 2012 (the “Variable Funding Note Purchase Agreement”), among the Co-Issuers, Iconix, as manager, certain conduit investors, financial institutions and funding agents, and Barclays Bank PLC, as provider of letters of credit, as swingline lender and as administrative agent. The Variable Funding Notes are governed, in part, by the Variable Funding Note Purchase Agreement and by certain generally applicable terms contained in the Securitization Notes Indenture. Interest on the Variable Funding Notes is payable at per annum rates equal to the CP Rate, Base Rate or Eurodollar Rate, each as defined in the Variable Funding Note Purchase Agreement. In February 2015, the Company fully drew down the $100.0 million of available funding under the Variable Funding Notes, which remains outstanding as of June 30, 2019. On June 21, 2013, the Co-Issuers issued $275.0 million aggregate principal amount of 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 an offering exempt from registration under the Securities Act. The Senior Secured Notes and the Variable Funding Notes are referred to collectively as the “Securitization Notes.” The Securitization Notes were issued under a base indenture (the “Securitization Notes Base Indenture”) and related supplemental indentures (the “Securitization Notes Supplemental Indentures” and, collectively with the Securitization Notes Base Indenture, the “Securitization Notes Indenture”) among the Co-Issuers and Citibank, N.A., as trustee and securities intermediary. The Securitization Notes Indenture allows the Co-Issuers to issue additional series of notes in the future subject to certain conditions. On August 18, 2017, the Company entered into an amendment to the Securitization Notes Supplemental Indenture to, among other things, (i) extend the anticipated repayment date for the Variable Funding Notes from January 2018 to January 2020, (ii) decrease the L/C Commitment and the Swingline Commitment (as such terms are defined in the amendment) available under the Variable Funding Notes to $0 as of the closing date, (iii) replace Barclays Bank PLC with Guggenheim Securities Credit Partners, LLC, as provider of letters of credit, as swingline lender and as administrative agent under the purchase agreement and (iv) provide that, upon the disposition of intellectual property assets by the Co-Issuers as permitted by the Securitization Notes Base Indenture, (x) the holders of the Variable Funding Notes will receive a mandatory prepayment, pro rata based on the amount of Variable Funding Notes held by such holder, and (y) the maximum commitment will be permanently reduced by the amount of the mandatory prepayment. While the Securitization Notes are outstanding, payments of interest are required to be made on the 2012 Senior Secured Notes and the 2013 Senior Secured Notes, in each case, on a quarterly basis. Initially, principal payments in the amount of $10.5 million and $4.8 million were required to be made on the 2012 Senior Secured Notes and 2013 Senior Secured Notes, respectively, on a quarterly basis. The amount of quarterly principal payments has since changed in subsequent periods due to the prepayments made under the Securitization Notes Indenture. See below for further discussion. The legal final maturity date of the Securitization Notes is in January of 2043. If the Co-Issuers have not repaid or refinanced the Securitization Notes prior to January 2020 (the “anticipated repayment date”), additional interest will accrue on amounts outstanding under the Securitization Notes at a rate equal to (A) in respect of the Variable Funding Notes, 5% per annum, (B) in respect of the 2012 Senior Secured Notes and the 2013 Senior Secured Notes, the greater of (1) 5% per annum and (2) a per annum interest rate equal to the excess, if any, by which the sum of (x) the yield to maturity (adjusted to a quarterly bond-equivalent basis), on the anticipated repayment date of the United States treasury security having a term closest to 10 years plus (y) 5% per annum plus (z) with respect to the 2012 Senior Secured Notes, 3.4% per annum, or with respect to the 2013 Senior Secured Notes, 3.14% per annum, exceeds the original interest rate. Pursuant to the Securitization Notes Indenture, such additional interest is not due to be paid by the Company until January 2043 (the legal maturity date) and does not compound annually. The Securitization Notes rank pari passu with each other. Pursuant to the Securitization Notes Indenture, the Securitization Notes are the joint and several obligations of the Co-Issuers only. The Securitization Notes are secured under the Securitization Notes Indenture by a security interest in certain of the assets of the Co-Issuers (the “Securitized Assets”), which includes, among other things, (i) intellectual property assets, including the U.S. and Canadian registered and applied for trademarks for the following brands and other related IP assets: Candie’s, Bongo, Joe Boxer (excluding Canadian trademarks, none of which are owned by Iconix), Rampage, Mudd, London Fog (other than the trademark for outerwear products sold in the United States), Mossimo, Ocean Pacific and OP, Danskin and Danskin Now, Rocawear, Starter, Waverly, Fieldcrest, Royal Velvet, Cannon, and Charisma; (ii) the rights (including the rights to receive payments) and obligations under all license agreements for use of those trademarks in such territories; (iii) the following equity interests in the following joint ventures: an 85% interest in Hardy Way LLC which owns the Ed Hardy brand, a 50% interest in MG Icon LLC which owns the Material Girl and Truth or Dare brands, and a 100% interest in ZY Holdings LLC which owns the Zoo York brand; and (iv) certain cash accounts established under the Securitization Notes Indenture. The Securitized Assets do not include revenue generating assets of (x) the Iconix subsidiaries that own the Ecko Unltd trademarks, the Mark Ecko trademarks, the Artful Dodger trademarks, the Umbro trademarks, and the Lee Cooper trademarks, (y) the Iconix subsidiaries that own Iconix’s other brands outside of the United States and Canada or (z) the joint ventures in which Iconix and certain of its subsidiaries have investments and which own the Modern Amusement trademarks and the Buffalo trademarks, the Pony trademarks, and the Hydraulic trademarks. If the Company contributes an Additional IP Holder to Icon Brand Holdings LLC or Icon DE Intermediate Holdings LLC, that Additional IP Holder will enter into a guarantee and collateral agreement in a form provided for in the Securitization Notes Indenture pursuant to which such Additional IP Holder will guarantee the obligations of the Co-Issuers in respect of any Securitization Notes issued under the Securitization Notes Indenture and the other related documents and pledge substantially all of its assets to secure those guarantee obligations pursuant to a guarantee and collateral agreement. Neither the Company nor any subsidiary of the Company, other than the Securitization Entities, will guarantee or in any way be liable for the obligations of the Co-Issuers under the Securitization Notes Indenture or the Securitization Notes. The Securitization Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Co-Issuers maintain specified reserve accounts to be used to make required payments in respect of the Securitization Notes, (ii) provisions relating to optional and mandatory prepayments, including mandatory prepayments in the event of a change of control (as defined in the Securitization Notes Supplemental Indentures) and the related payment of specified amounts, including specified make-whole payments in the case of the Senior Secured Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the transfers of the assets pledged as collateral for the Securitization Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters. As of June 30, 2019, the Company is in compliance with all covenants under the Securitization Notes. The Company’s 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 March 31, 2019, the DSCR fell below 1.10x as of March 31, 2019. Beginning April 1, 2019, the Senior Secured Notes experienced a Rapid Amortization Event pursuant to the Securitization Notes Indenture. Upon a Rapid Amortization Event, any residual amounts available will immediately be used to pay down the principal. The Securitization Notes are subject to customary rapid amortization events provided for in the Securitization Notes Indenture, including events tied to (i) the failure to maintain a stated DSCR, (ii) certain manager termination events, (iii) the occurrence of an event of default and (iv) the failure to repay or refinance the Securitization Notes on the anticipated repayment date. If a rapid amortization event were to occur, including as a result of not paying or redeeming the Securitization Notes in full prior to the anticipated repayment date, the management fee payable to the Company would remain payable pursuant to the priority of payments set forth under the Securitization Indenture, but no residual amounts would be payable to the Company thereafter. As noted above, a Rapid Amortization Event occurred beginning April 1, 2019. In June 2014, the Company sold the “sharperimage.com” domain name and the exclusive right to use the Sharper Image trademark in connection with the operation of a branded website and catalog distribution in specified jurisdictions, in which the Senior Secured Notes had a security interest pursuant to the Indenture. As a result of this permitted disposition, the Company paid an additional $1.6 million in principal in July 2014. In January 2017, in connection with the sale of the Sharper Image intellectual property and related assets, the Company made a mandatory principal prepayment on its Senior Secured Notes of $36.7 million. The Company wrote off a pro-rata portion of the Senior Secured Notes’ deferred financing costs of $0.5 million. As a result of this transaction, the quarterly principal payments on the 2012 Senior Secured notes and 2013 Senior Secured Notes were reduced to $9.9 million and $4.5 million, respectively. In July 2017, in connection with the sale of the businesses underlying the Entertainment segment, the Company made a mandatory principal prepayment on its Senior Secured Notes of $152.2 million. The Company wrote off a pro-rata portion of the Senior Secured Notes’ deferred financing costs of $2.0 million as well as paid a prepayment penalty of $0.3 million. As a result of this transaction, the quarterly principal payments on the 2012 Senior Secured Notes and 2013 Senior Secured Notes were reduced to $7.3 million and $3.4 million, respectively. As of June 30, 2019 and December 31, 2018, the total outstanding principal balance of the Securitization Notes was $453.2 million and $465.5 million, respectively, of which $47.9 million and $46.0 million, respectively, is included in the current portion of long-term debt on the consolidated balance sheet. As of June 30, 2019 and December 31, 2018, $13.7 million and $15.2 million, respectively, is included in restricted cash on the consolidated balance sheet and represents short-term restricted cash consisting of collections on behalf of the Securitized Assets, restricted to the payment of principal, interest and other fees on a quarterly basis under the Senior Secured Notes. For the Current Quarter and Prior Year Quarter, cash interest expense relating to the Securitization Notes was approximately $5.3 million and $5.6 million, respectively. For the Current Six Months and the Prior Year Six Months, cash interest expense relating to the Securitization Notes was approximately $10.8 million and $11.2 million, respectively. For the Current Quarter and Prior Year Quarter, the Company recorded an expense for the amortization of original issue discount relating to the Variable Funding Notes of $1.1 million and $1.0 million, respectively. For the Current Six Months and Prior Year Six Months, the Company recorded an expense for the amortization of original issue discount relating to the Variable Funding Notes of $2.1 million and $1.9 million, respectively. Senior Secured Term Loan On August 2, 2017, the Company entered into a credit agreement (as amended or otherwise modified, unless context provides otherwise the “Senior Secured Term Loan”), among IBG Borrower, the Company’s wholly-owned direct subsidiary, as borrower, the Company and certain wholly-owned subsidiaries of IBG Borrower, as guarantors (the “Guarantors”), Cortland Capital Market Services LLC, as administrative agent and collateral agent (“Cortland”) and the lenders party thereto from time to time, including Deutsche Bank AG, New York Branch. Pursuant to the Senior Secured Term Loan, the lenders provided to IBG Borrower a senior secured term loan (the “Senior Secured Term Loan”), scheduled to mature on August 2, 2022 in an aggregate principal amount of $300 million and bearing interest at LIBOR plus an applicable margin of 7% per annum (the “Interest Rate”). On August 2, 2017, the net cash proceeds of the Senior Secured Term Loan were deposited into an escrow account and subject to release to IBG Borrower from time to time, subject to the satisfaction of customary conditions precedent upon each withdrawal, to finance repurchases of, or at the maturity date thereof to repay in full, the 1.50% Convertible Notes (as defined below). Prior to the First Amendment (as discussed below), the Company had the ability to make these repurchases in the open market or privately negotiated transactions, depending on prevailing market conditions and other factors. Prior to the First Amendment, borrowings under the Senior Secured Term Loan were to amortize quarterly at 0.5% of principal, commencing on September 30, 2017. IBG Borrower was obligated to make mandatory prepayments annually from excess cash flow and periodically from net proceeds of certain asset dispositions and from net proceeds of certain indebtedness, if incurred (in each case, subject to certain exceptions and limitations provided for in the Senior Secured Term Loan). IBG Borrower’s obligations under the Senior Secured Term Loan are guaranteed jointly and severally by the Company and the other Guarantors pursuant to a separate facility guaranty. IBG Borrower’s and the Guarantors’ obligations under the Senior Secured Term Loan are secured by first priority liens on and security interests in substantially all assets of IBG Borrower, the Company and the other Guarantors and a pledge of substantially all equity interests of the Company’s subsidiaries (subject to certain limits including with respect to foreign subsidiaries) owned by the Company, IBG Borrower or any other Guarantor. However, the security interests will not cover certain intellectual property and licenses owned, directly or indirectly by the Company’s subsidiary Iconix Luxembourg Holdings SÀRL or those subject to the Company’s securitization facility. In addition, the pledges exclude certain equity interests of Marcy Media Holdings, LLC and the subsidiaries of Iconix China Holdings Limited. In connection with the Senior Secured Term Loan, IBG Borrower, the Company and the other Guarantors made customary representations and warranties and have agreed to adhere to certain customary affirmative covenants. Additionally, the Senior Secured Term Loan mandates that IBG Borrower, the Company and the other Guarantors enter into account control agreements on certain deposit accounts, maintain and allow appraisals of their intellectual property, perform under the terms of certain licenses and other agreements scheduled in the Senior Secured Term Loan and report significant changes to or terminations of licenses generating guaranteed minimum royalties of more than $0.5 million. Prior to the First Amendment (as discussed below), IBG Borrower was required to satisfy a minimum asset coverage ratio of 1.25:1.00 and maintain a leverage ratio of no greater than 4.50:1.00. Amendments to Senior Secured Term Loan First Amendment On October 27, 2017, the Company entered into the First Amendment to the Senior Secured Term Loan (the “First Amendment”) pursuant to which, among other things, the remaining escrow balance of approximately $231 million (after taking into account approximately $59.2 million that was used to buy back 1.50% Convertible Notes in open market purchases in the third quarter of 2017) was returned to the lenders. The First Amendment also provided for, among other things, (a) a reduction in the existing $300 million term loan to the then-current term loan balance of approximately $57.8 million, (b) a new senior secured delayed draw term loan facility in the aggregate amount of up to $165.7 million, consisting of (i) a $25 million First Delayed Draw Term Loan (the “First Delayed Draw Term Loan”), and (ii) a $140.7 million Second Delayed Draw Term Loan (the “Second Delayed Draw Term Loan” and, together, with the First Delayed Draw Term Loan, the “Delayed Draw Term Loan Facility”) for the purpose of repaying the 1.50% Convertible Notes; (c) an increase of the Total Leverage Ratio permitted under the Senior Secured Term Loan from 4.50:1.00 to 5.75:1.00; (d) a reduction in the debt service coverage ratio multiplier in the Company’s asset coverage ratio under the Senior Secured Term Loan; (e) an increase in the existing amortization rate from 2 percent per annum to 10 percent per annum commencing July 2019; and (f) amendments to the mandatory prepayment provisions to (i) permit the Company not to prepay borrowings under the Senior Secured Term Loan from the first $100 million of net proceeds resulting from Permitted Capital Raising Transactions (as defined in the Senior Secured Term Loan) effected prior to March 15, 2018, and (ii) eliminate the requirement that the Company pay a Prepayment Premium (as defined in the Senior Secured Term Loan) on any payments or prepayments made prior to December 31, 2018. Indebtedness issued under the Delayed Draw Term Loan Facility was issued with original issue discount. As a result of the First Amendment, on October 27, 2017, the Company repaid $231.0 million on the Senior Secured Term Loan which represented $240.7 million of outstanding principal balance. As this transaction was accounted for as a debt modification in accordance with ASC 470-50-40, and based on the Company’s accounting policy for debt modifications, the Company wrote-off a pro-rata portion of the original issue discount and deferred financing costs of $9.3 million and $5.4 million, respectively. As a result of this transaction, the Company’s outstanding principal balance of the Senior Secured Term Loan was reduced to $57.8 million as of such date. On November 2, 2017, the Company drew down the full amount of $25.0 million on the First Delayed Draw Term Loan, of which the Company received $24.0 million in cash, net of the $1.0 million of original issue discount. Second Amendment Given that the Company was unable to timely file its quarterly financial statements for the quarter ended September 30, 2017 with the SEC by November 14, 2017 and became in default under the terms of the Senior Secured Term Loan, as amended, on November 24, 2017, the Company entered into the Second Amendment to the Senior Secured Term Loan. Pursuant to the Second Amendment, among other things, the lenders under the Senior Secured Term Loan agreed, subject to the Company’s compliance with the requirements set forth in the Second Amendment, to waive until December 22, 2017, certain potential defaults and events of default arising under the Senior Secured Term Loan. In connection with the Second Amendment, Deutsche Bank was granted additional pricing flex in the form of price protection upon syndication of the Senior Secured Term Loan (“Flex”) and ticking fees on the unfunded portion of the loan. The Second Amendment allows, among other things, for cash payments on account of the Flex and ticking fees to be paid from the proceeds of the First Delayed Draw Term Loan, which was previously fully funded in accordance with the terms of the Senior Secured Term Loan. After giving effect to the additional Flex provided in the Second Amendment, the Company estimated that it could be responsible for payments on account of Flex in an aggregate total amount of up to $12.0 million. As of March 31, 2019, the Company has paid a total of approximately $5.0 million in Flex. The Company has recorded this amount against the outstanding principal balance of Senior Secured Term Loan on the Company’s consolidated balance sheet and is being amortized over the remaining term of Senior Secured Term Loan. Third Amendment
On February 12, 2018, the Company, through IBG Borrower, entered into the Third Amendment to the Senior Secured Term Loan. The Third Amendment provides for, among other things, amendments to certain restrictive covenants and other terms set forth in the Senior Secured Term Loan, as amended, to permit (i) IBG Borrower to enter into the 5.75% Notes Indenture (as defined below) and a related intercreditor agreement and (ii) the Note Exchange (as defined below). In connection with the Third Amendment, Deutsche Bank was granted additional pricing flex in the form of price protection upon syndication of the loan (“Third Amendment Flex”). After giving effect to the additional Third Amendment Flex, the Company estimates that it could be responsible for payments on account of the Third Amendment Flex in an aggregate total amount of up to $6.1 million. Fourth Amendment The Company, through IBG Borrower, entered into the Fourth Amendment to the Senior Secured Term Loan on March 12, 2018. The Fourth Amendment provided, among other things, that the funding date for the Second Delayed Draw Term Loan would be March 14, 2018 instead of March 15, 2018. The conditions to the availability of the Second Delayed Draw Term Loan were satisfied as of March 14, 2018 due, in part, to the transactions contemplated by the Note Exchange, and the Company was able to draw on the Second Delayed Draw Term Loan. On March 14, 2018, the Company drew down $110 million under the Second Delayed Draw Term Loan and used those proceeds, along with cash on hand, to make a payment to the trustee under the indenture governing the 1.50% Convertible Notes to repay the remaining 1.50% Convertible Notes at maturity on March 15, 2018. The Senior Secured Term Loan, as amended, contains customary negative covenants and events of default. The Senior Secured Term Loan limits the ability of IBG Borrower, the Company and the other Guarantors, with respect to themselves, their subsidiaries and certain joint ventures, from, among other things, incurring and prepaying certain indebtedness, granting liens on certain assets, consummating certain types of acquisitions, making fundamental changes (including mergers and consolidations), engaging in substantially different lines of business than those in which they are currently engaged, making restricted payments and amending or terminating certain licenses scheduled in the Senior Secured Term Loan. Such restrictions, failure to comply with which may result in an event of default under the terms of the Senior Secured Term Loan, are subject to certain customary and specifically negotiated exceptions, as set forth in the Senior Secured Term Loan. If an event of default occurs, in addition to the Interest Rate increasing by an additional 3% per annum, Cortland shall, at the request of lenders holding more than 50% of the then-outstanding principal of the Senior Secured Term Loan, declare payable all unpaid principal and accrued interest and take action to enforce payment in favor of the lenders. An event of default includes, among other events: (i) a change of control by which a person or group becomes the beneficial owner of 35% of the voting stock of the Company or IBG Borrower; (ii) the failure to extend of the Series 2012-1 Class A-1 Senior Notes Renewal Date (as defined in the Senior Secured Term Loan); (iii) the failure of any of Icon Brand Holdings LLC, Icon NY Holdings LLC, Icon DE Intermediate Holdings LLC, Icon DE Holdings LLC and their respective subsidiaries (the “Securitization Entities”) to perform certain covenants; and (iv) the entry into amendments to the securitization facility that would be materially adverse to the lenders or Cortland without consent. Subject to the terms of the Senior Secured Term Loan, both voluntary and certain mandatory prepayments will trigger a premium of 5% of the aggregate principal amount during the first year of the loan and a premium of 3% of the aggregate principal amount during the second year of the loan, with no premiums payable in subsequent periods. As of June 30, 2019 and December 31, 2018, the outstanding principal balance of the Senior Secured Term Loan was $171.6 million (which is net of $15.8 million of original issue discount) and $171.1 million (which is net of $18.3 million of original issue discount), respectively, of which $19.3 million and $11.6 million is recorded in current portion of long term debt on the Company’s consolidated balance sheet, respectively. The Company recorded cash interest expense of approximately $4.6 million relating to the Senior Secured Term Loan in the Current Quarter as compared to $4.6 million in the Prior Year Quarter. The Company recorded cash interest expense of approximately $9.1 million relating to the Senior Secured Term Loan in the Current Six Months as compared to $8.0 million (which included a commitment fee) in the Prior Year Six Months. The Company recorded an expense for the amortization of original issue discount and deferred financing fees of approximately $1.4 million relating to the Senior Secured Term Loan, included in interest expense on the consolidated statement of operations, during the Current Quarter as compared to $1.2 million during the Prior Year Quarter. The Company recorded an expense for the amortization of original issue discount and deferred financing fees of approximately $2.6 million relating to the Senior Secured Term Loan, included in interest expense on the unaudited condensed consolidated statement of operations, during the Current Six Months as compared to approximately $1.8 million during the Prior Year Six Months. 5.75% Convertible Notes On February 22, 2018, the Company consummated an exchange (the “Note Exchange”) of approximately $125 million previously outstanding 1.50% Convertible Senior Subordinated Notes due 2018 (the “1.50% Convertible Notes”), pursuant to which it issued approximately $125 million of new 5.75% Convertible Notes due 2023 (the 5.75% Convertible Notes”). The 5.75% Convertible Notes were issued pursuant to an indenture, dated February 22, 2018, by and among the Company, each of the guarantors thereto and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent (the “Indenture”). The 5.75% Convertible Notes mature on August 15, 2023. Interest on the 5.75% Convertible Notes may be paid in cash, shares of the Company’s common stock, or a combination of both, at the Company’s election. If the Company elects to pay all or a portion of an interest payment in shares of common stock, the number of shares of common stock payable will be equal to the applicable interest payment divided by the average of the 10 individual volume-weighted average prices for the 10-trading day period ending on and including the trading day immediately preceding the relevant interest payment date. The 5.75% Convertible Notes are (i) secured by a second lien on the same assets that secure the obligations of IBG Borrower under the Senior Secured Term Loan and (ii) guaranteed by IBG Borrower and same guarantors as those under the Senior Secured Term Loan, other than the Company. Subject to certain conditions and limitations, the Company may cause all or part of the 5.75% Convertible Notes to be automatically converted into common stock of the Company. The 5.75% Convertible Notes are convertible into shares of the Company’s common stock based on a conversion rate of 52.1919 shares of the Company’s common stock, per $1,000 principal amount of the 5.75% Convertible Notes (which is equal to an initial conversion price of approximately $19.16 per share), subject to adjustment from time to time pursuant to the 5.75% Convertible Note Indenture. Holders converting their 5.75% Convertible Notes (including in connection with a mandatory conversion) shall also be entitled to receive a payment from the Company equal to the Conversion Make-Whole Payment (as defined in the Indenture) if such conversion occurs after a regular record date and on or before the next succeeding interest payment date, through and including the maturity date (determined as if such conversion did not occur). If the Company elects to pay all or a portion of a Conversion Make-Whole Payment in shares of common stock, the number of shares of common stock payable will be equal to the applicable Conversion Make-Whole Payment divided by the average of the 10 individual volume-weighted average prices for the 10-trading day period immediately preceding the applicable conversion date. Subject to certain limitations pursuant to the Senior Secured Term Loan, from and after the February 22, 2019, the Company may redeem for cash all or part of the 5.75% Convertible Notes at 100% of the principal amount of the 5.75% Convertible Notes, plus accrued and unpaid interest, if any, at any time by providing at least 30 days’ prior written notice to holders of the 5.75% Convertible Notes. If the Company undergoes a fundamental change (which would occur if the Company experiences a change of control or is delisted from NASDAQ) prior to maturity, each holder will have the right, at its option, to require the Company to repurchase for cash all or a portion of such holder’s 5.75% Convertible Notes at a fundamental change purchase price equal to 100% of the principal amount of the 5.75% Convertible Notes to be repurchased, together with interest accrued and unpaid to, but excluding, the fundamental change purchase date. The Company is subject to certain restrictive covenants pursuant to the 5.75% Convertible Note Indenture, including limitations on (i) liens, (ii) indebtedness, (iii) asset sales, (iv) restricted payments and investments, (v) prepayments of indebtedness and (vi) transactions with affiliates. During the Current Quarter and Current Six Months, certain noteholders converted an aggregate outstanding principal balance of $11.2 million and $15.1 million, respectively, of their 5.75% Convertible Notes into approximately 0.6 million and 0.8 million shares, respectively, of the Company’s common stock. Pursuant to the Indenture, the Company also made Conversion Make-Whole Payments of approximately 2.1 million and 2.9 million shares of the Company’s common stock to those converting noteholders during the Current Quarter and Current Six Months, respectively. As a result of the difference in the fair market value versus the carrying value of the 5.75% Convertible Notes that were converted during the Current Quarter and Current Six Months, an aggregate $1.4 million loss and an aggregate $1.6 million loss was recorded within Other Income in the Company’s condensed consolidated statement of operations in the Current Quarter and Current Six Months, respectively. The Company has elected to account for the 5.75% Convertible Notes based on the Fair Value Option accounting as outlined in ASC 825. Refer to Note 8 for further details. As of June 30, 2019 and December 31, 2018, while the debt balance recorded at fair value on the Company’s consolidated balance sheet is $23.2 million and $48.1 million, respectively, the actual outstanding principal balance of the 5.75% Convertible Notes is $94.6 million and $109.7 million, respectively. The Company recorded interest expense of approximately $1.4 million relating to the 5.75% Convertible Notes in the Current Quarter as compared to $1.6 million in the Prior Year Quarter. The Company recorded interest expense of approximately $2.9 million relating to the 5.75% Convertible Notes in the Current Six Months as compared to $2.3 million for the Prior Year Six Months. 1.50% Convertible Notes On March 18, 2013, the Company completed the issuance of $400.0 million principal amount of the Company’s 1.50% Convertible Notes issued pursuant to that certain Indenture, dated as of March 15, 2013, by and between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the “1.50% Notes Indenture”), in a private offering to certain institutional investors with net proceeds of approximately $390.6 million.
During FY 2016, the Company repurchased $104.9 million par value of the 1.50% Convertible Notes with a combination of $36.7 million in cash (including interest and trading fees) and the issuance of approximately 0.7 million shares of the Company’s common stock. During FY 2017, the Company repurchased $58.9 million par value of the 1.50% Convertible Notes for $59.3 million in cash (including interest and trading fees).
On February 22, 2018, the Company completed the Note Exchange. On March 15, 2018, the Company repaid the remaining outstanding principal balance of $111.2 million of the 1.50% Convertible Notes with the proceeds of the Second Delayed Draw Term Loan of $110 million plus cash on hand, and no further 1.50% Convertible Notes remained outstanding. The exchange of the 1.50% Convertible Notes for the 5.75% Convertible Notes was accounted for as a debt extinguishment in accordance with ASC 470 and resulted in the Company recording a gain on extinguishment of debt of $4.5 million, which is recorded in the Company’s condensed consolidated statement of operations in the Prior Year Six Months.
For the Prior Year Quarter and the Prior Year Six Months, the Company recorded none (refer to the extinguishment of the debt as is discussed above) and approximately $2.4 million, respectively, of additional non-cash interest expense representing the difference between the stated interest rate on the 1.50% Convertible Notes and the rate for a similar instrument that does not have a conversion feature. For the Prior Year Quarter and the Prior Year Six Months, the Company recorded none (refer to the extinguishment of the debt as discussed above) and approximately $0.7 million, respectively, of cash interest expense relating to the 1.50% Convertible Notes. Debt Maturities As of June 30, 2019, the Company’s debt maturities on a calendar year basis are as follows:
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Stockholders' Equity |
9. Stockholders’ Equity 2016 Omnibus Incentive Plan On November 4, 2016, the Company’s stockholders approved the Company’s 2016 Omnibus Incentive Plan (“2016 Plan”). The 2016 Plan replaced and superseded the Amended and Restated 2009 Plan. Under the 2016 Plan, all employees, directors, officers, consultants and advisors of the Company, including those of the Company’s subsidiaries, are eligible to be granted common stock, options or other stock-based awards. At inception, there were 0.2 million shares of the Company’s common stock available for issuance under the 2016 Plan. The 2016 Plan was amended at the 2017 Annual Meeting of Stockholders to increase the number of shares available under the plan by 0.19 million shares. Shares Reserved for Issuance As of June 30, 2019, there were approximately 0.1 million common shares available for issuance under the 2016 Plan. Reverse Stock Split On March 14, 2019, the Company effected a 1-for-10 reverse stock split (the “Reverse Stock Split”) of its common stock. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who otherwise would have been entitled to receive fractional shares of common stock had their holdings rounded up to the next whole share. Proportional adjustments were made to the Company’s outstanding stock options and other equity securities and to the Company’s incentive plans, and the conversion ratio of the 5.75% Convertible Notes, to reflect the Reverse Stock Split, in each case, in accordance with the terms thereof. Unless the context otherwise requires, all share and per share amounts in this quarterly report on Form 10-Q have been adjusted to reflect the Reverse Stock Split. Stock Options Stock options outstanding and exercisable as of June 30, 2019 were issued under previous equity incentive plans of the Company. There was no grants of stock options or warrants and no compensation expense related to stock option grants or warrant grants during the Current Six Months or Prior Year Six Months as all prior awards have been fully expensed. As of June 30, 2019, there was a total of 1,500 stock options outstanding and exercisable at a weighted average exercise price of $171.60. During the Current Six Months, there were no canceled, exercised or expired/forfeited stock options. The weighted average contractual term (in years) of options outstanding and exercisable as of June 30, 2019 was 0.23. Restricted stock Compensation cost for restricted stock is measured as the excess, if any, of the quoted market price of the Company’s stock at the date the common stock is issued over the amount the employee must pay to acquire the stock (which is generally zero). The compensation cost, net of projected forfeitures, is recognized over the period between the issue date and the date any restrictions lapse, with compensation cost for grants with a graded vesting schedule recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. The restrictions do not affect voting and dividend rights. The following table summarizes information about unvested restricted stock transactions:
The Company has awarded time-based restricted shares of common stock to certain employees. The awards have restriction periods tied to employment and vest over a maximum period of approximately 3 years. The cost of the time-based restricted stock awards, which is the fair market value on the date of grant net of estimated forfeitures, is expensed ratably over the vesting period. The Company has awarded performance-based restricted shares of common stock to certain employees. The awards have restriction periods tied to certain performance measures. The cost of the performance-based restricted stock awards, which is the fair market value on the date of grant net of estimated forfeitures, is expensed when the likelihood of those shares being earned is deemed probable. Compensation expense related to restricted stock grants (inclusive of the restricted stock grants awarded as part of the long-term incentive plans discussed below) for the Current Quarter and Prior Year Quarter was approximately $0.2 million and $1.2 million, respectively. Compensation expense related to restricted stock grants (inclusive of the restricted stock grants awarded as part of the long-term incentive plans discussed below) for the Current Six Months and Prior Year Six Months was approximately $0.4 million and $1.7 million, respectively. An additional amount of $0.7 million of expense of compensation expense related to restricted stock grants (inclusive of the restricted stock grants awarded as part of the long-term incentive plans discussed below) is expected to be expensed evenly over a period of approximately three years. For both the Current Quarter and Prior Year Quarter, the Company repurchased shares valued at less than $0.1 million of its common stock in connection with net share settlement of restricted stock grants. For the both the Current Six Months and Prior Year Six Months, the Company repurchased shares valued at approximately $0.1 million of its common stock in connection with the net share settlement of restricted stock grants.
Retention Stock
On January 7, 2016, the Company awarded to certain employees a retention stock grant of approximately 1.3 million shares in the aggregate with a then current value of approximately $7.5 million. The awards cliff vest in three years based on the Company’s total shareholder return measured against a peer group, as described in the Company’s Form 10-K/A filed on April 29, 2016. The grant date fair value of the awards issued on January 7, 2016 was $42.50. As of December 31, 2018, pursuant to the terms of the awards and based upon the Company’s performance over the vesting period, no shares were issued upon expiration of the grant.
Mr. John Haugh, the Company’s former Chief Executive Officer, was issued an employment inducement award pursuant to his employment agreement. The terms of the Employment Inducement Award are similar to the retention stock awards provided to all other employees as described above. The grant date fair value of Mr. Haugh’s award issued on February 23, 2016 was $57.50. As of June 15, 2018, Mr. Haugh, the Company’s former Chief Executive Officer and President, was no longer an employee of the Company or member of the Company’s board of directors. As of Mr. Haugh’s termination date, given that the retention stock awards were not earning out, the vesting of shares associated with Mr. Haugh’s awards resulted in zero shares issuable.
On October 15, 2018, the Company hired Robert C. Galvin as its Chief Executive Officer and President and was appointed to the Company’s board of directors. Mr. Galvin was issued an Employment Inducement Award pursuant to his employment agreement. The terms of the Employment Inducement Award are similar to the retention stock awards provided to other employees as described above. The grant date fair value of Mr. Galvin’s award issued on October 15, 2018 was $1.80.
Compensation expense related to the retention stock awards was less than $0.1 million and $0.2 million for the Current Quarter and Prior Year Quarter, respectively. Compensation expense related to the retention stock awards was approximately $0.1 million and $0.5 million for the Current Six Months and Prior Year Six Months, respectively. An additional amount of $0.3 million of expense of compensation expense related to Mr. Galvin’s retention stock awards is expected to be expensed evenly over a period of approximately 2.5 years.
Long-Term Incentive Compensation On March 31, 2016, the Company approved a new grant for long-term incentive compensation (the “2016 LTIP”) for key employees and granted equity awards under the 2016 LTIP in the aggregate amount of approximately 0.1 million shares at a weighted average share price of $73.10 with a then current value of approximately $5.2 million. The awards granted were a combination of restricted stock units (“RSUs”) and target level performance stock units (“PSUs”). Pursuant to the terms of the awards and based upon the Company’s performance over the vesting period, less than 0.1 million were issued upon expiration of the grant on March 31, 2019. On March 7, 2017, the Company approved a new grant for long-term incentive compensation (the “2017 LTIP”) for certain employees and granted equity awards under the 2017 LTIP in the aggregate amount of approximately 0.1 million shares at a weighted average share price of $75.20 with a then current value of $6.6 million. The awards granted were a combination of RSUs and target level PSUs. The material terms of the PSUs and RSUs are substantially similar to those set forth in the 2016 LTIP. Specifically, the RSUs vest one third annually on each of March 30, 2018, March 30, 2019 and March 30, 2020. The PSUs vest based on performance metrics approved by the Compensation Committee, which, for the performance period commencing January 1, 2017 and ending on December 31, 2019, are based on the Company’s achievement of an aggregate adjusted operating income performance target as set forth in the applicable award agreements, and continued employment through December 31, 2019. For the Current Six Months, less than 0.1 million shares were forfeited in respect of the 2017 LTIP. The weighted average remaining contractual term (in years) of the PSUs is one year. On March 15, 2018, the Company approved a new grant for long-term incentive compensation (the “2018 LTIP”) for certain employees which consisted of (i) PSU equity awards in the aggregate amount of approximately 0.2 million shares at a weighted average share price of $13.80 with a then current value of $3.1 million and (ii) cash awards in the aggregate amount of approximately $3.1 million (the “2018 Cash Grant”). The Cash Grants comprising the 2018 LTIP vest in 48 equal semi-monthly installments on the 15th and last days of each month, beginning March 31, 2018 and ending March 15, 2020, subject in each case to continued employment through the applicable vesting date. Each installment is paid within 15 days of the applicable vesting date. Upon the end of an employee’s employment with the Company, any remaining unpaid portion of the 2018 Cash Grant is forfeited. The PSUs vest based on performance metrics approved by the Compensation Committee over three separate performance periods, commencing on January 1 of each of 2018, 2019 and 2020 and ending on December 31 of each of 2018, 2019 and 2020, which, for each such performance period, are based on the Company’s achievement of an aggregated adjusted operating income performance target to be set by the Compensation Committee prior to March 30 of each applicable performance period, and continued employment through the settlement date. For the Current Six Months, less than 0.1 million shares were forfeited in respect of the 2018 LTIP. The weighted average remaining contractual term (in years) of the PSUs is two years. On March 15, 2019, the Company approved a new grant for long-term incentive compensation (the “2019 LTIP”) for certain employees which consisted of (i) PSU equity awards in the aggregate amount of approximately 0.4 million shares at a weighted average share price of $2.02 with a then current value of $0.8 million and (ii) cash awards in the aggregate amount of approximately $1.0 million (the “2019 Cash Grant”). As part of the 2019 LTIP, pursuant to his employment agreement, the Company’s Chief Executive Officer and President was granted 0.3 million shares of the Company’s common stock with an aggregate fair market value of $0.3 million upon final execution of the RSU agreement in April 2019. The 2019 Cash Grant and the PSUs vest based on performance metrics approved by the Compensation Committee over two separate performance periods, commencing on January 1 of each of 2019 and 2020 and ending on December 31 of each of 2019 and 2020, which, for each such performance period, are based on the Company’s achievement of an aggregated adjusted EBITDA performance target to be set by the Compensation Committee prior to March 30 of each applicable performance period, and continued employment through the settlement date. The weighted average remaining contractual term (in years) of the PSUs is approximately two years. In the Current Quarter, the Company recognized compensation benefit related to the PSUs granted as part of the long-term incentive plans of less than $0.1 million as compared to a compensation benefit of $0.9 million in the Prior Year Quarter. In the Current Six Months, the Company recognized compensation expense related to the PSUs granted as part of the long-term incentive plans of $0.1 million as compared to compensation benefit of $0.6 million in the Prior Year Six Months. An additional amount of $0.4 million of expense of compensation expense related to the PSUs granted is expected to be expensed evenly over a period of approximately two years.
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Earnings Per Share |
10. Earnings Per Share Basic earnings per share includes no dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects, in periods in which they have a dilutive effect, the effect of restricted stock-based awards, common shares issuable upon exercise of stock options and warrants and shares underlying convertible notes potentially issuable upon conversion. The difference between basic and diluted weighted-average common shares results from the assumption that all dilutive stock options outstanding were exercised, and all convertible notes have been converted into common stock. For the Current Quarter, of the total potentially dilutive shares related to restricted stock-based awards and stock options, approximately 0.5 million shares were anti-dilutive, as compared to approximately 0.2 million shares that were anti-dilutive for the Prior Year Quarter. For the Current Quarter, approximately 0.2 million of the performance related restricted stock-based awards issued to the Company’s named executive officers were anti-dilutive as compared to approximately 0.3 million of the performance related restricted stock-based awards issued to the Company’s named executive officers were anti-dilutive in the Prior Year Quarter. A reconciliation of weighted average shares used in calculating basic and diluted earnings per share follows:
In accordance with ASC 480, the Company considers its redeemable non-controlling interest in its computation of both basic and diluted earnings per share. In addition, in accordance with ASC 260, the Company considers its 5.75% Convertible Notes in its computation of diluted earnings per share. For the Current Quarter, Prior Year Quarter, Current Six Months, and Prior Year Six Months, adjustments to the Company’s redeemable non-controlling interest and effects of potential conversion on the 5.75% Convertible Notes had impacts on the Company’s earnings per share calculations as follows:
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Commitments And Contingencies Disclosure [Abstract] | |
Contingencies |
11. Contingencies
In May 2016, Supply Company, LLC, (“Supply”), a former licensee of the Ed Hardy trademark, commenced the action against the Company and its affiliate, Hardy Way, LLC, (“Hardy Way”, and, together with the Company, the “Iconix Defendants”) seeking damages of $50 million, including punitive damages, attorneys’ fees and costs. Supply alleges that Hardy Way breached the parties’ license agreement by failing to reimburse Supply for markdown reimbursement requests that Supply received from a certain retailer. Supply also alleges that the Company is liable for fraud because it made purported misstatements about the Company’s financials and the viability of the Ed Hardy trademark in order to induce Supply to enter into the license agreement and to induce Supply to enter into a separate agreement with a certain retailer. The Iconix Defendants are vigorously defending against the claims, and have filed a motion to dismiss the Complaint, which is awaiting Court decision. At this time, the Company is unable to estimate the ultimate outcome of this matter. Two shareholder derivative complaints captioned James v. Cuneo et al, Docket No. 1:16-cv-02212 and Ruthazer v. Cuneo et al, Docket No. 1:16-cv-04208 have been consolidated in the United States District Court for the Southern District of New York, and three shareholder derivative complaints captioned De Filippis v. Cuneo et al. Index No. 650711/2016, Gold v. Cole et al, Index No. 53724/2016 and Rosenfeld v. Cuneo et al., Index No. 510427/2016 have been consolidated in the Supreme Court of the State of New York, New York County. The complaints name the Company as a nominal defendant and assert claims for breach of fiduciary duty, insider trading and unjust enrichment against certain of the Company's current and former directors and officers arising out of the Company's restatement of financial reports and certain employee departures. At this time, the Company is unable to estimate the ultimate outcome of these matters.
The Company continues to cooperate in the previously disclosed SEC and Southern District of New York (“SDNY”) investigations.
Three securities class actions have been consolidated in the United States District Court for the Southern District of New York, under the caption In re Iconix Brand Group, Inc., et al., Docket No. 1:15-cv-4860, against the Company and certain former officers and one current officer (the “Class Action”). The plaintiffs in the Class Action purport to represent a class of purchasers of the Company’s securities from February 22, 2012 to November 5, 2015, inclusive, and claim that the Company and individual defendants violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, by making allegedly false and misleading statements regarding certain aspects of the Company’s business operations and prospects. On October 25, 2017, the Court granted the motion to dismiss the consolidated amended complaint filed by the Company and the individual defendants with leave to amend. On November 14, 2017, the plaintiffs filed a second consolidated amended complaint. On February 2, 2018, the defendants moved to dismiss the second consolidated amended complaint. The Company and the individual defendants intend to vigorously defend against such claims. At this time, the Company is unable to estimate the ultimate outcome of these matters, but has recorded a preliminary estimate of a settlement, which the Company believes will fully be covered by insurance.
From time to time, the Company is also made a party to litigation incurred in the normal course of business. In addition, in connection with litigation commenced against licensees for non-payment of royalties, certain licensees have asserted unsubstantiated counterclaims against the Company. While any litigation has an element of uncertainty, the Company believes that the final outcome of any of these routine matters will not, individually or in the aggregate, have a material effect on the Company’s financial position or future liquidity. |
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Related Party Transactions |
12. Related Party Transactions The Company has entered into certain license agreements in which the core licensee is also one of our joint venture partners. In the case of Sports Direct International plc (“Sports Direct”), the Company maintains license agreements with Sports Direct, but in addition, during the Prior Year Six Months, the Company entered into a cooperation agreement with Sports Direct that allowed Sports Direct to appoint two members to the Company’s Board of Directors. For the Current Quarter, Prior Year Quarter, Current Six Months, and Prior Year Six Months, the Company recognized the following royalty revenue amounts:
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Income Taxes |
6 Months Ended |
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Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes |
13. Income Taxes The Company computes its expected annual effective income tax rate in accordance with ASC 740 and makes changes on a quarterly basis, as necessary, based on certain factors such as changes in forecasted annual pre-tax income; changes to actual or forecasted permanent book to tax differences; impacts from tax audits with state, federal or foreign tax authorities; impacts from tax law changes; or change in judgment as to the realizability of deferred tax assets. The Company identifies items which are unusual and non-recurring in nature and treats these as discrete events. The tax effect of discrete items is recorded in the quarter in which the discrete events occur. Due to the volatility of these factors, the Company's consolidated effective income tax rate can change significantly on a quarterly basis. With the exception of the Buffalo brand joint venture, Iconix Middle East joint venture, Diamond Icon joint venture and Umbro China joint venture, the Company is not responsible for the income taxes related to the non-controlling interest’s share of the joint venture’s earnings. Therefore, the tax liability associated with the non-controlling interest share of the joint venture’s earnings is not reported in the Company’s income tax expense, despite the joint venture’s entire income being consolidated in the Company’s reported income before income tax expense. As such, the joint venture’s earnings have the effect of lowering our effective tax rate. This effect is more pronounced in periods in which joint venture earnings are higher relative to our other earnings. Since the Buffalo brand joint venture is a taxable entity in Canada, the Iconix Middle East joint venture and Diamond Icon joint venture are taxable entities in the United Kingdom, the Company is required to report its tax liability, including taxes attributable to the non-controlling interest, in its statement of operations. All other consolidated joint ventures are partnerships and treated as pass-through entities not subject to taxation in their local tax jurisdiction, and therefore the Company includes only the tax attributable to its proportionate share of income from the joint venture in income tax expense. The Company files income tax returns in the U.S. federal and various state and local jurisdictions. For federal income tax purposes, during the fourth quarter of 2016, the Internal Revenue Service initiated an audit of the 2014 federal tax return which is ongoing. The Company also files returns in numerous foreign jurisdictions that have varied years remaining open for examination, but generally the statute of limitations is three to four years from when the return is filed. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the recorded deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on these items and the consecutive years of pretax losses (resulting from impairment), management determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance for all taxing jurisdictions as of December 31, 2018. In addition, the Company continues to have deferred tax liabilities related to indefinite lived intangibles on the condensed consolidated balance sheet a portion of which cannot be considered to be a source of taxable income to offset deferred tax assets. The Company’s consolidated effective tax rate for the Current Quarter was -4% which resulted in a $0.1 million income tax benefit as compared to the consolidated effective tax rate for the Prior Year Quarter of 4% which resulted in a $2.8 million income tax benefit. The decrease in the effective tax rate was due to trademark impairment recorded in the Prior Year Quarter, for which the Company recognized a tax benefit against a pretax loss. The Company’s consolidated effective tax rate for Current Six Months was 7% which resulted in a $1.8 million income tax provision as compared to the consolidated effective tax rate for the Prior Year Six Months of 3% which resulted in a $1.2 million income tax benefit. The increase in tax expense is due to trademark impairment recorded in the Prior Year Six Months, for which the Company recognized a tax benefit. Management has not recorded a tax provision for current ongoing tax examinations; however, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company's tax audits are resolved in a manner not consistent with management's expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs. The Company has net operating loss (“NOL”) carryforwards for federal and state income tax purposes which, generally, can be used to reduce future taxable income. Use of the NOL carryforwards is limited under Section 382 of the Internal Revenue Code, as we have had a change in ownership of more than 50% of our capital stock over a three-year period as measured under Section 382 of the Internal Revenue Code. These complex changes of ownership rules generally focus on ownership changes involving shareholders owning directly or indirectly 5% or more of our stock, including certain public “groups” of shareholders as set forth under Section 382 of the Internal Revenue Code, including those arising from new stock issuances and other equity transactions. Some of these NOL carryforwards will expire if they are not used within certain periods. At this time, we consider it more likely than not that we will not have sufficient taxable income in the future that will allow us to realize these NOL carryforwards. |
Accumulated Other Comprehensive Income |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income |
14. Accumulated Other Comprehensive Income The following table sets forth the activity in accumulated other comprehensive income for the Current Six Months and Prior Year Six Months:
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Segment and Geographic Data |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment and Geographic Data |
15. Segment and Geographic Data The Company identifies its operating segments for which separate financial information is available and for which segment results are evaluated regularly by the Chief Executive Officer, the Company’s chief operating decision maker, in deciding how to allocate resources and in assessing performance. The Company has disclosed the following operating segments: men’s, women’s, home, and international. Since the Company does not track, manage and analyze its assets by segments, no disclosure of segmented assets is reported.
The geographic regions consist of the United States and Other (which principally represent Latin America and Europe). Revenues attributable to each region are based on the location in which licensees are located and where they principally do business. Reportable data for the Company’s operating segments is as follows:
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Other Assets- Current and Long-Term |
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Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Assets- Current and Long -Term |
16. Other Assets - Current and Long-Term Other Assets - Current
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Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases |
17. Leases The Company is a lessee in several noncancelable operating leases, primarily for its corporate office, additional office space and certain office equipment. Beginning January 1, 2019, the Company accounts for leases in accordance with ASC Topic 842, Leases. Refer to Note 20. The Company determines if an arrangement is or contains a lease at contract inception. The Company recognizes a right of use (ROU) asset and a lease liability at the lease commencement date. For operating leases, the ROU asset is initially measured at the initial measurement amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the lease incentive received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense is recognized on a straight-line basis over the lease term. Variable lease payments associated with the Company’s leases are recognized in the period in which the obligation for those payments is incurred. Variable lease payments are presented as operating expense in the Company’s condensed consolidated statement of operations in the same line item as expense arising from fixed lease payments. Operating lease ROU assets are presented as operating lease right of use assets within non-current assets on the consolidated balance sheet. The current portion of operating lease liabilities is included in other current liabilities and the long-term portion is included in other liabilities on the consolidated balance sheet. The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less. The Company recognizes the lease payments associated with its short-term leases of office space and office equipment as an expense on a straight-line basis over the lease term. The Company’s leases may include nonlease components such as common area maintenance. The Company has elected the practical expedient to account for the lease and nonlease components as a single lease component, therefore, for all of our operating leases, the lease payments used to measure the lease liability include all of the fixed consideration in the contract. The Company’s operating leases expire over the next five years. The Company’s operating leases may contain renewal options however, because the Company is not reasonably certain to exercise these renewal options, the options are not included in the lease term and associated potential option payments are excluded from lease payments. Payments due under the lease contracts include fixed payments and in certain of the Company’s leases, variable payments. Variable lease payments consist of the Company’s proportionate share of the building’s property taxes, insurance, electricity and other common area maintenance costs. For the Current Quarter and Current Six Months, components of lease cost were as follows:
For the Prior Year Quarter and Prior Year Six Months, minimum rental payments under operating leases are recognized on a straight-line basis over the term of the lease including any periods of free rent. Rental expense for operating leases during the Prior Year Quarter and Prior Year Six Months amounted to $1.1 million and $2.0 million, respectively. As of June 30, 2019, the operating lease ROU assets and operating lease liabilities were $7.4 million and $9.6 million, respectively. For the Current Six Months, cash paid for lease liabilities for operating leases was $0.6 million. Additionally, for the Current Six Months, the Company obtained a ROU asset of $0.1 million exchanged for operating lease obligations of $0.1 million. There were no ROU assets exchanged and no operating lease obligations assumed during the Current Quarter. In the Current Six Months, there were no reductions to ROU assets resulting from reductions to lease obligations. Because we generally do not have access to the rate implicit in the lease, the Company utilizes our incremental borrowing rate as the discount rate. As of June 30, 2019, the weighted average remaining operating lease term is 4.66 years and the weighted average discount rate for the operating leases is 8.61%. Maturities of lease liabilities under non-cancellable leases as of June 30, 2019 are as follows:
As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, future minimum lease payments under non-cancellable leases were as follows:
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Other Liabilities - Current |
6 Months Ended |
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Jun. 30, 2019 | |
Other Liabilities Disclosure [Abstract] | |
Other Liabilities - Current |
18. Other Liabilities – Current As of June 30, 2019, other current liabilities of $12.8 million relates to amounts due to certain joint ventures that are not consolidated with the Company as well as the current portion of the lease liabilities (refer to Note 17 for further details) as compared to $9.8 million as of December 31, 2018 which relates solely to amounts due to certain joint ventures that are not consolidated with the Company. |
Foreign Currency Translation |
6 Months Ended |
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Jun. 30, 2019 | |
Foreign Currency [Abstract] | |
Foreign Currency Translation |
19. Foreign Currency Translation The functional currency of Iconix Luxembourg and Red Diamond Holdings, which are wholly owned subsidiaries of the Company located in Luxembourg, is the Euro. However, the companies have certain dollar denominated assets, in particular cash and notes receivable, that are maintained in U.S. Dollars, which are required to be revalued each quarter. Due to fluctuations in currency in the Current Quarter and the Prior Year Quarter, the Company recorded a $0.3 million currency translation gain and a $0.7 million currency translation loss, respectively, that is included in the condensed consolidated statement of operations. Due to fluctuations in currency in the Current Six Months and the Prior Year Six Months, the Company recorded a $0.4 million currency translation loss and a $0.2 million currency translation loss, respectively, that is included in the condensed consolidated statement of operations. Comprehensive income includes certain gains and losses that, under U.S. GAAP, are excluded from net income as such amounts are recorded directly as an adjustment to stockholders’ equity. The Company’s comprehensive income is primarily comprised of net income and foreign currency translation gain or loss. During the Current Quarter and the Prior Year Quarter, the Company recognized as a component of its comprehensive income, a foreign currency translation gain of $1.1 million and foreign currency translation loss of $5.5 million, respectively, due to changes in foreign exchange rates during the Current Quarter and the Prior Year Quarter, respectively. During the Current Six Months and the Prior Year Six Months, the Company recognized as a component of its comprehensive income, a foreign currency translation loss of $0.6 million and foreign currency translation loss of $2.8 million, respectively, due to changes in foreign exchange rates during the Current Six Months and the Prior Year Six Months, respectively. |
Accounting Pronouncements |
6 Months Ended |
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Jun. 30, 2019 | |
Accounting Changes And Error Corrections [Abstract] | |
Accounting Pronouncements |
20. Accounting Pronouncements Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Additionally, FASB issued ASU No. 2018-11, Targeted Improvements, which allows companies to adopt Topic 842 without revising comparative period reporting or disclosures. ASU 2016-02 and ASU 2018-11 are effective for the Company and the Company adopted the new standard on January 1, 2019. The Company adopted ASU 2016-02 using the optional transition approach as of the effective date. As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption (ie. January 1, 2019). The Company has elected to adopt the package of transition practical expedients and therefore, has not reassessed (1) whether existing or expired contracts contain a lease, (2) lease classification of existing or expired leases or (3) the accounting for initial direct costs that were previously capitalized. The Company did not elect the practical expedient to use hindsight for leases existing at the adoption date. The adoption of ASU 2016-02 had a material impact to the Company’s condensed consolidated balance sheet, but did not materially impact the consolidated statement of operations. The most significant changes to the condensed consolidated balance sheet relate to the recognition of new ROU assets and lease liabilities for operating leases. The adoption of ASU 2016-02 also had no material impact on operating, investing or financing cash flows in the consolidated statement of cash flows. See Note 17 for further details. As a result of adopting ASU 2016-02, the Company recognized operating lease liabilities of $10.4 million (of which $1.7 million was current and $8.7 million was noncurrent) with corresponding ROU assets of $8.0 million as of January 1, 2019. In February 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test and eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. The ASU is effective for public business entities for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. This ASU should be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We will adopt this accounting guidance in future periods. |
Other Matters |
6 Months Ended |
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Jun. 30, 2019 | |
Other Matters Disclosure [Abstract] | |
Other Matters |
21. Other Matters
During the Current Quarter and the Prior Year Quarter, the Company included in its selling, general and administrative expenses approximately $3.2 million and $2.7 million, respectively, of charges related to professional fees associated with the continuing correspondence with the Staff of the SEC, the SEC and related SDNY investigations and the class action and derivative litigations. During the Current Six Months and the Prior Year Six Months, the Company included in its selling, general and administrative expenses approximately $6.0 million and $5.4 million, respectively, of charges related to professional fees associated with the continuing correspondence with the Staff of the SEC, the SEC and related SDNY investigations and the class action and derivative litigations. |
Subsequent Events |
6 Months Ended |
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Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events |
22. Subsequent Events In July 2019, pursuant to the operating agreement, the Company reacquired the remaining 5% ownership interest in Umbro China from MHMC, its joint venture partner, for approximately $1.3 million in cash. As a result of this transaction, the Company maintains 100% ownership interest in Umbro China. As previously disclosed, on July 8, 2019, the Company received a letter from the Listing Qualifications Department of The Nasdaq Stock Market notifying the Company that the minimum bid price per share for its common stock fell below $1.00 for a period of 30 consecutive business days (from May 23, 2019 to July 5, 2019) and that therefore the Company did not meet the minimum bid price requirement set forth in the Nasdaq Listing Rules. The letter also states that pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company will be provided 180 calendar days, or until January 6, 2020, to regain compliance with the minimum bid price requirement. In accordance with Rule 5810(c)(3)(A), the Company can regain compliance with the minimum bid price requirement, if, at any time during such 180-day period, the closing bid price of the Company’s common stock is at least $1.00 for a minimum period of 10 consecutive business days. If by January 6, 2020, the Company does not regain compliance with the Nasdaq Listing Rules, the Company may be eligible for additional time to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(ii). To qualify, the Company would need to submit a Transfer Application and a $5,000 application fee. In addition, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the minimum bid price requirement. In addition, the Company would need to provide written notice to Nasdaq of its intention to cure the minimum bid price deficiency during the second compliance period by effecting a reverse stock split, if necessary. As part of its review process, the Nasdaq staff will make a determination of whether it believes the Company will be able to cure this deficiency. Should the Nasdaq staff conclude that the Company will not be able to cure the deficiency, or should the Company determine not to submit a Transfer Application or make the required representation, Nasdaq will provide notice that the Company’s shares of common stock will be subject to delisting. If the Company does not regain compliance within the allotted compliance period(s), including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Company’s shares of common stock will be subject to delisting. At such time, the Company may appeal the delisting determination to a Hearings Panel. The Company intends to monitor its closing bid price for its common stock between now and January 6, 2020, and will consider available options to resolve the Company’s noncompliance with the minimum bid price requirement, as may be necessary. There can be no assurance that the Company will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with other Nasdaq listing criteria. |
Revenue Recognition (Tables) |
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Summary of Revenues Disaggregated by License Type, Revenue Source and Geography |
The following table presents our revenues disaggregated by license type:
The following table represents our revenues disaggregated by geography:
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Goodwill and Trademarks and Other Intangibles, net (Tables) |
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Trademarks and Other Intangibles, net |
Trademarks and other intangibles, net, consist of the following:
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Joint Ventures and Investments (Tables) |
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments In And Advances To Affiliates Schedule Of Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Joint Ventures |
As of June 30, 2019, the following joint ventures are consolidated with the Company:
|
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Equity Method Investments |
Investments Equity Method Investments
Additionally, through its ownership of Iconix China Holdings Limited, the Company has equity interests in the following private companies which are accounted for as equity method investments:
Other Equity Investments
|
Gains on Sale of Trademarks, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments Debt And Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Gains on Sale of Trademarks, Net |
The following table details transactions comprising gains on sale of trademarks, net in the condensed consolidated statement of operations:
|
Fair Value Measurements (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Fair Values of Other Financial Instruments | The estimated fair values of other financial instruments subject to fair value disclosures, determined based on Level One inputs including broker quotes or quoted market prices or rates for the same or similar instruments and the related carrying amounts are as follows:
|
Debt Arrangements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt Obligations |
The Company’s debt obligations consist of the following:
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Company's Debt Maturities on Calendar Year Basis |
As of June 30, 2019, the Company’s debt maturities on a calendar year basis are as follows:
|
Stockholders' Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Unvested Restricted Stock |
The following table summarizes information about unvested restricted stock transactions:
|
Earnings Per Share (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Weighted Average Shares Used in Calculating Basic and Diluted Earnings Per Share |
A reconciliation of weighted average shares used in calculating basic and diluted earnings per share follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Impact on Earnings Per Share Calculation |
|
Related Party Transactions (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Royalty Revenue Recognized |
The Company has entered into certain license agreements in which the core licensee is also one of our joint venture partners. In the case of Sports Direct International plc (“Sports Direct”), the Company maintains license agreements with Sports Direct, but in addition, during the Prior Year Six Months, the Company entered into a cooperation agreement with Sports Direct that allowed Sports Direct to appoint two members to the Company’s Board of Directors. For the Current Quarter, Prior Year Quarter, Current Six Months, and Prior Year Six Months, the Company recognized the following royalty revenue amounts:
|
Accumulated Other Comprehensive Income (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income |
The following table sets forth the activity in accumulated other comprehensive income for the Current Six Months and Prior Year Six Months:
|
Segment and Geographic Data (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Revenues by Type of License and Information by Geographic Region |
Reportable data for the Company’s operating segments is as follows:
|
Other Assets- Current and Long-Term (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Assets-Current and Long-Term |
Other Assets - Current
|
Leases (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Components of Lease Cost |
For the Current Quarter and Current Six Months, components of lease cost were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Maturities of Lease Liabilities Under Non-cancellable Leases |
Maturities of lease liabilities under non-cancellable leases as of June 30, 2019 are as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Lease Payments Under Non-cancellable Leases |
As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, future minimum lease payments under non-cancellable leases were as follows:
|
Basis of Presentation - Additional Information (Detail) |
3 Months Ended | 6 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|---|
Mar. 14, 2019 |
Jun. 30, 2019
$ / shares
|
Sep. 30, 2018
$ / shares
|
Jun. 30, 2018
$ / shares
|
Jun. 30, 2019
$ / shares
|
Jun. 30, 2018
$ / shares
|
Sep. 30, 2018
$ / shares
|
|
Basis Of Presentation [Line Items] | |||||||
Basic earnings (loss) per share | $ 0.12 | $ (12.04) | $ 2.04 | $ (8.26) | |||
Diluted earnings (loss) per share | $ 0.12 | $ (12.04) | $ 0.08 | $ (8.26) | |||
Reverse stock split | 1-for-10 reverse stock split | ||||||
Stock split, conversion ratio | 0.10 | ||||||
Adjustments | |||||||
Basis Of Presentation [Line Items] | |||||||
Basic earnings (loss) per share | $ 2.81 | $ (4.87) | |||||
Diluted earnings (loss) per share | $ 0.26 | $ (7.35) |
Revenue Recognition - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Jul. 01, 2019 |
Dec. 31, 2018 |
|
Disaggregation Of Revenue [Line Items] | ||||||
Licensing revenue | $ 34,394 | $ 50,212 | $ 70,336 | $ 98,761 | ||
Type of Revenue [Extensible List] | us-gaap:LicenseMember | us-gaap:LicenseMember | us-gaap:LicenseMember | us-gaap:LicenseMember | ||
Contract assets, current | $ 4,924 | $ 4,924 | $ 4,802 | |||
Contract assets, long term | 15,968 | 15,968 | 14,560 | |||
Impairment loss of contract assets | 100 | $ 400 | 600 | $ 400 | ||
ASC 606 | ||||||
Disaggregation Of Revenue [Line Items] | ||||||
Deferred revenue | 3,800 | 3,800 | ||||
ASC 606 | Other Assets – Current | ||||||
Disaggregation Of Revenue [Line Items] | ||||||
Contract assets, current | 4,900 | 4,900 | 4,800 | |||
ASC 606 | Other Assets Noncurrent | ||||||
Disaggregation Of Revenue [Line Items] | ||||||
Contract assets, long term | 16,000 | 16,000 | $ 14,600 | |||
Subsequent Event | ||||||
Disaggregation Of Revenue [Line Items] | ||||||
Revenue, remaining performance obligation | $ 384,000 | |||||
International | ||||||
Disaggregation Of Revenue [Line Items] | ||||||
Licensing revenue | $ 200 | $ 600 | $ 600 | $ 2,600 | ||
Type of Revenue [Extensible List] | us-gaap:LicenseMember | us-gaap:LicenseMember | us-gaap:LicenseMember | us-gaap:LicenseMember | ||
Cost of goods sold | $ 200 | $ 600 | $ 600 | $ 2,500 | ||
Type of Cost, Good or Service [Extensible List] | us-gaap:SellingGeneralAndAdministrativeExpensesMember | us-gaap:SellingGeneralAndAdministrativeExpensesMember | us-gaap:SellingGeneralAndAdministrativeExpensesMember | us-gaap:SellingGeneralAndAdministrativeExpensesMember |
Revenue Recognition - Summary of Revenues Disaggregated by License Type (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|||
Disaggregation Of Revenue [Line Items] | ||||||
Type of Revenue [Extensible List] | us-gaap:LicenseMember | us-gaap:LicenseMember | us-gaap:LicenseMember | us-gaap:LicenseMember | ||
Total revenue | $ 34,394 | $ 50,212 | $ 70,336 | $ 98,761 | ||
Direct To Retail License | ||||||
Disaggregation Of Revenue [Line Items] | ||||||
Total revenue | 10,364 | 20,094 | 20,117 | 41,307 | ||
Wholesale License | ||||||
Disaggregation Of Revenue [Line Items] | ||||||
Total revenue | 23,746 | 29,418 | 49,551 | 54,557 | ||
Other Licenses | ||||||
Disaggregation Of Revenue [Line Items] | ||||||
Total revenue | [1] | $ 284 | $ 700 | $ 668 | $ 2,897 | |
|
Revenue Recognition - Summary of Revenues Disaggregated by License Type (Parenthetical) (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|||
Disaggregation Of Revenue [Line Items] | ||||||
Total revenue | $ 34,394 | $ 50,212 | $ 70,336 | $ 98,761 | ||
Other Licenses | ||||||
Disaggregation Of Revenue [Line Items] | ||||||
Total revenue | [1] | 284 | 700 | 668 | 2,897 | |
Other Licenses | Umbro Business | ||||||
Disaggregation Of Revenue [Line Items] | ||||||
Total revenue | $ 200 | $ 600 | $ 600 | $ 2,600 | ||
|
Revenue Recognition - Summary of Revenues Disaggregated by Geography (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|||
Disaggregation Of Revenue [Line Items] | ||||||
Total revenue | $ 34,394 | $ 50,212 | $ 70,336 | $ 98,761 | ||
UNITED STATES | ||||||
Disaggregation Of Revenue [Line Items] | ||||||
Total revenue | 18,988 | 34,225 | 41,607 | 67,102 | ||
Other | ||||||
Disaggregation Of Revenue [Line Items] | ||||||
Total revenue | [1] | $ 15,406 | $ 15,987 | $ 28,729 | $ 31,659 | |
|
Joint Ventures and Investments - Consolidated Joint Ventures (Parenthetical) (Detail) - Iconix Europe LLC - Put / Call Options |
1 Months Ended |
---|---|
Mar. 31, 2019 | |
Schedule Of Investments [Line Items] | |
Put/Call option period | 5 years |
Put/Call option commencement date | Jan. 13, 2019 |
Joint Ventures and Investments - Equity Method Investments (Detail) - USD ($) $ in Thousands |
6 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
||||||||
Iconix China Holdings Limited | |||||||||
Schedule Of Equity Method Investments [Line Items] | |||||||||
Value of Investment | $ 23,165 | $ 25,328 | |||||||
Iconix India | |||||||||
Schedule Of Equity Method Investments [Line Items] | |||||||||
Date of Original Formation / Investment | [1] | 2012-06 | |||||||
Partner | [1] | Reliance Brands Ltd. | |||||||
Iconix SE Asia, Ltd. | Put / Call Options | |||||||||
Schedule Of Equity Method Investments [Line Items] | |||||||||
Date of Original Formation / Investment | [1],[2] | 2013-10 | |||||||
Partner | [1],[2] | Global Brands Group Asia Limited | |||||||
MG Icon | |||||||||
Schedule Of Equity Method Investments [Line Items] | |||||||||
Date of Original Formation / Investment | [1] | 2010-03 | |||||||
Partner | [1] | Purim LLC | |||||||
Candies Shanghai Fashion Co. Ltd. | Iconix China Holdings Limited | |||||||||
Schedule Of Equity Method Investments [Line Items] | |||||||||
Brand Placed | Candie’s | ||||||||
Ownership by Iconix China | 20.00% | ||||||||
Value of Investment | $ 10,612 | 10,529 | |||||||
Shanghai MuXiang Apparel & Accessory Co. Limited | Iconix China Holdings Limited | |||||||||
Schedule Of Equity Method Investments [Line Items] | |||||||||
Brand Placed | Marc Ecko | ||||||||
Ownership by Iconix China | 15.00% | ||||||||
Value of Investment | $ 2,270 | 2,270 | |||||||
Ningbo Material Girl Fashion Co., Ltd | Iconix China Holdings Limited | |||||||||
Schedule Of Equity Method Investments [Line Items] | |||||||||
Brand Placed | [3] | Material Girl | |||||||
Ownership by Iconix China | [3] | 20.00% | |||||||
Value of Investment | [3] | 2,129 | |||||||
Ai Xi Enterprise (Shanghai) Co. Limited | Iconix China Holdings Limited | |||||||||
Schedule Of Equity Method Investments [Line Items] | |||||||||
Brand Placed | Ecko Unltd | ||||||||
Ownership by Iconix China | 20.00% | ||||||||
Value of Investment | $ 10,283 | $ 10,400 | |||||||
|
Joint Ventures and Investments - Equity Method Investments (Parenthetical) (Detail) - USD ($) $ in Thousands |
1 Months Ended | 6 Months Ended |
---|---|---|
Mar. 31, 2019 |
Jun. 30, 2019 |
|
Schedule Of Equity Method Investments [Line Items] | ||
Gain on sale of equity investments | $ 209 | |
Ningbo Material Girl Fashion Co Ltd | Ningbo Peacebird Fashion & Accessories Co. Ltd. | ||
Schedule Of Equity Method Investments [Line Items] | ||
Percentage of equity ownership interest sold | 20.00% | |
Sale of ownership interest | $ 3,000 | |
Sale price reduction by initial cash investments | 200 | |
Brand management expenses incurred | 600 | |
Proceeds from sale of equity method investments | 2,200 | |
Proceeds from sale of interest in Ningbo Material Girl | $ 2,200 | |
Ningbo Material Girl Fashion Co Ltd | Purim LLC. | ||
Schedule Of Equity Method Investments [Line Items] | ||
Percentage of equity ownership interest sold | 33.30% | |
Sale of ownership interest | $ 700 | |
Proceeds from sale of equity method investments | 1,500 | |
Proceeds from sale of interest in Ningbo Material Girl | 1,500 | |
Gain on sale of equity investments | $ 200 | |
Iconix SE Asia, Ltd. | Put / Call Options | ||
Schedule Of Equity Method Investments [Line Items] | ||
Put/Call option period | 5 years | |
Put/Call option commencement date | Oct. 01, 2018 |
Joint Ventures and Investments - Other Equity Investments (Detail) |
6 Months Ended | |||||
---|---|---|---|---|---|---|
Jun. 30, 2019 | ||||||
China Outfitters Holdings Ltd. | ||||||
Schedule Of Investments [Line Items] | ||||||
Date of Original Formation / Investment | 2008-09 | [1] | ||||
Marcy Media Holdings, LLC | ||||||
Schedule Of Investments [Line Items] | ||||||
Date of Original Formation / Investment | 2013-07 | [2] | ||||
|
Joint Ventures and Investments - Other Equity Investments (Parenthetical) (Detail) - China Outfitters Holdings Ltd. - Equity Investments - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Schedule Of Investments [Line Items] | ||
Fair value investment | $ 1.0 | $ 1.0 |
Other Income | ||
Schedule Of Investments [Line Items] | ||
Increase (decrease) in fair value investment | $ 0.1 |
Schedule of Gains on Sale of Trademarks, Net (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2018 |
||||||
Schedule Of Gain Loss On Investments Including Marketable Securities And Investments Held At Cost Income Statement Reported Amounts Summary [Line Items] | |||||||
Net gains (losses) on sale of trademarks | $ 125 | $ 1,268 | |||||
Sharper Image Trademark | Iconix Southeast Asia | |||||||
Schedule Of Gain Loss On Investments Including Marketable Securities And Investments Held At Cost Income Statement Reported Amounts Summary [Line Items] | |||||||
Net gains (losses) on sale of trademarks | [1] | 236 | |||||
Sharper Image Trademark | Iconix Europe LLC | |||||||
Schedule Of Gain Loss On Investments Including Marketable Securities And Investments Held At Cost Income Statement Reported Amounts Summary [Line Items] | |||||||
Net gains (losses) on sale of trademarks | [1] | 352 | |||||
Sharper Image Trademark | Iconix MENA | |||||||
Schedule Of Gain Loss On Investments Including Marketable Securities And Investments Held At Cost Income Statement Reported Amounts Summary [Line Items] | |||||||
Net gains (losses) on sale of trademarks | [1] | 250 | |||||
Sharper Image Trademark | Iconix Australia | |||||||
Schedule Of Gain Loss On Investments Including Marketable Securities And Investments Held At Cost Income Statement Reported Amounts Summary [Line Items] | |||||||
Net gains (losses) on sale of trademarks | [1] | $ 125 | 125 | ||||
Badgley Mischka Trademark | Iconix Southeast Asia | |||||||
Schedule Of Gain Loss On Investments Including Marketable Securities And Investments Held At Cost Income Statement Reported Amounts Summary [Line Items] | |||||||
Net gains (losses) on sale of trademarks | [2] | 478 | |||||
Badgley Mischka Trademark | Iconix Europe LLC | |||||||
Schedule Of Gain Loss On Investments Including Marketable Securities And Investments Held At Cost Income Statement Reported Amounts Summary [Line Items] | |||||||
Net gains (losses) on sale of trademarks | [2] | (244) | |||||
Badgley Mischka Trademark | Iconix MENA | |||||||
Schedule Of Gain Loss On Investments Including Marketable Securities And Investments Held At Cost Income Statement Reported Amounts Summary [Line Items] | |||||||
Net gains (losses) on sale of trademarks | [2] | $ 71 | |||||
|
Gains on Sale of Trademarks, net - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2018 |
|
Schedule Of Gain Loss On Investments Including Marketable Securities And Investments Held At Cost Income Statement Reported Amounts Summary [Line Items] | ||
Net gains (losses) on sale of trademarks | $ 125 | $ 1,268 |
Sharper Image intellectual property and related assets | ||
Schedule Of Gain Loss On Investments Including Marketable Securities And Investments Held At Cost Income Statement Reported Amounts Summary [Line Items] | ||
Net gains (losses) on sale of trademarks | 1,000 | |
Badgley Mischka Intellectual Property and Related Assets | ||
Schedule Of Gain Loss On Investments Including Marketable Securities And Investments Held At Cost Income Statement Reported Amounts Summary [Line Items] | ||
Net gains (losses) on sale of trademarks | $ 300 |
Fair Value Measurements - Additional Information (Detail) - USD ($) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Fair Value Disclosures [Abstract] | ||
Impairment of long-lived assets | $ 0 | $ 0 |
Fair value of other equity investments | $ 1,000,000 |
Estimated Fair Values of Other Financial Instruments (Detail) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|||
---|---|---|---|---|---|
Fair Value Disclosures [Abstract] | |||||
Long-term debt, including current portion, Carrying Amount | [1] | $ 642,141 | $ 675,229 | ||
Long-term debt, including current portion, Fair Value | [1] | $ 547,301 | $ 582,370 | ||
|
Fair Value Option - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Mar. 14, 2019 |
Dec. 31, 2018 |
Feb. 22, 2018 |
Sep. 30, 2017 |
|||
Fair Value Option Qualitative Disclosures Related To Election [Line Items] | ||||||||||
Debt instrument, interest rate, stated percentage | 5.75% | 5.75% | ||||||||
Long term debt, fair value | $ 23,190 | $ 23,190 | $ 48,076 | |||||||
Principal outstanding balance | [1] | $ 642,141 | $ 642,141 | $ 675,229 | ||||||
5.75% Senior Subordinated Notes Due August 2023 | ||||||||||
Fair Value Option Qualitative Disclosures Related To Election [Line Items] | ||||||||||
Debt instrument, interest rate, stated percentage | 5.75% | 5.75% | 5.75% | 5.75% | 5.75% | |||||
Convertible Notes | ||||||||||
Fair Value Option Qualitative Disclosures Related To Election [Line Items] | ||||||||||
Debt instrument, interest rate, stated percentage | 1.50% | |||||||||
Convertible Notes | 5.75% Senior Subordinated Notes Due August 2023 | ||||||||||
Fair Value Option Qualitative Disclosures Related To Election [Line Items] | ||||||||||
Debt instrument, interest rate, stated percentage | 5.75% | 5.75% | 5.75% | 5.75% | 5.75% | 5.75% | ||||
Long term debt, fair value | $ 23,200 | $ 23,200 | $ 48,100 | |||||||
Principal outstanding balance | 94,600 | 94,600 | $ 109,700 | |||||||
Change in fair value of convertible notes | $ 300 | $ 32,100 | $ 20,300 | $ 56,500 | ||||||
|
Schedule of Debt Obligations (Detail) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|||||||
---|---|---|---|---|---|---|---|---|---|
Debt Instrument [Line Items] | |||||||||
Total debt | $ 645,365 | ||||||||
Unamortized debt issuance costs | (3,224) | $ (4,738) | |||||||
Total debt | [1] | 642,141 | 675,229 | ||||||
Less current maturities | 67,163 | 54,263 | |||||||
Total long-term debt | 574,978 | 620,966 | |||||||
Senior Secured Notes | |||||||||
Debt Instrument [Line Items] | |||||||||
Total debt | 353,163 | 365,481 | |||||||
Less current maturities | 47,900 | 46,000 | |||||||
Variable Funding Notes | |||||||||
Debt Instrument [Line Items] | |||||||||
Total debt | 97,364 | [2] | 95,273 | ||||||
Senior Secured Term Loan | |||||||||
Debt Instrument [Line Items] | |||||||||
Total debt | 171,648 | 171,137 | |||||||
Less current maturities | 19,300 | 11,600 | |||||||
Convertible Notes | 5.75% Senior Subordinated Notes Due August 2023 | |||||||||
Debt Instrument [Line Items] | |||||||||
Total debt | 23,190 | [3] | 48,076 | ||||||
Total debt | $ 94,600 | $ 109,700 | |||||||
|
Schedule of Debt Obligations (Parenthetical) (Detail) - USD ($) $ in Millions |
Jun. 30, 2019 |
Mar. 14, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Feb. 22, 2018 |
Oct. 27, 2017 |
Sep. 30, 2017 |
---|---|---|---|---|---|---|---|
Debt Instrument [Line Items] | |||||||
Principal amount of long term debt | $ 240.7 | ||||||
Percentage of conversion of convertible notes | 5.75% | ||||||
5.75% Senior Subordinated Notes Due August 2023 | |||||||
Debt Instrument [Line Items] | |||||||
Percentage of conversion of convertible notes | 5.75% | 5.75% | 5.75% | ||||
Convertible Notes | |||||||
Debt Instrument [Line Items] | |||||||
Percentage of conversion of convertible notes | 1.50% | ||||||
Convertible Notes | 5.75% Senior Subordinated Notes Due August 2023 | |||||||
Debt Instrument [Line Items] | |||||||
Principal amount of long term debt | $ 94.6 | $ 109.7 | $ 125.0 | ||||
Percentage of conversion of convertible notes | 5.75% | 5.75% | 5.75% | 5.75% |
Debt Arrangements - Additional Information (Detail) |
1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 15, 2018
USD ($)
|
Mar. 14, 2018
USD ($)
|
Feb. 22, 2018
USD ($)
d
|
Nov. 02, 2017
USD ($)
|
Oct. 27, 2017
USD ($)
|
Aug. 18, 2017
USD ($)
|
Aug. 02, 2017
USD ($)
|
Mar. 18, 2013
USD ($)
|
Nov. 29, 2012
USD ($)
|
Jul. 31, 2017
USD ($)
|
Jan. 31, 2017
USD ($)
|
Feb. 28, 2015
USD ($)
|
Jul. 31, 2014
USD ($)
|
Jun. 30, 2019
USD ($)
$ / shares
shares
|
Mar. 31, 2019
USD ($)
|
Jun. 30, 2018
USD ($)
shares
|
Sep. 30, 2017
USD ($)
|
Jun. 30, 2019
USD ($)
$ / shares
shares
|
Jun. 30, 2018
USD ($)
shares
|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
Dec. 31, 2016
USD ($)
shares
|
Jul. 31, 2019 |
Mar. 14, 2019
USD ($)
|
Feb. 12, 2018
USD ($)
|
Nov. 24, 2017
USD ($)
|
Oct. 26, 2017
USD ($)
|
Jun. 21, 2013
USD ($)
|
|||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Principal amount of long term debt | $ 240,700,000 | |||||||||||||||||||||||||||||
Percentage of conversion of convertible notes | 5.75% | 5.75% | ||||||||||||||||||||||||||||
Net proceeds received from issuance of debt | $ 95,700,000 | |||||||||||||||||||||||||||||
Debt service coverage ratio | 110.00% | |||||||||||||||||||||||||||||
Payment of long-term debt | $ 14,246,000 | 134,018,000 | ||||||||||||||||||||||||||||
Deferred financing costs | 5,400,000 | |||||||||||||||||||||||||||||
Debt issue discount costs | $ 9,300,000 | |||||||||||||||||||||||||||||
Current portion of long-term debt | $ 67,163,000 | 67,163,000 | $ 54,263,000 | |||||||||||||||||||||||||||
Restricted cash | 14,632,000 | 14,632,000 | 16,026,000 | |||||||||||||||||||||||||||
Non cash additional interest expense on convertible notes | 5,411,000 | |||||||||||||||||||||||||||||
Leverage ratio | 450.00% | |||||||||||||||||||||||||||||
Net proceeds from Permitted Capital Raising Transactions | $ 100,000,000 | |||||||||||||||||||||||||||||
Repayment of remaining outstanding principal balance | $ 231,000,000 | $ 5,000,000 | ||||||||||||||||||||||||||||
Long term debt, fair value | 23,190,000 | 23,190,000 | 48,076,000 | |||||||||||||||||||||||||||
Principal outstanding balance | [1] | $ 642,141,000 | $ 642,141,000 | 675,229,000 | ||||||||||||||||||||||||||
Gain on extinguishment of debt | $ 4,473,000 | |||||||||||||||||||||||||||||
Maximum | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Leverage ratio | 575.00% | |||||||||||||||||||||||||||||
Aggregate amount of term loan facility | $ 165,700,000 | |||||||||||||||||||||||||||||
1.50% Senior Subordinated Notes Due March 15, 2018 | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Percentage of conversion of convertible notes | 1.50% | 1.50% | ||||||||||||||||||||||||||||
5.75% Senior Subordinated Notes Due August 2023 | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Percentage of conversion of convertible notes | 5.75% | 5.75% | 5.75% | 5.75% | 5.75% | |||||||||||||||||||||||||
5.75% Senior Subordinated Notes Due August 2023 | Common Stock | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Notes converted into common stock | shares | 2,713,000 | 463,000 | 3,671,000 | 1,104,000 | ||||||||||||||||||||||||||
MG Icon | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Equity ownership percentage | 50.00% | |||||||||||||||||||||||||||||
Hardy Way, LLC | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Joint venture ownership percentage | 85.00% | |||||||||||||||||||||||||||||
Zoo York brand | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Ownership Percentage | 100.00% | |||||||||||||||||||||||||||||
IBG Borrower | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Termination of license generating with minimum royalty guarantees | $ 500,000 | |||||||||||||||||||||||||||||
IBG Borrower | Minimum | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Asset coverage ratio, minimum | 125.00% | |||||||||||||||||||||||||||||
IBG Borrower | Maximum | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Leverage ratio | 450.00% | |||||||||||||||||||||||||||||
2012 Senior Secured Notes | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Principal amount of long term debt | $ 600,000,000 | |||||||||||||||||||||||||||||
Percentage of conversion of convertible notes | 4.229% | |||||||||||||||||||||||||||||
Debt instrument, quarterly payment | $ 10,500,000 | |||||||||||||||||||||||||||||
Debt instrument, frequency of payment | quarterly | |||||||||||||||||||||||||||||
Variable Funding Notes | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Principal amount of long term debt | 100,000,000 | $ 100,000,000 | $ 100,000,000 | |||||||||||||||||||||||||||
Net proceeds received from issuance of debt | $ 100,000,000 | |||||||||||||||||||||||||||||
Line of credit, outstanding | 100,000,000 | 100,000,000 | ||||||||||||||||||||||||||||
Debt Instrument anticipated repayment year and month | 2020-01 | |||||||||||||||||||||||||||||
L/C commitment and the swingline commitment | $ 0 | |||||||||||||||||||||||||||||
Non cash additional interest expense on convertible notes | 1,100,000 | $ 1,000,000 | $ 2,100,000 | $ 1,900,000 | ||||||||||||||||||||||||||
2013 Senior Secured Notes | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Principal amount of long term debt | $ 275,000,000 | |||||||||||||||||||||||||||||
Percentage of conversion of convertible notes | 4.352% | |||||||||||||||||||||||||||||
Debt instrument, quarterly payment | $ 4,800,000 | |||||||||||||||||||||||||||||
Debt instrument, frequency of payment | quarterly | |||||||||||||||||||||||||||||
Debt instrument, quarterly principal payments | $ 4,500,000 | |||||||||||||||||||||||||||||
Senior Secured Notes | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Principal amount of long term debt | 453,200,000 | $ 453,200,000 | 465,500,000 | |||||||||||||||||||||||||||
Debt Instrument anticipated repayment year and month | 2020-01 | |||||||||||||||||||||||||||||
Debt instrument, Maturity Date | 2043-01 | |||||||||||||||||||||||||||||
Debt instrument description of interest | If the Co-Issuers have not repaid or refinanced the Securitization Notes prior to January 2020 (the “anticipated repayment date”), additional interest will accrue on amounts outstanding under the Securitization Notes at a rate equal to (A) in respect of the Variable Funding Notes, 5% per annum, (B) in respect of the 2012 Senior Secured Notes and the 2013 Senior Secured Notes, the greater of (1) 5% per annum and (2) a per annum interest rate equal to the excess, if any, by which the sum of (x) the yield to maturity (adjusted to a quarterly bond-equivalent basis), on the anticipated repayment date of the United States treasury security having a term closest to 10 years plus (y) 5% per annum plus (z) with respect to the 2012 Senior Secured Notes, 3.4% per annum, or with respect to the 2013 Senior Secured Notes, 3.14% per annum, exceeds the original interest rate. | |||||||||||||||||||||||||||||
Additional interest rate | 5.00% | |||||||||||||||||||||||||||||
Anticipated repayment date | 10 years | |||||||||||||||||||||||||||||
Payment of long-term debt | $ 1,600,000 | |||||||||||||||||||||||||||||
Debt instrument, annual principal prepayment | 36,700,000 | |||||||||||||||||||||||||||||
Deferred financing costs | 500,000 | |||||||||||||||||||||||||||||
Mandatory principal prepayment | $ 152,200,000 | |||||||||||||||||||||||||||||
Debt issue discount costs | 2,000,000 | |||||||||||||||||||||||||||||
Prepayment penalty | 300,000 | |||||||||||||||||||||||||||||
Current portion of long-term debt | 47,900,000 | $ 47,900,000 | 46,000,000 | |||||||||||||||||||||||||||
Restricted cash | 13,700,000 | 13,700,000 | 15,200,000 | |||||||||||||||||||||||||||
Cash interest expense for convertible notes | 5,300,000 | 5,600,000 | 10,800,000 | 11,200,000 | ||||||||||||||||||||||||||
2012 Senior Secured Notes | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Excess interest rate on original interest rate | 3.40% | |||||||||||||||||||||||||||||
Debt instrument, quarterly principal payments | $ 9,900,000 | |||||||||||||||||||||||||||||
Debt instrument, decrease in quarterly principal payments | 7,300,000 | |||||||||||||||||||||||||||||
2013 Senior Secured Notes | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Excess interest rate on original interest rate | 3.14% | |||||||||||||||||||||||||||||
Debt instrument, decrease in quarterly principal payments | $ 3,400,000 | |||||||||||||||||||||||||||||
Senior Secured Term Loan | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Principal amount of long term debt | 57,800,000 | $ 300,000,000 | 187,500,000 | 187,500,000 | $ 300,000,000 | |||||||||||||||||||||||||
Debt issue discount costs | 15,800,000 | 18,300,000 | ||||||||||||||||||||||||||||
Current portion of long-term debt | 19,300,000 | 19,300,000 | 11,600,000 | |||||||||||||||||||||||||||
Cash interest expense for convertible notes | 4,600,000 | 4,600,000 | 9,100,000 | 8,000,000 | ||||||||||||||||||||||||||
Non cash additional interest expense on convertible notes | 1,400,000 | 1,200,000 | 2,600,000 | 1,800,000 | ||||||||||||||||||||||||||
Maturity date of credit agreement | Aug. 02, 2022 | |||||||||||||||||||||||||||||
Margin applied to LIBOR | 7.00% | |||||||||||||||||||||||||||||
Percentage of principal debt quarterly amortization | 0.50% | |||||||||||||||||||||||||||||
Principal debt quarterly amortization commencement date | Sep. 30, 2017 | |||||||||||||||||||||||||||||
Estimated principal payments | $ 12,000,000 | |||||||||||||||||||||||||||||
Interest rate increase additional per annum | 3.00% | |||||||||||||||||||||||||||||
Payment of unpaid principal and accrued interest of lenders | 50.00% | |||||||||||||||||||||||||||||
Principal amount of long term debt | 171,600,000 | 171,600,000 | 171,100,000 | |||||||||||||||||||||||||||
Senior Secured Term Loan | IBG Borrower | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Equity ownership percentage | 35.00% | |||||||||||||||||||||||||||||
Premium percentage of aggregate principal amount first year loan | 5.00% | |||||||||||||||||||||||||||||
Premium percentage of aggregate principal amount second year loan | 3.00% | |||||||||||||||||||||||||||||
Convertible Notes | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Percentage of conversion of convertible notes | 1.50% | |||||||||||||||||||||||||||||
Cash from escrow deposit returned to lenders | 231,000,000 | |||||||||||||||||||||||||||||
Payment from Escrow Account to acquire convertible notes | $ 59,200,000 | |||||||||||||||||||||||||||||
Convertible Notes | 1.50% Senior Subordinated Notes Due March 15, 2018 | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Principal amount of long term debt | $ 125,000,000 | $ 400,000,000 | ||||||||||||||||||||||||||||
Percentage of conversion of convertible notes | 1.50% | 1.50% | 1.50% | 1.50% | ||||||||||||||||||||||||||
Net proceeds received from issuance of debt | $ 390,600,000 | |||||||||||||||||||||||||||||
Cash interest expense for convertible notes | 0 | 700,000 | ||||||||||||||||||||||||||||
Non cash additional interest expense on convertible notes | $ 0 | $ 2,400,000 | ||||||||||||||||||||||||||||
Repayment of remaining outstanding principal balance | $ 111,200,000 | |||||||||||||||||||||||||||||
Debt instrument, par value of notes repurchased | $ 58,900,000 | $ 104,900,000 | ||||||||||||||||||||||||||||
Debt instrument, cash paid to repurchase convertible notes | $ 59,300,000 | $ 36,700,000 | ||||||||||||||||||||||||||||
Convertible Notes | 1.50% Senior Subordinated Notes Due March 15, 2018 | Common Stock | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Debt instrument, shares issued to repurchase convertible notes | shares | 700,000 | |||||||||||||||||||||||||||||
Convertible Notes | 5.75% Senior Subordinated Notes Due August 2023 | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Principal amount of long term debt | $ 125,000,000 | $ 94,600,000 | $ 94,600,000 | $ 109,700,000 | ||||||||||||||||||||||||||
Percentage of conversion of convertible notes | 5.75% | 5.75% | 5.75% | 5.75% | 5.75% | 5.75% | ||||||||||||||||||||||||
Cash interest expense for convertible notes | $ 1,400,000 | $ 1,600,000 | $ 2,900,000 | $ 2,300,000 | ||||||||||||||||||||||||||
Maturity date of credit agreement | Aug. 15, 2023 | |||||||||||||||||||||||||||||
Debt instrument, conversion rate | 52.1919 | |||||||||||||||||||||||||||||
Principal amount of each convertible note | $ 1,000 | $ 1,000 | ||||||||||||||||||||||||||||
Convertible notes, initial conversion price per share | $ / shares | $ 19.16 | $ 19.16 | ||||||||||||||||||||||||||||
Debt instrument convertible conversion price as percentage upon automatic conversion | 5.75% | |||||||||||||||||||||||||||||
Debt instrument convertible conversion price as percentage upon mandatory conversion | 5.75% | |||||||||||||||||||||||||||||
Debt instrument, convertible, threshold trading days | d | 10 | |||||||||||||||||||||||||||||
Volume weighted average price description | If the Company elects to pay all or a portion of a Conversion Make-Whole Payment in shares of common stock, the number of shares of common stock payable will be equal to the applicable Conversion Make-Whole Payment divided by the average of the 10 individual volume-weighted average prices for the 10-trading day period immediately preceding the applicable conversion date. | |||||||||||||||||||||||||||||
Debt instrument, convertible, threshold consecutive trading days | d | 30 | |||||||||||||||||||||||||||||
Debt instrument, redemption price, percentage | 100.00% | |||||||||||||||||||||||||||||
Debt instrument, redemption, description | each holder will have the right, at its option, to require the Company to repurchase for cash all or a portion of such holder’s 5.75% Convertible Notes at a fundamental change purchase price equal to 100% of the principal amount of the 5.75% Convertible Notes to be repurchased, together with interest accrued and unpaid to, but excluding, the fundamental change purchase date. | |||||||||||||||||||||||||||||
Debt instrument, restrictive covenants | The Company is subject to certain restrictive covenants pursuant to the 5.75% Convertible Note Indenture, including limitations on (i) liens, (ii) indebtedness, (iii) asset sales, (iv) restricted payments and investments, (v) prepayments of indebtedness and (vi) transactions with affiliates. | |||||||||||||||||||||||||||||
Debt conversion original debt amount | $ 11,200,000 | $ 15,100,000 | ||||||||||||||||||||||||||||
Notes converted into common stock | shares | 600,000 | 800,000 | ||||||||||||||||||||||||||||
Stock issued pursuant to conversion settlement | shares | 2,100,000 | 2,900,000 | ||||||||||||||||||||||||||||
Long term debt, fair value | $ 23,200,000 | $ 23,200,000 | $ 48,100,000 | |||||||||||||||||||||||||||
Principal outstanding balance | 94,600,000 | 94,600,000 | 109,700,000 | |||||||||||||||||||||||||||
Gain on extinguishment of debt | $ 4,500,000 | |||||||||||||||||||||||||||||
Convertible Notes | 5.75% Senior Subordinated Notes Due August 2023 | Fair Value Option | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Long term debt, fair value | 23,200,000 | 23,200,000 | $ 48,100,000 | |||||||||||||||||||||||||||
Convertible Notes | 5.75% Senior Subordinated Notes Due August 2023 | Other Income | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Loss on conversion of debt | $ (1,400,000) | $ (1,600,000) | ||||||||||||||||||||||||||||
First Delayed Draw Term Loan | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Debt issue discount costs | $ 1,000,000 | |||||||||||||||||||||||||||||
Aggregate amount of term loan facility | 25,000,000 | $ 25,000,000 | ||||||||||||||||||||||||||||
Aggregate amount of term loan received in cash | $ 24,000,000 | |||||||||||||||||||||||||||||
Second Delayed Draw Term Loan | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Aggregate amount of term loan facility | $ 140,700,000 | |||||||||||||||||||||||||||||
Second Delayed Draw Term Loan | 1.50% Senior Subordinated Notes Due March 15, 2018 | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Percentage of conversion of convertible notes | 1.50% | |||||||||||||||||||||||||||||
Maturity date of credit agreement | Mar. 15, 2018 | |||||||||||||||||||||||||||||
Aggregate amount of term loan facility | $ 110,000,000 | |||||||||||||||||||||||||||||
Senior Secured Term Loan Due 2022 | Minimum | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Amortization rate per annum | 2.00% | |||||||||||||||||||||||||||||
Senior Secured Term Loan Due 2022 | Maximum | Subsequent Event | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Amortization rate per annum | 10.00% | |||||||||||||||||||||||||||||
5.75% Senior Subordinated Notes Due August 2023 | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Estimated principal payments | $ 6,100,000 | |||||||||||||||||||||||||||||
5.75% Senior Subordinated Notes Due August 2023 | Maximum | ||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Percentage of conversion of convertible notes | 5.75% | |||||||||||||||||||||||||||||
|
Company's Debt Maturities on Calendar Year Basis (Detail) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Debt Instrument [Line Items] | ||||||||||
Total | $ 645,365 | |||||||||
July 1 through December 31, 2019 | 40,017 | |||||||||
2020 | 58,135 | |||||||||
2021 | 61,977 | |||||||||
2022 | 166,131 | |||||||||
2023 | 65,883 | |||||||||
Thereafter | 253,222 | |||||||||
Senior Secured Notes | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Total | 353,163 | $ 365,481 | ||||||||
July 1 through December 31, 2019 | 30,375 | |||||||||
2020 | 38,851 | |||||||||
2021 | 42,693 | |||||||||
2022 | 42,693 | |||||||||
2023 | 42,693 | |||||||||
Thereafter | 155,858 | |||||||||
Convertible Notes | 5.75% Senior Subordinated Notes Due August 2023 | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Total | 23,190 | [1] | 48,076 | |||||||
2023 | [1] | 23,190 | ||||||||
Variable Funding Notes | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Total | 97,364 | [2] | $ 95,273 | |||||||
Thereafter | [2] | 97,364 | ||||||||
Senior Secured Term Loan | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Total | [3] | 171,648 | ||||||||
July 1 through December 31, 2019 | [3] | 9,642 | ||||||||
2020 | [3] | 19,284 | ||||||||
2021 | [3] | 19,284 | ||||||||
2022 | [3] | $ 123,438 | ||||||||
|
Company's Debt Maturities on Calendar Year Basis (Parenthetical) (Detail) - USD ($) $ in Millions |
Jun. 30, 2019 |
Mar. 14, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Feb. 22, 2018 |
Oct. 27, 2017 |
Oct. 26, 2017 |
Sep. 30, 2017 |
Aug. 02, 2017 |
Nov. 29, 2012 |
---|---|---|---|---|---|---|---|---|---|---|
Debt Instrument [Line Items] | ||||||||||
Principal amount of long term debt | $ 240.7 | |||||||||
Percentage of conversion of convertible notes | 5.75% | |||||||||
5.75% Senior Subordinated Notes Due August 2023 | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Percentage of conversion of convertible notes | 5.75% | 5.75% | 5.75% | |||||||
Variable Funding Notes | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Principal amount of long term debt | $ 100.0 | $ 100.0 | ||||||||
Senior Secured Term Loan | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Principal amount of long term debt | 187.5 | $ 57.8 | $ 300.0 | $ 300.0 | ||||||
Convertible Notes | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Percentage of conversion of convertible notes | 1.50% | |||||||||
Convertible Notes | 5.75% Senior Subordinated Notes Due August 2023 | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Principal amount of long term debt | $ 94.6 | $ 109.7 | $ 125.0 | |||||||
Percentage of conversion of convertible notes | 5.75% | 5.75% | 5.75% | 5.75% |
Stockholders' Equity - Additional Information (Detail) |
3 Months Ended | 6 Months Ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 15, 2019
USD ($)
$ / shares
shares
|
Mar. 14, 2019
shares
|
Oct. 15, 2018
$ / shares
|
Jun. 15, 2018
shares
|
Mar. 15, 2018
USD ($)
$ / shares
shares
|
Oct. 31, 2017
shares
|
Mar. 07, 2017
USD ($)
$ / shares
shares
|
Mar. 31, 2016
USD ($)
$ / shares
|
Feb. 23, 2016
$ / shares
|
Jan. 07, 2016
USD ($)
$ / shares
shares
|
Jun. 30, 2019
USD ($)
$ / shares
shares
|
Mar. 31, 2019
shares
|
Jun. 30, 2018
USD ($)
|
Mar. 31, 2016
USD ($)
shares
|
Jun. 30, 2019
USD ($)
$ / shares
shares
|
Jun. 30, 2018
USD ($)
shares
|
Nov. 04, 2016
shares
|
|
Class Of Stock [Line Items] | |||||||||||||||||
Reverse stock split | 1-for-10 reverse stock split | ||||||||||||||||
Stock split, conversion ratio | 0.10 | ||||||||||||||||
Reverse stock split, shares issued | 0 | ||||||||||||||||
Percentage of conversion of convertible notes | 5.75% | 5.75% | |||||||||||||||
Stock options outstanding | 1,500 | 1,500 | |||||||||||||||
Stock options exercisable | 1,500 | 1,500 | |||||||||||||||
Stock options outstanding, weighted average exercise price | $ / shares | $ 171.60 | $ 171.60 | |||||||||||||||
Stock options exercisable, weighted average exercise price | $ / shares | $ 171.60 | $ 171.60 | |||||||||||||||
Stock options, canceled | 0 | ||||||||||||||||
Stock options, exercised | 0 | ||||||||||||||||
Stock options, expired/forfeited | 0 | ||||||||||||||||
Mr. Haugh | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Employment resigned date | Jun. 15, 2018 | ||||||||||||||||
Warrant | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Share based compensation awards granted in period | 0 | 0 | |||||||||||||||
Stock Options | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Compensation expense (benefit) related to stock grants | $ | $ 0 | $ 0 | |||||||||||||||
Stock options granted | 0 | 0 | |||||||||||||||
Weighted average contractual term of awards outstanding and exercisable | 2 months 23 days | ||||||||||||||||
Restricted Stock | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Share based compensation awards granted in period | 329,145 | ||||||||||||||||
Share based compensation awards vesting period | 3 years | ||||||||||||||||
Compensation cost not yet recognized, period for recognition | 3 years | ||||||||||||||||
Value of common stock shares repurchased in connection with net share settlement of restricted stock grants and option exercises | $ | $ 100,000 | $ 100,000 | |||||||||||||||
Granted | $ / shares | $ 1.70 | ||||||||||||||||
Share based compensation awards forfeited in period | 296 | ||||||||||||||||
Restricted Stock | Maximum | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Value of common stock shares repurchased in connection with net share settlement of restricted stock grants and option exercises | $ | $ 100,000 | $ 100,000 | |||||||||||||||
Retention Stock | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Compensation expense (benefit) related to stock grants | $ | $ 200,000 | $ 100,000 | $ 500,000 | ||||||||||||||
Share based compensation awards granted in period | 7,500,000 | ||||||||||||||||
Share based compensation awards vesting period | 3 years | ||||||||||||||||
Compensation cost not yet recognized, period for recognition | 2 years 6 months | ||||||||||||||||
Share based compensation awards granted in period, value | $ | $ 1,300,000 | ||||||||||||||||
Grant date fair value of award issued | $ / shares | $ 42.50 | ||||||||||||||||
Share-based compensation award, shares issued upon expiration of grant | 0 | ||||||||||||||||
Compensation cost not yet recognized | $ | 300,000 | $ 300,000 | |||||||||||||||
Retention Stock | Mr. Haugh | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Share-based compensation award, vesting shares Issuable | 0 | ||||||||||||||||
Retention Stock | Maximum | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Compensation expense (benefit) related to stock grants | $ | $ 100,000 | ||||||||||||||||
Employment Inducement Award | Mr. Haugh | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Grant date fair value of award issued | $ / shares | $ 1.80 | $ 57.50 | |||||||||||||||
5.75% Senior Subordinated Notes Due August 2023 | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Percentage of conversion of convertible notes | 5.75% | 5.75% | 5.75% | 5.75% | 5.75% | ||||||||||||
2016 Omnibus Incentive Plan | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Common stock reserved for issuance | 100,000 | 100,000 | 200,000 | ||||||||||||||
Number of additional common stock shares approved for issuance under Incentive Plan | 190,000 | ||||||||||||||||
Long-Term Incentive Plan | Restricted Stock | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Compensation expense (benefit) related to stock grants | $ | $ 200,000 | $ 1,200,000 | $ 400,000 | $ 1,700,000 | |||||||||||||
Long Term Incentive Compensation Plan | Restricted Stock | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Compensation cost not yet recognized | $ | 700,000 | 700,000 | |||||||||||||||
2016 LTIP | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Share based compensation awards granted in period | 100,000 | ||||||||||||||||
Share based compensation awards granted in period, value | $ | $ 5,200,000 | $ 5,200,000 | |||||||||||||||
Share-based compensation award, shares issued upon expiration of grant | 100,000 | ||||||||||||||||
Granted | $ / shares | $ 73.10 | ||||||||||||||||
2016 LTIP | Performance Shares | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Compensation expense (benefit) related to stock grants | $ | $ (900,000) | $ 100,000 | $ (600,000) | ||||||||||||||
Compensation cost not yet recognized, period for recognition | 2 years | ||||||||||||||||
Compensation cost not yet recognized | $ | 400,000 | $ 400,000 | |||||||||||||||
2016 LTIP | Performance Shares | Maximum | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Compensation expense (benefit) related to stock grants | $ | $ (100,000) | ||||||||||||||||
2017 LTIP | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Share based compensation awards granted in period | 0.1 | ||||||||||||||||
Share based compensation awards granted in period, value | $ | $ 6,600,000 | ||||||||||||||||
Granted | $ / shares | $ 75.20 | ||||||||||||||||
2017 LTIP | Maximum | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Share based compensation awards forfeited in period | 100,000 | ||||||||||||||||
2017 LTIP | RSUs | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Share based compensation award, description of vesting rights | one third annually | ||||||||||||||||
2017 LTIP | Performance Shares | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Share based compensation award, description of vesting rights | based on performance metrics approved by the Compensation Committee | ||||||||||||||||
Weighted average contractual term of awards outstanding and exercisable | 1 year | ||||||||||||||||
2018 LTIP | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Share based compensation awards granted in period | 200,000 | ||||||||||||||||
Share based compensation awards vesting period | 15 days | ||||||||||||||||
Share based compensation awards granted in period, value | $ | $ 3,100,000 | ||||||||||||||||
Granted | $ / shares | $ 13.80 | ||||||||||||||||
Share based compensation award, description of vesting rights | 48 equal semi-monthly installments | ||||||||||||||||
Share based compensation cash awards, aggregate amount. | $ | $ 3,100,000 | ||||||||||||||||
2018 LTIP | Maximum | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Share based compensation awards forfeited in period | 100,000 | ||||||||||||||||
2018 LTIP | Performance Shares | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Weighted average contractual term of awards outstanding and exercisable | 2 years | ||||||||||||||||
2019 LTIP | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Share based compensation awards granted in period | 400,000 | ||||||||||||||||
Share based compensation awards granted in period, value | $ | $ 800,000 | ||||||||||||||||
Granted | $ / shares | $ 2.02 | ||||||||||||||||
Share based compensation cash awards, aggregate amount. | $ | $ 1,000,000 | ||||||||||||||||
2019 LTIP | Chief Executive Officer and President | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Share based compensation awards granted in period | 300,000 | ||||||||||||||||
Share based compensation awards vested in period, fair market value | $ | $ 300,000 | ||||||||||||||||
2019 LTIP | Performance Shares | |||||||||||||||||
Class Of Stock [Line Items] | |||||||||||||||||
Weighted average contractual term of awards outstanding and exercisable | 2 years |
Summary of Unvested Restricted Stock (Detail) - Restricted Stock |
6 Months Ended |
---|---|
Jun. 30, 2019
$ / shares
shares
| |
Shares | |
Beginning balance | shares | 315,396 |
Granted | shares | 329,145 |
Vested | shares | (86,975) |
Forfeited/Canceled | shares | (296) |
Ending balance | shares | 557,270 |
Weighted Average Grant Date Fair Value | |
Beginning balance | $ / shares | $ 108.63 |
Granted | $ / shares | 1.70 |
Vested | $ / shares | 8.65 |
Forfeited/Canceled | $ / shares | 75.20 |
Ending balance | $ / shares | $ 63.79 |
Earnings Per Share - Additional Information (Detail) - shares shares in Millions |
3 Months Ended | |||||
---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Mar. 14, 2019 |
Dec. 31, 2018 |
Feb. 22, 2018 |
Sep. 30, 2017 |
|
Earnings Per Share Disclosure [Line Items] | ||||||
Anti-dilutive shares | 0.5 | 0.2 | ||||
Percentage of conversion of convertible notes | 5.75% | |||||
5.75% Senior Subordinated Notes Due August 2023 | ||||||
Earnings Per Share Disclosure [Line Items] | ||||||
Percentage of conversion of convertible notes | 5.75% | 5.75% | 5.75% | |||
Convertible Notes | ||||||
Earnings Per Share Disclosure [Line Items] | ||||||
Percentage of conversion of convertible notes | 1.50% | |||||
Convertible Notes | 5.75% Senior Subordinated Notes Due August 2023 | ||||||
Earnings Per Share Disclosure [Line Items] | ||||||
Percentage of conversion of convertible notes | 5.75% | 5.75% | 5.75% | 5.75% | ||
Performance Shares | ||||||
Earnings Per Share Disclosure [Line Items] | ||||||
Anti-dilutive shares | 0.2 | 0.3 |
Reconciliation of Weighted Average Shares Used in Calculating Basic and Diluted Earnings Per Share (Detail) - shares shares in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Earnings Per Share [Abstract] | ||||
Basic | 10,377 | 6,598 | 9,426 | 6,257 |
Effect of convertible notes subject to conversion | 35,327 | |||
Effect of assumed vesting of dilutive shares | 26 | |||
Diluted | 10,377 | 6,598 | 44,779 | 6,257 |
Schedule of Impact on Earnings Per Share Calculation (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
For earnings (loss) per share - basic: | ||||
Net income attributable to Iconix Brand Group, Inc. | $ 1,271 | $ (79,429) | $ 19,216 | $ (51,670) |
Net income attributable to Iconix Brand Group, Inc. after the effect of accretion of redeemable non-controlling interest for basic earnings (loss) per share | 1,271 | (79,429) | 19,216 | (51,670) |
For earnings (loss) per share - diluted: | ||||
Net income attributable to Iconix Brand Group, Inc. | 1,271 | (79,429) | 19,216 | (51,670) |
Effect of potential conversion of 5.75% Convertible Notes | (15,762) | |||
Net income attributable to Iconix Brand Group, Inc. after the effect of potential conversion of 5.75% Convertible Notes for diluted earnings (loss) per share | $ 1,271 | $ (79,429) | $ 3,454 | $ (51,670) |
Basic | $ 0.12 | $ (12.04) | $ 2.04 | $ (8.26) |
Diluted | $ 0.12 | $ (12.04) | $ 0.08 | $ (8.26) |
Weighted average number of common shares outstanding: | ||||
Basic | 10,377 | 6,598 | 9,426 | 6,257 |
Diluted | 10,377 | 6,598 | 44,779 | 6,257 |
Schedule of Impact on Earnings Per Share Calculation (Parenthetical) (Detail) |
Jun. 30, 2019 |
Mar. 14, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Feb. 22, 2018 |
Sep. 30, 2017 |
---|---|---|---|---|---|---|
Earnings Per Share Disclosure [Line Items] | ||||||
Percentage of conversion of convertible notes | 5.75% | |||||
5.75% Senior Subordinated Notes Due August 2023 | ||||||
Earnings Per Share Disclosure [Line Items] | ||||||
Percentage of conversion of convertible notes | 5.75% | 5.75% | 5.75% | |||
Convertible Notes | ||||||
Earnings Per Share Disclosure [Line Items] | ||||||
Percentage of conversion of convertible notes | 1.50% | |||||
Convertible Notes | 5.75% Senior Subordinated Notes Due August 2023 | ||||||
Earnings Per Share Disclosure [Line Items] | ||||||
Percentage of conversion of convertible notes | 5.75% | 5.75% | 5.75% | 5.75% |
Contingencies - Additional Information (Detail) $ in Millions |
1 Months Ended |
---|---|
May 31, 2016
USD ($)
| |
Supply Company, LLC | |
Loss Contingencies [Line Items] | |
Compensatory damages sought | $ 50 |
Related Party Transactions - Additional Information (Detail) |
6 Months Ended |
---|---|
Jun. 30, 2019
Director
| |
Board of Directors Chairman | |
Related Party Transaction [Line Items] | |
Number of board of directors | 2 |
Related Party Transactions - Summary of Royalty Revenue Recognized (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Related Party Transaction [Line Items] | ||||
Royalty revenue | $ 34,394 | $ 50,212 | $ 70,336 | $ 98,761 |
Royalty | ||||
Related Party Transaction [Line Items] | ||||
Royalty revenue | 1,198 | 8,550 | 2,069 | 16,008 |
Royalty | Global Brands Group Asia Limited | ||||
Related Party Transaction [Line Items] | ||||
Royalty revenue | 6,138 | 11,767 | ||
Royalty | Rise Partners, LLC / Top On International Group Limited | ||||
Related Party Transaction [Line Items] | ||||
Royalty revenue | 242 | 483 | ||
Royalty | M.G.S. Sports Trading Limited | ||||
Related Party Transaction [Line Items] | ||||
Royalty revenue | 103 | 182 | 218 | 336 |
Royalty | Pac Brands USA, Inc. | ||||
Related Party Transaction [Line Items] | ||||
Royalty revenue | 79 | 23 | 108 | 124 |
Royalty | Albion Equity Partners LLC / GL Damek | ||||
Related Party Transaction [Line Items] | ||||
Royalty revenue | 568 | 633 | 1,162 | 1,218 |
Royalty | Anthony L&S | ||||
Related Party Transaction [Line Items] | ||||
Royalty revenue | 600 | 617 | ||
Royalty | Sports Direct International plc | ||||
Related Party Transaction [Line Items] | ||||
Royalty revenue | $ 448 | 574 | ||
Royalty | MHMC | ||||
Related Party Transaction [Line Items] | ||||
Royalty revenue | $ 732 | $ 7 | $ 1,463 |
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2016 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Income Taxes [Line Items] | |||||
Effective income tax rate | (4.00%) | 4.00% | 7.00% | 3.00% | |
Provision (benefit) for income taxes | $ (130) | $ (2,804) | $ 1,838 | $ (1,154) | |
Internal Revenue Service (IRS) | |||||
Income Taxes [Line Items] | |||||
Minimum change in ownership percentage | 50.00% | ||||
Measurement of change in ownership period | 3 years | ||||
Minimum change in ownership percentage held by shareholders directly or indirectly | 5.00% | ||||
Internal Revenue Service (IRS) | Minimum | |||||
Income Taxes [Line Items] | |||||
Income tax, years under examination | 2014 |
Schedule of Accumulated Other Comprehensive Income (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Accumulated Other Comprehensive Income Loss [Line Items] | ||||
Beginning Balance | $ (145,735) | |||
Current period other comprehensive income | $ 1,121 | $ (5,541) | (603) | $ (2,780) |
Ending Balance | (123,440) | (94,303) | (123,440) | (94,303) |
Foreign Currency Translation Adjustments | ||||
Accumulated Other Comprehensive Income Loss [Line Items] | ||||
Beginning Balance | (53,068) | (48,103) | ||
Changes before reclassifications | (603) | (2,780) | ||
Current period other comprehensive income | (603) | (2,780) | ||
Ending Balance | (53,671) | (50,883) | (53,671) | (50,883) |
Unrealized Losses of Available for Sale Securities | ||||
Accumulated Other Comprehensive Income Loss [Line Items] | ||||
Beginning Balance | (3,177) | |||
Current period other comprehensive income | 3,177 | |||
Unrealized Losses of Available for Sale Securities | ASU 2016-01 | ||||
Accumulated Other Comprehensive Income Loss [Line Items] | ||||
Cumulative adjustment for adoption of ASU 2016-01 | 3,177 | |||
AOCI Attributable to Parent | ||||
Accumulated Other Comprehensive Income Loss [Line Items] | ||||
Beginning Balance | (54,792) | (45,342) | (53,068) | (51,280) |
Changes before reclassifications | (603) | (2,780) | ||
Current period other comprehensive income | (603) | 397 | ||
Ending Balance | $ (53,671) | $ (50,883) | $ (53,671) | (50,883) |
AOCI Attributable to Parent | ASU 2016-01 | ||||
Accumulated Other Comprehensive Income Loss [Line Items] | ||||
Cumulative adjustment for adoption of ASU 2016-01 | $ 3,177 |
Net Revenues by Type of License and Information by Geographic Region (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Segment Reporting Information [Line Items] | ||||
Licensing revenue | $ 34,394 | $ 50,212 | $ 70,336 | $ 98,761 |
Type of Revenue [Extensible List] | us-gaap:LicenseMember | us-gaap:LicenseMember | us-gaap:LicenseMember | us-gaap:LicenseMember |
Operating income (loss) | $ 18,572 | $ (94,586) | $ 36,971 | $ (79,050) |
International | ||||
Segment Reporting Information [Line Items] | ||||
Licensing revenue | $ 200 | $ 600 | $ 600 | $ 2,600 |
Type of Revenue [Extensible List] | us-gaap:LicenseMember | us-gaap:LicenseMember | us-gaap:LicenseMember | us-gaap:LicenseMember |
Operating Segments | Women's | ||||
Segment Reporting Information [Line Items] | ||||
Licensing revenue | $ 8,171 | $ 16,871 | $ 16,538 | $ 33,469 |
Operating income (loss) | 8,622 | (95,694) | 16,249 | (81,066) |
Operating Segments | Men's | ||||
Segment Reporting Information [Line Items] | ||||
Licensing revenue | 6,614 | 10,526 | 17,550 | 20,470 |
Operating income (loss) | 4,952 | 664 | 12,498 | 6,538 |
Operating Segments | Home | ||||
Segment Reporting Information [Line Items] | ||||
Licensing revenue | 4,285 | 6,961 | 7,775 | 13,473 |
Operating income (loss) | 3,782 | 6,589 | 6,787 | 12,332 |
Operating Segments | International | ||||
Segment Reporting Information [Line Items] | ||||
Licensing revenue | 15,324 | 15,854 | 28,473 | 31,349 |
Operating income (loss) | 10,766 | 8,082 | 19,189 | 14,569 |
Corporate | ||||
Segment Reporting Information [Line Items] | ||||
Operating income (loss) | $ (9,550) | $ (14,227) | $ (17,752) | $ (31,423) |
Other Assets - Current (Detail) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
||
---|---|---|---|---|
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract] | ||||
US federal tax receivables | $ 15,855 | $ 16,757 | ||
Insurance receivable | [1] | 12,876 | ||
Prepaid advertising | 914 | 1,100 | ||
Prepaid expenses | 1,643 | 2,451 | ||
Prepaid taxes | 6,171 | 1,755 | ||
Prepaid insurance | 822 | 1,446 | ||
Due from related parties | 3,885 | 3,903 | ||
Other current assets | 634 | 645 | ||
Total | $ 42,800 | $ 28,057 | ||
|
Other Assets - Current (Parenthetical) (Detail) $ in Thousands |
Jun. 30, 2019
USD ($)
|
|||
---|---|---|---|---|
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract] | ||||
Insurance receivable | $ 12,876 | [1] | ||
|
Other Assets - Long-Term (Detail) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract] | ||
Prepaid interest | $ 5,148 | $ 5,496 |
Deposits | 482 | 482 |
Other noncurrent assets | 4 | 1 |
Total | $ 5,634 | $ 5,979 |
Leases - Additional Information (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Leases [Abstract] | ||||
Operating lease term | 5 years | 5 years | ||
Rental expense for operating leases | $ 1,100,000 | $ 2,000,000 | ||
Right-of-use asset | $ 7,425,000 | $ 7,425,000 | ||
Operating lease liabilities | 9,605,000 | 9,605,000 | ||
Cash paid for lease liabilities for operating leases | 600,000 | |||
Right-of-use assets obtained in exchange for operating lease obligations | 0 | 100,000 | ||
Operating lease obligations | $ 0 | $ 100,000 | ||
Weighted average remaining operating lease term | 4 years 7 months 28 days | 4 years 7 months 28 days | ||
Weighted average discount rate | 8.61% | 8.61% |
Leases - Summary of Components of Lease Cost (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
|
Lease Cost [Abstract] | ||
Operating lease cost | $ 552 | $ 1,101 |
Short-term lease cost | 70 | 197 |
Variable lease cost | 52 | 211 |
Lease, Cost | $ 674 | $ 1,509 |
Leases - Schedule of Maturities of Lease Liabilities Under Non-cancellable Leases (Detail) $ in Thousands |
Jun. 30, 2019
USD ($)
|
---|---|
Operating Lease Liabilities Payments Due [Abstract] | |
Remainder of 2019 | $ 1,254 |
2020 | 2,590 |
2021 | 2,447 |
2022 | 2,164 |
2023 | 2,109 |
Thereafter | 1,078 |
Total undiscounted lease payments | 11,642 |
Less: Imputed interest | 2,037 |
Operating lease liabilities | $ 9,605 |
Leases - Schedule of Future Minimum Lease Payments Under Non-cancellable Leases (Detail) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Operating Lease Liabilities Payments Due [Abstract] | |
2019 | $ 2,650 |
2020 | 2,726 |
2021 | 2,583 |
2022 | 2,191 |
2023 | 2,109 |
Thereafter | 1,078 |
Total undiscounted lease payments | $ 13,337 |
Other Liabilities - Current - Additional Information (Detail) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Other liabilities – current | $ 12,788 | $ 9,788 |
Foreign Currency Translation - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Foreign Currency [Abstract] | ||||
Gain (loss) on foreign currency translation | $ 258 | $ (704) | $ (369) | $ (152) |
Foreign currency translation (loss) gain | $ 1,121 | $ (5,541) | $ (603) | $ (2,780) |
Accounting Pronouncements - Additional Information (Detail) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Jan. 01, 2019 |
---|---|---|
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | ||
Operating lease liabilities | $ 9,605 | |
Right-of-use asset | $ 7,425 | |
ASU 2016-02 | ||
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | ||
Operating lease liabilities | $ 10,400 | |
Operating lease liabilities, current | 1,700 | |
Operating lease liabilities, noncurrent | 8,700 | |
Right-of-use asset | $ 8,000 |
Other Matters - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Selling, General and Administrative Expenses | ||||
Other Matters [Line Items] | ||||
Professional Fees | $ 3.2 | $ 2.7 | $ 6.0 | $ 5.4 |
Subsequent Events - Additional Information (Detail) - USD ($) |
1 Months Ended | 6 Months Ended | |
---|---|---|---|
Jul. 08, 2019 |
Jul. 31, 2019 |
Jun. 30, 2019 |
|
Subsequent Event [Line Items] | |||
Minimum bid price description | minimum bid price per share for its common stock fell below $1.00 for a period of 30 consecutive business days (from May 23, 2019 to July 5, 2019) and that therefore the Company did not meet the minimum bid price requirement set forth in the Nasdaq Listing Rules. | ||
Minimum bid price requirement description | Nasdaq Listing Rule 5810(c)(3)(A), the Company will be provided 180 calendar days, or until January 6, 2020, to regain compliance with the minimum bid price requirement. In accordance with Rule 5810(c)(3)(A), the Company can regain compliance with the minimum bid price requirement, if, at any time during such 180-day period, the closing bid price of the Company’s common stock is at least $1.00 for a minimum period of 10 consecutive business days. If by January 6, 2020, the Company does not regain compliance with the Nasdaq Listing Rules, the Company may be eligible for additional time to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(ii). To qualify, the Company would need to submit a Transfer Application and a $5,000 application fee. | ||
Subsequent Event | |||
Subsequent Event [Line Items] | |||
Transfer application fee | $ 5,000 | ||
Subsequent Event | Umbro China Limited | |||
Subsequent Event [Line Items] | |||
Company ownership interest | 100.00% | ||
Subsequent Event | Umbro China Limited | MHMC | |||
Subsequent Event [Line Items] | |||
Ownership interest acquired | 5.00% | ||
Payments to acquire ownership interest | $ 1,300,000 |
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