Iconix Brand Group Inc. (ICON, Financial) filed Quarterly Report for the period ended 2009-03-31.
Iconix Brand Group Inc. is in the business of licensing the CANDIE'S BONGO BADGLEY MISCHKA and JOE BOXER trademarks on a variety of footwear apparel and fashion products. Through its wholly owned subsidiary Brightstar Footwear Inc. the Company also arranges for the manufacture of footwear products for mass market and discount retailers under the private label brand of the retailer. Iconix Brand Group Inc. has a market cap of $899.3 million; its shares were traded at around $15.49 with a P/E ratio of 13.5 and P/S ratio of 4.2.
Our principal capital requirements have been to fund acquisitions, working capital needs, and to a lesser extent, capital expenditures. We have historically relied on internally generated funds to finance our operations and our primary source of capital needs for acquisition has been the issuance of debt and equity securities. At March 31, 2009 and December 31, 2008, our cash totaled $43.2 million and $67.3 million, respectively, including short-term restricted cash of $5.1 million and $0.9 million, respectively. Of the $5.1 million of short-term restricted cash at March 31, 2009, $4.1 is in a cash collateral account in our name (see Note 12 of Notes to Unaudited Condensed Consolidated Financial Statements).
As of March 31, 2009, our marketable securities consist of auction rate securities. Beginning in the third quarter of 2007, $13.0 million of our auction rate securities had failed auctions due to sell orders exceeding buy orders. These funds will not be available to us until a successful auction occurs or a buyer is found outside the auction process. As a result, $13.0 million of auction rate securities have been written down to $7.5 million, using Level 3 inputs with present value techniques as described by the fair value hierarchy and the income approach outlined in SFAS 157, as an cumulative unrealized pre-tax loss of $5.6 million to reflect a temporary decrease in fair value. As the write-down of $5.6 million has been identified as a temporary decrease in fair value, the write-down has not impacted our earnings and is reflected as an other comprehensive loss in the stockholders equity section of our consolidated balance sheet. We estimated the fair value of our auction rate securities using a discounted cash flow model where we used the expected rate of interest to be received. We believe this decrease in fair value is temporary due to general macroeconomic market conditions, and interest is being paid in full as scheduled. Further, we have the ability and intent to hold the securities until an anticipated full redemption, and we have no reason to believe that any of the underlying issuers of these auction rate securities or its third-party insurers are presently at risk of default. We believe our cash flow from future operations and its existing cash on hand will be sufficient to satisfy its anticipated working capital requirements for the foreseeable future, regardless of the timeliness of the auction process.
Net cash provided by operating activities increased $6.6 million to $25.7 million in the Current Quarter from $19.1 million of net cash provided by operating activities in the Prior Year Quarter. This increase is primarily due to an increase of $1.0 million in our non-cash deferred income taxes to $5.6 million in the Current Quarter as compared to $4.6 million in the Prior Year Quarter; a decrease of $1.7 million in prepaid advertising and other, as compared to an increase of $1.2 million in the Prior Year Quarter, and an increase in accounts receivable of $0.6 million in the Current Quarter as compared to an increase of $7.1 million in the Prior Year Quarter. The increases in accounts receivable and prepaid advertising and other in the Prior Year Quarter were primarily related to acquisitions made during the three months ended December 31, 2007. There was no such impact in the Current Quarter as there were no new acquisitions in the Current Quarter, and the acquisition of Waverly during the three months ended December 31, 2008 only accounted for approximately $1.4 million of our $47.1 million balance of accounts receivable at December 31, 2008. The aggregate of these increases to our cash provided by operating activities was offset by a decrease of $0.5 million in stock option expense to $1.6 million in the Current Quarter from $2.1 million in the Prior Year Quarter, a decrease of $1.0 million in accounts payable and accrued expenses in the Current Quarter as compared to an increase of $0.9 million in accounts payable and accrued expenses in the Prior Year Quarter, and an increase of $0.5 million in other assets in the Current Quarter as compared to a decrease of $0.4 million in other assets in the Prior Year Quarter.
Net cash used in financing activities increased $32.6 million to $47.3 million in the Current Quarter from $14.7 million of net cash used in financing activities in the Prior Year Quarter. This increase is primarily due to payment of long term debt. Specifically, our payment in the Prior Year Quarter of 50% of our excess cash flow from the subsidiaries subject to the term loan facility for fiscal 2007 was $15.6 million, as compared to our payment in the Current Quarter of $38.7 million, which represented 50% of our excess cash flow from the subsidiaries subject to the term loan facility for fiscal 2008. Additionally, short-term restricted cash increased $4.2 million primarily as a result of an investment through our joint venture Scion (see Note 12 of Notes to Unaudited Condensed Consolidated Financial Statements), which was offset by a non-controlling interest contribution of $2.1 million. Further, in the Current Quarter the tax benefit from share-based payment arrangements was $0.3 million, as compared to a $4.0 million tax benefit in the Prior Year Quarter. Lastly, during the Current Quarter, we repurchased shares of our common stock for $1.5 million related to a stock repurchase plan authorized by our Board of Directors in November 2008. There were no such repurchases in the Prior Year Quarter.
As of March 31, 2009, our balance sheet reflects consolidated debt of approximately $578 million, including secured debt of $328.9 million ($217.2 million under our Term Loan Facility and $111.7 million under Asset-Backed Notes issued by our subsidiary, IP Holdings), primarily all of which was incurred in connection with our acquisition activities. In accordance with FSP APB 14-1, our Convertible Notes are included in our $578 million of consolidated debt at a net debt carrying value of $236.9 million; the principal amount owed to the holders of the Convertible Notes is $287.5 million. We may also assume or incur additional debt, including secured debt, in the future in connection with, or to fund, future acquisitions. Our debt obligations:
Read the The complete ReportICON is in the portfolios of Ron Baron of Baron Funds.
Iconix Brand Group Inc. is in the business of licensing the CANDIE'S BONGO BADGLEY MISCHKA and JOE BOXER trademarks on a variety of footwear apparel and fashion products. Through its wholly owned subsidiary Brightstar Footwear Inc. the Company also arranges for the manufacture of footwear products for mass market and discount retailers under the private label brand of the retailer. Iconix Brand Group Inc. has a market cap of $899.3 million; its shares were traded at around $15.49 with a P/E ratio of 13.5 and P/S ratio of 4.2.
Highlight of Business Operations:
Operating Expenses. Consolidated selling, general and administrative, herein referred to as SG&A, expenses totaled $16.3 million in the Current Quarter compared to $18.7 million in the Prior Year Quarter. The decrease of $2.4 million was driven by a variety of cost saving initiatives, including: (i) a decrease of approximately $0.6 million in payroll costs related to a reduction in employee headcount, which was partially offset by the cost of severance for terminated employees; (ii) a decrease of approximately $0.6 million in advertising and marketing related expenses; (iii) a decrease of $0.5 million in professional fees; and (iv) a decrease of $0.3 million in employee travel related expensesOur principal capital requirements have been to fund acquisitions, working capital needs, and to a lesser extent, capital expenditures. We have historically relied on internally generated funds to finance our operations and our primary source of capital needs for acquisition has been the issuance of debt and equity securities. At March 31, 2009 and December 31, 2008, our cash totaled $43.2 million and $67.3 million, respectively, including short-term restricted cash of $5.1 million and $0.9 million, respectively. Of the $5.1 million of short-term restricted cash at March 31, 2009, $4.1 is in a cash collateral account in our name (see Note 12 of Notes to Unaudited Condensed Consolidated Financial Statements).
As of March 31, 2009, our marketable securities consist of auction rate securities. Beginning in the third quarter of 2007, $13.0 million of our auction rate securities had failed auctions due to sell orders exceeding buy orders. These funds will not be available to us until a successful auction occurs or a buyer is found outside the auction process. As a result, $13.0 million of auction rate securities have been written down to $7.5 million, using Level 3 inputs with present value techniques as described by the fair value hierarchy and the income approach outlined in SFAS 157, as an cumulative unrealized pre-tax loss of $5.6 million to reflect a temporary decrease in fair value. As the write-down of $5.6 million has been identified as a temporary decrease in fair value, the write-down has not impacted our earnings and is reflected as an other comprehensive loss in the stockholders equity section of our consolidated balance sheet. We estimated the fair value of our auction rate securities using a discounted cash flow model where we used the expected rate of interest to be received. We believe this decrease in fair value is temporary due to general macroeconomic market conditions, and interest is being paid in full as scheduled. Further, we have the ability and intent to hold the securities until an anticipated full redemption, and we have no reason to believe that any of the underlying issuers of these auction rate securities or its third-party insurers are presently at risk of default. We believe our cash flow from future operations and its existing cash on hand will be sufficient to satisfy its anticipated working capital requirements for the foreseeable future, regardless of the timeliness of the auction process.
Net cash provided by operating activities increased $6.6 million to $25.7 million in the Current Quarter from $19.1 million of net cash provided by operating activities in the Prior Year Quarter. This increase is primarily due to an increase of $1.0 million in our non-cash deferred income taxes to $5.6 million in the Current Quarter as compared to $4.6 million in the Prior Year Quarter; a decrease of $1.7 million in prepaid advertising and other, as compared to an increase of $1.2 million in the Prior Year Quarter, and an increase in accounts receivable of $0.6 million in the Current Quarter as compared to an increase of $7.1 million in the Prior Year Quarter. The increases in accounts receivable and prepaid advertising and other in the Prior Year Quarter were primarily related to acquisitions made during the three months ended December 31, 2007. There was no such impact in the Current Quarter as there were no new acquisitions in the Current Quarter, and the acquisition of Waverly during the three months ended December 31, 2008 only accounted for approximately $1.4 million of our $47.1 million balance of accounts receivable at December 31, 2008. The aggregate of these increases to our cash provided by operating activities was offset by a decrease of $0.5 million in stock option expense to $1.6 million in the Current Quarter from $2.1 million in the Prior Year Quarter, a decrease of $1.0 million in accounts payable and accrued expenses in the Current Quarter as compared to an increase of $0.9 million in accounts payable and accrued expenses in the Prior Year Quarter, and an increase of $0.5 million in other assets in the Current Quarter as compared to a decrease of $0.4 million in other assets in the Prior Year Quarter.
Net cash used in financing activities increased $32.6 million to $47.3 million in the Current Quarter from $14.7 million of net cash used in financing activities in the Prior Year Quarter. This increase is primarily due to payment of long term debt. Specifically, our payment in the Prior Year Quarter of 50% of our excess cash flow from the subsidiaries subject to the term loan facility for fiscal 2007 was $15.6 million, as compared to our payment in the Current Quarter of $38.7 million, which represented 50% of our excess cash flow from the subsidiaries subject to the term loan facility for fiscal 2008. Additionally, short-term restricted cash increased $4.2 million primarily as a result of an investment through our joint venture Scion (see Note 12 of Notes to Unaudited Condensed Consolidated Financial Statements), which was offset by a non-controlling interest contribution of $2.1 million. Further, in the Current Quarter the tax benefit from share-based payment arrangements was $0.3 million, as compared to a $4.0 million tax benefit in the Prior Year Quarter. Lastly, during the Current Quarter, we repurchased shares of our common stock for $1.5 million related to a stock repurchase plan authorized by our Board of Directors in November 2008. There were no such repurchases in the Prior Year Quarter.
As of March 31, 2009, our balance sheet reflects consolidated debt of approximately $578 million, including secured debt of $328.9 million ($217.2 million under our Term Loan Facility and $111.7 million under Asset-Backed Notes issued by our subsidiary, IP Holdings), primarily all of which was incurred in connection with our acquisition activities. In accordance with FSP APB 14-1, our Convertible Notes are included in our $578 million of consolidated debt at a net debt carrying value of $236.9 million; the principal amount owed to the holders of the Convertible Notes is $287.5 million. We may also assume or incur additional debt, including secured debt, in the future in connection with, or to fund, future acquisitions. Our debt obligations:
Read the The complete ReportICON is in the portfolios of Ron Baron of Baron Funds.
