Iconix Brand Group, Inc. (ICON)
Q4 2012 Earnings Call
February 20, 2013 10:00 AM ET
Warren Clamen – EVP and CFO
Neil Cole – President and CEO
Bob Drbul – Barclays
Jim Chartier – Monness, Crespi and Hardt
Steve Marotta – C.L. King & Associates
Susan Anderson – Citi
Robby Ohmes – Bank of America Merrill Lynch
Danielle McCoy – Brean Capital
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Our speakers on the call today are Neil Cole, Chief Executive Officer; and Warren Clamen, Chief Financial Officer.
Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. The statements that are not historically fact contained in this conference call are forward-looking statements that involve a number of risks, uncertainties and other factors, all of which are difficult or impossible to predict and many of which are beyond the control of the company. This may cause the actual results, performance or achievements of the company to be materially different from the results, performance or achievements expressed or implied by such forward-looking statements. The words believe, anticipate, expect, confident, and similar expressions identify forward-looking statements. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as the date the statement was made.
I would now like to turn the conference over to your host for today, Mr. Warren Clamen, Chief Financial Officer. Please proceed, sir.
Good morning, everyone, and welcome to the Iconix Brand Group Fourth Quarter and Full Year 2012 Earnings Conference Call. On today’s call, we will review our financial results, provide an update of our existing portfolio of brands and discuss our recent acquisitions of Buffalo, and Lee Cooper as well as our outlook for 2013.
Reviewing the results for the fourth quarter ended December 31, 2012, revenue was $85.1 million as compared to $95.5 million in the fourth quarter of 2011. As anticipated, healthy trends across the majority of our portfolio continued to be offset by the transition of the Royal Velvet license and the year-over-year declines of our Men’s businesses.
In the fourth quarter, we generated $37.9 million of free cash flow or $0.54 per diluted share as compared to $41.9 million in the prior year quarter. EBITDA in the fourth quarter was approximately $50 million as compared to $57.3 million in the prior year quarter, and our EBITDA margin for the fourth quarter was approximately 59%.
Non-GAAP net income, which excludes non-cash interest related to our convertible notes, was $28.9 million as compared to $31.3 million in the prior year quarter. Diluted non-GAAP earnings per share was $0.41 compared to $0.41 in the prior year quarter, noting that with lower revenues in 2012 we were able to deliver similar earnings per share to our shareholders as compared to 2011.
GAAP net income for the fourth quarter was approximately $26.1 million as compared to $27.2 million in the prior year quarter. And GAAP diluted EPS was $0.37 per diluted share compared to $0.36 in the prior year quarter.
Our weighted average diluted share count for the fourth quarter was approximately 70.3 million compared to approximately 75.4 million in the prior year quarter. This reflects our repurchases, which I will discuss later on the call.
Reviewing our results for the full year, December 31, 2012, our revenue was approximately $353.8 million, as compared to $369.8 million in the prior year. For 2012, we generated free cash flow of approximately $180.5 million, or $2.51 per diluted share, and $179.2 million, or $2.37 per diluted share, in 2011. Our EBITDA for the year was approximately $217 million as compared to approximately $229.6 million in the prior year.
Our non-GAAP net income, which excludes noncash interest related to our convertible notes and a one-time accounting gain in 2011, was approximately $122 million as compared to approximately $127.4 million in the prior year. And our diluted non-GAAP earnings per share was $1.70, as compared to $1.69 in the prior-year quarter, again, demonstrating that we were focused throughout 2012 in delivering similar earnings per share as compared to 2011 despite revenue decline.
EBITDA, free cash flow, non-GAAP net income and non-GAAP diluted EPS are all non-GAAP metrics, and reconciliation tables for each can be found in the press release sent earlier this morning and on our website, iconixbrand.com.
Moving on to our balance sheet. We ended the year with approximately $255 million of cash. In addition to generating $180 million of free cash flow in the fourth quarter, we launched a new $1.1 billion securitization facility, under which we have borrowed $600 million at an interest rate of 4.23% and have a yet-to-be-placed revolver of $100 million. We used a portion of the securitization proceeds to finance our purchase of the Umbro brand in the fourth quarter, to pay our 51% stake in the Buffalo brand earlier this month, to acquire the Lee Cooper brand that we announced this morning, and to repay amounts outstanding under our previous facilities.
We are excited about our ability to leverage the strength of our brands’ predictable and stable cash flows to secure financing at attractive prices. With this facility in place and a strong balance sheet and strong free cash flow, we believe we are well positioned to grow our business through additional acquisitions.