Iconix Brand Group Files 10-Q $ICON

• In the Current Quarter, the Company recorded a total non-cash asset impairment charge of $521.7 million which is comprised of $135.9 million in the men's segment, $227.6 million in the women’s segment, $69.5 million in the home segment, and $88.8 million in the international segment to reduce various trademarks in those segments to fair value. Additionally, the Company recorded a total non-cash goodwill impairment charge of $103.9 million which is comprised of $73.9 million in the women's segment, $1.5 million in the men's segment and $28.4 million in the home segment.
• Pursuant to the amendment,in order to receive the net proceeds of the Second Delayed Draw Term Loan on March 15, 2018, the Company will have to raise net cash proceeds of at least $100 million(and/or achieving a reduction in the outstanding principal amount of the 1.50% Convertible Notes) which would provide sufficient funds with the amounts drawn under the Second Delayed Draw Term Loan for the Company to retire the 1.50% Convertible Notes outstanding on their maturity date. If the Company cannot secure additional funds or otherwise satisfy the requirements for availability of the First Delayed Draw Term Loan, the Company will not have sufficient liquidity to repay its 1.50% Convertible Notes which will become due in March 2018, which default may result in a cross-default and acceleration of the Company’s other outstanding indebtedness, which could ultimately force the Company into bankruptcy or liquidation.These factors raise substantial doubt about the Company's ability to continue as a going concern within one year after the financial statements contained in this Quarterly Report on Form 10-Q are issued.
• In order to continue its operations, the Company continues to actively evaluate various capital raising options to repay debt and add additional liquidity to the Company's balance sheet, as well as considering strategic alternatives, which could include the sale of certain assets or of the entire company, to sufficiently extend its cash and liquidity. There can be no assurance, however, that any of these alternatives will be successfully completed on terms acceptable to the Company to extend its cash and liquidity. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
• In order to seek to satisfy these requirements, we continue to actively evaluate various capital raising options to repay debt and add additional liquidity to the company’s balance sheet as well as strategic alternatives, which could include the sale of certain assets or of the entire company. There can be no assurance, however, that any of these alternatives will be successfully completed on terms acceptable to us in order to extend our cash and liquidity. If we cannot secure additional funds and cannot repay the 1.50% Convertible Notes when they become due in March 2018, the resulting default may result in a cross-default and acceleration of our other outstanding indebtedness, whichcould ultimately force us into bankruptcy or liquidation. These factors raise substantial doubt about our ability to continue as a going concern over the next twelve months.

Iconix Reports Preliminary Third Quarter 2017 Results and Provides Update on Intangible Asset Impairment

Licensing Revenue: The Company expects licensing revenue for the third quarter of 2017 to be approximately $53.2 million, a 12% decline as compared to $60.5 million in the prior year quarter. Revenue in the prior year’s third quarter included approximately $2.3 million of licensing revenue from the Sharper Image brand which was sold in the fourth quarter of 2016 and approximately $1.3 million of revenue from its Southeast Asia joint venture which was deconsolidated in the second quarter of 2017. As a result, there was no comparable revenue for these items in the third quarter of 2017. Excluding Sharper Image and Southeast Asia, revenue declined approximately 7% in the third quarter of 2017.

SG&A Expenses: The Company continued to manage expenses and expects SG&A expenses to be approximately $21.5 million in the third quarter of 2017, a 28% decrease as compared to approximately $29.9 million in the third quarter of 2016.

Asset Impairment: As previously disclosed, the Company accelerated the timing of its annual impairment testing of goodwill and intangible assets that is customarily performed in connection with the preparation of year-end financial statements and is in the process of completing such testing in connection with the preparation of its financial statements for the quarter ended September 30, 2017. The Company has not yet finalized its impairment analysis, however, as a result of such testing which will be completed prior to the filing of the Company’s Form 10-Q for the period ended September 30, 2017, the Company expects to recognize a non-cash intangible asset impairment charge of approximately $500 million to $750 million primarily related to the women’s segment. The Company also expects to have a non-cash tax charge of approximately $15 million related to the write off of certain deferred tax assets.

GAAP Diluted EPS from Continuing Operations: The Company expects GAAP diluted EPS from continuing operations for the third quarter of 2017, excluding the impairment charge, to be a loss of approximately $0.10, as compared to earnings of $0.25 in the third quarter of 2016. The earnings of $0.25 in the third quarter of 2016 includes approximately $0.18 per share related to a gain on the sale of our equity interest in Complex Media. The loss of $0.10 in the third quarter of 2017 includes the non-cash tax charge of approximately $15 million or $0.26 per share.

Non-GAAP Diluted EPS from Continuing Operations: The Company expects non-GAAP diluted EPS from continuing operations for the third quarter of 2017 to be approximately $0.24, as compared to $0.18 in the third quarter of 2016. A reconciliation table for non-GAAP diluted EPS is included at the end of this press release.

Distressed Debt Watch

• Exco Resources (XCO, EDGAR) bond due Sept 2018 trading at 10 cents, YTM over 650%. 
• Cobalt International Energy (CIE, EDGAR) bond due Dec 2019 trading at 11 cents, YTM ~160%.
• Iconix Brand Group (ICON, EDGAR) bond due March 2018 trading at 85 cents, YTM of 63%.
• Bon Ton Stores (BONT, EDGAR) bond due June 2021 trading at 30 cents, YTM over 50%.
• Egalet Corp (EGLT, EDGAR) bond due April 2020 trading at 45 cents, YTM over 45%.
• GNC Holdings (GNC, EDGAR) bond due August 2020 trading at 59 cents, YTM of 22%.
• Frontier Communications (FTR, EDGAR) bond due April 2022 trading at 75 cents, YTM of 17%.

Distressed Debt Watch

• Cobalt International Energy (CIE, EDGAR) bond due Dec 2019 trading at 8 cents, YTM over 180%. Latest news: "The Company has elected not to make the interest payment of approximately $12.3 million due on November 15, 2017 with respect to its outstanding 3.125% Convertible Senior Notes due 2024 (the “2024 Notes”). The indenture governing the 2024 Notes permits the Company a 30-day grace period to make the interest payment. If the Company fails to make the interest payment within the grace period an event of default will result, and the trustee or noteholders holding at least 25% in the aggregate outstanding principal amount of 2024 Notes may elect to accelerate the 2024 Notes causing them to be immediately due and payable." [Going Concern Warning]
• Exco Resources (XCO, EDGAR) bond due Sept 2018 trading at 12 cents, YTM almost 600%. [Going Concern Warning]
• Bon Ton Stores (BONT, EDGAR) bond due June 2021 trading at 30 cents, YTM over 50%.
• Egalet Corp (EGLT, EDGAR) bond due April 2020 trading at 45 cents, YTM over 45%.
• Frontier Communications (FTR, EDGAR) bond due April 2022 trading at 75 cents, YTM of 17%.
• Iconix Brand Group (ICON, EDGAR) bond due March 2018 trading at 84 cents, YTM of 61%.
• GNC Holdings (GNC, EDGAR) bond due August 2020 trading at 59 cents, YTM of 22%.