Icon Energy Corp (ICON) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Iconix Brand Group First Quarter 2010 Earnings Conference Call. My name is [Tawanda] and I will be your coordinator for today. At this time, all participants are in a listen-only mode. (Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. Our speakers today are Neil Cole, Chief Executive Officer, YehudaShmidman, EVP, Operations, and Warren Clamen, EVP, and Chief Financial Officer. Before we begin, the Company has asked me to read the Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995.

The statements that are not historical facts 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 of the date the statement was made.

I would now like to turn the presentation over to Mr. Warren Clamen, Chief Financial Officer. You may proceed, sir.

Thank you. Good morning, everybody. And welcome to the Iconix Brand Group First Quarter 2010 Earnings Conference Call. In addition to reviewing our quarterly performance this morning, we will also discuss our acquisition of Peanuts and provide you with an update on our 2010 outlook.

Reviewing our results for the first quarter ended March 31, 2010, total revenue was approximately $71.7 million, a 42% increase as compared to $50.5 million in the prior year quarter. The driving factors on the increase were strong, organic growth from all of our major direct to retail or DTR brands, as well as the addition of the Ecko portfolio of the brands.

It's important to note that since direct to retail brands now represent a larger percentage of our business, the seasonality of the revenue will shift more towards the first quarter due to the tiered royalty structure of some of our larger DTRs.

EBITDA in the first quarter was approximately $49.4 million, a 36% increase as compared to approximately $36.3 million in the prior year quarter. Our EBITDA margins were approximately 69%. On a non-GAAP basis which excludes non-cash interest related to the convertible debt, net income increased 53% to approximately $27 million as compared to approximately $17.6 million in the prior year quarter. Diluted non-GAAP earnings per share for the first quarter was $0.36 compared to $0.29 in the prior year quarter. Our GAAP net income which includes non-cash interests related to the convertible debt increased 58% to $24.8 million as compared to $15.6 million in the prior year quarter and GAAP diluted earnings per share was $0.33 compared to $0.26 in the prior year quarter. Free cash flow for the quarter was $40.1 million, a 34% increase as compared to approximately $29.8 million in the prior year quarter. Free cash flow per diluted share for the quarter was $0.54. EBITDA, free cash flow, non-GAAP net income and non-GAAP EPS are all non-GAAP metrics and reconciliation tables for each can be found in the press release sent earlier this more and on our website, IconixBrand.com.

After making our annual term loan payment of approximately $47 million in the first quarter, our cash balance today is approximately $214 million, a portion of which will be used towards the acquisition of the Peanuts brand. I will now turn the call over to YehudaShmidman, our EVP of Operations who will provide you with an update on our organic business.

Thank you, Warren. Good morning, everyone. Total organic growth for the first quarter was very strong, driven primarily by our direct to retail brands with Wal-Mart, Kohl's, Target, and Costco. At Wal-Mart, sales of all three of our DTR brands -- OP, Starter, and Danskin Now -- were up significantly from the prior year. OP's strong performance with the combination of being in more doors and increased sales from its core categories. Starter and Danskin Now also had substantial growth this quarter, driven by larger assortments and new category growth.

A good example of category growth was with Starter as Wal-Mart launched a successful underwear and basics program this past quarter. Also this past quarter, both brands were featured in a joint hot spot as part of a marketing collaboration with the hit TV show, The Biggest Loser. Our two spokespeople, Tony Romo for Starter and Gabby Reece for Danskin Now are both integrated into the hit television show currently being aired on NBC with strong product placement for our brands.

Candie's and Mudd, our two DTR brands at Kohl's also demonstrated continued strength in the first quarter. In fact, Candie's which is now in its sixth year at Kohl's achieved its highest one week total to date, surpassing its previous best by more than 15%. Target sales for our DTR brands were also strong. Mossimo in particular saw sales levels for certain weeks in the quarter at levels last seen in the fourth quarter of 2007.

Another key driver of our organic performance came from our DTR with Costco for our Charisma brand. Our total Charisma business more than doubled from the prior year. We remain excited about the DTR partnership with Costco. Retail sales from our brands at Kmart and Sears were also strong. Joe Boxer which has shown steady sales increases at Kmart rolled out this past quarter throughout Sears. Cannon, our second DTR brand at Kmart-Sears continues to gain shelf space. And although Bongo had a soft quarter as it transitions to a DTR with Kmart and Sears, we're working hard on the fall 2010 launch.

Sales of our non-DTR brands also improved this quarter. Rocawear was better than planned as the kid's business had a strong quarter. Badgley Mischka which had been negatively impacted by the weakness in luxury over the past year was up this quarter as we promoted our second collection with the Home Shopping Network last month. And Waverly experienced softness with certain licensees; however our DTR with Lowes and various smaller licensees combined to offset the weakness.

We are also making progress on growing the Ecko portfolio of brands. Since the acquisition in November 2009, we've signed 11 new licensees including a long-term license with Li & Fung for Zoo York and new Ecko categories including big and tall, men's headwear, and tailored clothing.

In addition to our domestic business, we're focused on leveraging our international platform for long-term organic growth. In Greater China, our partners are projecting to open over 700 stores for our brands in the next three years. In Latin America, we recently launched our new Mossimo DTR with Suburbia. And in Europe, we are working through our JV partner to solicit new DTR and wholesale licensees for our brand.

All told, our top line performance last quarter was a result of the strength of our retail partners and our continued focus on two primary strategies of driving category growth and rack count expansion for each brand. Looking ahead, we see continued opportunities for organic growth of our portfolio with these strategies, especially when combined with our international platform.

With that, I'll now turn the call over to Neil Cole, our Chairman and Chief Executive Officer.

Good morning, everybody. Thank you, Yehuda. This has been an exciting quarter for our Company as we achieved 42% revenue growth and over 50% earnings growth, both of which exceed our expectations. We are having continued success with our direct to retail strategy where almost across the board, our DTR brands saw double-digit sales growth this quarter. We are fortunate to be partnership with many of the leading retailers in the world who are doing an amazing job of integrating our brands to be the anchor of our apparel platforms.

These partnerships have been a win-win both for us and the retailer and as such we feel confident that the relationships we are building will be long-lasting. Just recently we were informed by Wal-Mart that it intends to renew Danskin Now through December 31, 2013. This renewal, along with the four other DTRs we renewed in 2009 demonstrate that our partners are committed to our brands and give us even more assurance as to the long-term sustainability of this business model.

This morning we also announced we are acquiring the Peanuts brand which includes the rights to some of the most iconic and well-known characters in the world today, such as Charlie Brown, Snoopy, Lucy, Linus, Schroeder, Peppermint Patty, and Woodstock. We view this as a transformative acquisition for our Company and one that moves Iconix well beyond fashion into a true brand management Company. As part of our Peanuts acquisition, we'll also be acquiring the licensing and character representation business of United Media Licensing which in addition to Peanuts represents a number of other properties including Dilbert, Fancy Nancy, and Raggedy Ann and Andy.

We are acquiring the assets in a partnership with the Schulz family who have been actively involved in preserving Charles Schulz and his character's legacy which began over 60 years ago. In fact, 2010 marks the 60th anniversary of the famous Peanuts game. The total purchase price of the acquisition is $175 million although subject to an adjustment based on working capital at United Media business of which Iconix will pay 80% of the share and the Schulz family will pay 20% of the share. Iconix's portion will be funded from our existing cash balance. This acquisition provides Iconix with an entirely new brand management platform, including new categories, channels, and territories that we will be able to leverage for our existing and future brand.

Peanuts has a strong and diversified licensing program with over 1,200 licensing agreements worldwide including established retail and promotional relationships with MetLife, Hallmark, Universal, H&M, Benetton, Old Navy, CVS, Walgreens, Warner Bros, and ABC. We hope to leverage these relationships as well as Peanuts' large global footprint. Today Peanuts is licensed in over 40 countries with approximately two-thirds of its revenue coming from international markets. Revenue from the acquired assets is estimated at approximately $75 million per annum, of which approximately 95% comes from the Peanuts characters. We believe there are opportunities too grow the revenue stream which has been steady over the last decade as we make advancements in publishing and new media, expand into emerging markets, and identify new opportunities to cross market and promote the characters in other areas.

We anticipate the cost associated with this business to be higher than our existing brands as there is a contractual revenue share with the Schulz Family Trust which is separate from the family's 20% interest in our new partnership. There are also agent commissions and an additional administrative cost associated with managing over 1,200 contracts and product approvals around the world. Initially we estimate the EBITDA margins from this acquisition to be in the low 20s. Similar to Ecko, the acquisition will be fully consolidated in our financial statements. The expected transaction to close in approximately 30 to 60 days.

We are also excited about our new partnership with pop culture icon Madonna who has been a great calling card for us around the world. Starting with the details of the partnership, during the quarter, we formed MG Icon, a 50-50 global joint venture with Madonna to leverage her name and personality in developing consumer product brands worldwide. Simultaneously with forming joint venture MG Icon, we signed a long-term license with Macy's for the Material Girl brand. While Macy's has always been an important retailer for us as we have multiple brands with large Macy's businesses including Rocawear, Rampage, London Fog, and Ecko, this is our first direct to retail license with them. Through this partnership, we have become much closer with Macy's management team which has already positively impacted many areas of our other brands.

The new Material Girl brand is a fast fashion junior collection that we will launch in the fall in approximately 200 Macy's doors with the potential to expand to nearly 800 doors next year. Madonna's daughter, Lourdes, has played an integral role in the development of the Material Girl brand and will remain involved as the brand's muse. MG Icon has announced a separate worldwide cobranded sunglass partnership with Dolce & Gabbana. We're actively pursuing additional branding opportunities. We anticipate the joint venture will be neutral to earnings in 2010 and expect it to be generating profits in 2011.

Moving on to our 2010 outlook, based our first quarter's positive results and our Peanuts acquisition, we are revising our 2010 guidance. We're increasing our 2010 revenue guidance to a range of $305 million to $315 million. That was originally - or last $260 million to $270 million. Our revised revenue guidance implies an organic growth rate of approximately 7% and includes approximately $35 million to $40 million of revenue related to the Peanuts acquisition. Due to the higher cost structure of the Peanuts business which includes, as noted earlier, and existing contractual revenue share with the Schulz heirs as well as agent commissions, we expect our 2010 full year EBITDA margin to be approximately 60%.

We expect non-GAAP net income which includes non-cash interest to increase approximately 24% to a range of $100 million to $105 million and we are increasing our full year 2010 diluted non-GAAP EPS guidance by approximately $0.10 to $1.35 to $1.40. Further, we expect to continue to generate strong free cash flow and increasing our forecasted free cash flow to be approximately $150 million to $155 million in 2010.

In closing, 2010 is off to a great start and we are excited about the strong organic growth we saw across almost all our brands in the first quarter. With another record quarter for our Company in terms of both revenue and profitability, the power of our model is more evident than ever. Our continued positive results reflect our commitment to keeping our brands fresh and relevant. Our strong retail relationships and our focus on building lifestyle brands.

Our Company has evolved tremendously over the past five years and for the second year we were ranked by Global License Magazine as the world's second largest licensing Company, second only to Disney. If we include the Peanuts brand which will generate over $2 billion in retail sales, our portfolio now represents approximately $12 billion in annual retail sales. Peanuts provides us with a whole new licensing platform from which to grow. With its large global footprint and diverse licensing program, we believe it will open up various opportunities for our existing brand as well as future acquisitions. We are committed to building our brands globally and believe we will be able to achieve similar growth compared to the last five years as we continue to build strong retail relationships, execute on our global strategy and further leverage our brand management platform.

I'd like to thank all of you for listening this morning and your continued support. With that, we'd like to open up for questions.

(Operator Instructions) Our first question comes from the line of Mr. Todd Slater with Lazard Capital Markets. You may proceed, sir.

Good morning, this is Diana Katz: for Todd Slater. Congratulations.

Thank you so much.

Can you talk about the opportunity for Peanuts margins to expand over time from the initial 20% to 25% EBITDA margins? And second, can you give us a sense of some of the ancillary benefits from the acquisition? How you might creatively leverage some of these licensing relationships to benefit some of the Iconix brands with some of the non-apparel retailers such as Universal Studios or NBC?

It's a little to really jump in and tell you how we're going to expand margins and also how we're going to leverage the infrastructure and all the relationships. But what's exciting about the acquisition is on various different levels. Obviously, we want to have such a diverse group of direct licenses with people like MetLife and Hallmark and H&M and CBS, Universal. It goes on and on. There's almost 1,200 great licenses. So, that's exciting to try to figure out how to leverage our present brand structure within there.

Also, what's really exciting to us is the global footprint that the brands have in that we're in 40 countries. Japan is the largest with - right now we only have a very small business. I think we have four deals there. So, we see a big opportunity to leverage both the international footprint that Peanuts has and also the expansive types of non-fashion that it has. It's a little bit early to be specific on anything as far as both top line expansion or bottom line or trying to understand EBITDA.

Okay. Thank you very much.

Thank you.

Your next question comes from the line of Mr. Bob Drbul with Barclays Capital. Please proceed.

Hi. Good morning, guys.

Good morning.

I guess the first question is when you look at the profitability of the Peanuts acquisition, low 20s, how quickly can you improve that profitability? What do you think are the biggest drivers? And then the second question I have is can you maybe comment around any of the opportunities that you have in terms of the China opportunity and sort of thoughts around monetization for any of the brands that you've partnered with over there?

As kind of I just mentioned, Peanuts is a little early to discuss on how to leverage the great structure they have. The brand, United Media's been doing it for 60 years. Incredible global footprint. A little early to talk about the synergies on how to raise EBITDA and continue to increase top line. We're just very excited about the breadth of the brand both internationally and the diversified apparel. As far as China goes, we're just pretty excited about the opportunity where our partners are committed to open up 700 stores. We've got a couple more deals we hope to announce in the near future and hoping for a monetization sometime within the next 12 months. We're pretty excited about the opportunity of which China emphasized. Also going back to Peanuts, they have, I believe, over 500 stores in China today that are labeled Snoopy and there's also Charlie Brown cafes. The Peanuts opportunity is just exciting from a lot of levels. The Schulz family has done a wonderful job in working with it and we're excited to be working with them going forward to continuing to grow the royalty structure.

Great. Just one additional question is on the organic, the 7% number for this year, when you look at what's happening at retail today with 7% organic versus the 7% you guys experienced in 2009, is that apples to apples? What are the challenges on that 7% in terms of what's doing better and what's doing worse?

It's Yehuda. In terms of the organic, this quarter was an incredible quarter where across the board our DTRs had virtually all double-digit increases in retail sales year over year. So, from an apples to apples standpoint, I think you look at our portfolio, we still have an incredible driver in 19 DTRs that are showing great strength. We still have growth opportunities we're seeing via just greater, larger assortments, more rack counts, new categories are still coming out, and new territories are still opening up. I think a lot of those factors are still playing in and will contribute towards the 7% we're projecting this year.

We're also really encouraged by watching the inventory build up and we're hoping that the success of the first half of the year, the retailers get more encouraged to continue it and to continue to bring in inventories at the level they are and we think we have some good upside to the 7%.

Great. Thank you very much.

Thank you.

Your next question comes from the line of Eric Beder with Brean Murray. Please proceed.

Hi. This is Jennifer Sung filling in for Eric today. Just again in regard to the Peanuts acquisition, you mentioned that you're anticipating higher costs associated with the business. Can you give us a sense of how much the additional cost you're expecting and how that existing contractual revenue share that you have is structured?

Yes. Sure, Jennifer. We're seeing that the EBITDA margins for the Peanuts standalone are about 20% to 25%. In there there's about, I would say, 40% to 45% is the family revenue share which was an existing contractual agreement, about 15% is the worldwide agency fees that represent the Peanuts brand across the world and the balance, about 20%, is just regular comp and SG&A. That's the structure that exists today. That's what we're talking about.

Okay. Just in terms of the licensing agreements that you have in place now, like do you have the proper support and infrastructure to be able to manage it today?

Yes. They have a tremendous infrastructure, actually about 80 people that manage the brand worldwide, including large agencies around the world. They have 20,000 different products they approve every year. It's a pretty intense structure, very different than Iconix and something we're going to be analyzing the effectiveness of. So far, they've done a great job but it is a worldwide footprint in managing this brand.

And finally, just a question for you, Neil. Based on what you're seeing across all the partners you're working with, at this point do you feel that consumer spending levels are pretty sustainable or just what are your thoughts on the environment in general?

I think we're definitely in a recovery, no doubt. I think the consumer that was worried about losing their job is no longer worried and they're spending money. People have been saving for about a year, year and a half and living under fear of losing their job. So, the consumer is slowly coming back and actually you could argue not so slowly. The last two months have been pretty incredible. We're pretty hopeful it continues but we're also planning conservatively that it doesn't. Obviously there's still a lot of pain out there when you look at the unemployment and you look at housing. I think we have to plan for a very slow recovery but we're definitely in it and we're pretty excited about the opportunity for the rest of the year.

Thank you.

Thank you.

Your next question comes from the line of Omar Saad with Credit Suisse. Please proceed, sir.

Thanks. Good morning.

Good morning, Omar.

Great numbers today. Congratulations on the Peanuts acquisition.

Thank you.

Neil, can you help me -- I know a lot of people asked questions about the Peanuts thing already. Can you help me understand and maybe talk a little bit more about is this an acquisition where you guys can bring a certain competency or skill set or relationships to Peanuts that they're missing? What's the opportunity on the Peanuts side? Has it been under marketed as a brand? Is it the PR skills that you guys have that are really going to benefit there? Or is it more about getting access to the Peanuts relationships and getting more into those businesses and building out that platform for you guys? Or both?

I think it's a little bit of both. Having spent time with the Schulz family over the last month and seeing how they manage the property along with United Media, we definitely feel we can add value. They don't market the brand that tremendously. They kind of let the licensees do it, what MetLife does with Snoopy and what Hallmark does with the characters. I definitely think we can add value from the marketing side.

Also, I feel that maybe we can do some other DTRs that we do around the world. They do have great relationships. Obviously MetLife's been a licensee I think for 30 years. Hallmark for, I think, 50 years. Great theme parks with Universal and Cedar Fair. Also some pretty exciting apparel DTRs with H&M, Benetton, Old Navy, the world of drug stores which we're not in is kind of interesting, in CVS and Walgreens. So, it's a combination of where I think we can bring a lot to them. They've been a little slow on some of the new technologies, in our opinion has not invested as much as they should've been. So, we think we can advance some of the new technologies to make the characters more relevant to this generation. A lot of emerging countries like India and other places where the characters haven't gotten a foothold yet.

So, I think it's a combination of number one I think we can add value from a lot of different ways which we've identified and then second I think it's an incredible footprint worldwide of licensees that I think could benefit Iconix.

Okay. Great. And then if you could just give us separately on the core business an update on your licensee base? How are your licensees operating? Not the DTR stuff, but this vast network of licensees you work with. Financially, how are they standing right now? Are they being able to help you drive the business in some of those third-party brands that you operate?

Yes. As you can tell with 42% top line and 53% or 58% bottom line, it's been across the board recovery from top to bottom and even our wholesale licensees are as excited as our DTRs are. There's just a wonderful -- I think everyone was shocked so bad last year and everyone got their cost structures in line and shrunk the business to the right size and inventory planning and then when this recovery started to happen, everyone was in such a great place to start making profits again. It's a wonderful feeling across the board from our, I guess now, close to 2,000 licensees worldwide.

Okay. Great. Best of luck.

Thanks, Omar.

Your next question comes from the line of Mimi Bartow with Telsey Advisory Group. Please proceed.

Good morning, guys. Great quarter. First, I was wondering if maybe you could remind us about the upcoming category we would see at Wal-Mart in terms of the Wal-Mart brands this year?

Sure. I guess in terms of categories we're seeing a lot of those categories that we were hoping would be starting to hit the floor. You look at OP with skateboards and the big hit that started back in Black Friday time and carried into this year, some of the beach bikes, and Starter and Danskin with the hotspot that we had this past quarter, one of the most amazing things that we had was this introduction of Starter Basics, this new category where we had basic underwear, basic pallet programs just driving a lot of revenue. Danskin we still have just increased SKU counts in some of the related fitness areas, whether it's yoga mats or DVDs. So, in all three of the Wal-Mart brands, there are new categories that have come out that are coming out and with the interpretation of lifestyle branding as we do, we see increased opportunities there going forward.

Great. Do you have any visibility in terms of future hotspots?

We do. We try to keep that proprietary.

For proprietary reasons Wal-Mart doesn't like us to talk about how they're going to set the floor. But we are always working on them and they are across the board.

That's fair. And then just lastly, in terms of marketing I think you said you were going to, after reporting the fourth quarter, be a bit more aggressive in marketing. Is there any change to the marketing budget for the year given some of the strength in the underlying brands or because of the Peanuts acquisition?

No. It's pretty much -- there could be some quarterly flows with investors a little bit more in Q1 that we originally planned but, no. That's one area where we get the variable based on business and really the expense that we have is the Company. We vary is based on how good business is and just being opportunistic when opportunities come along.

Thanks.

Thanks, Mimi.

Your next question comes from the line of Robby Ohmes with Bank of America-Merrill Lynch. Please proceed.

Thanks. I just had a follow-up question on the non-DTR side. You mentioned that everything's picking up, Neil. Are there any brands within the portfolio that maybe you'd want to call out that you see a bigger opportunity with? I know you mentioned some of the brands you're doing in Macy's. Is there a lot of work going on with either Badgley Mischka or London Fog that could drive a big uptick in some of those brands either in the back half of this year or 2011? Thanks.

Thanks, Robby. There's a few. At London Fog we see some big opportunities. We're working with the Ecko group of brands, continuing to grow. We've signed 11 new deals since we acquired the property in the last three or four months. Pretty much across the board, we're seeing nice growth in a lot of different places. As far as any one brand that I see breakout, I wouldn't say. I mean, we're excited about what Badgley Mischka's doing with the Home Shopping Network and Rocawear's had a great quarter in the kid's area and the men's side. It's pretty much no one area breakout but everything seems pretty healthy and going forward strong.

Got you. Just a follow-up question on Peanuts, I just want to clarify. So, on that acquisition are you basically acquiring all the people that will manage all those agreements or do you think you'll actually have to add, go out and hire and pick up new headcount?

No. They really have a great team of people there. We've been doing the due diligence over the past few weeks and we're pretty excited about the team they have and don't see adding headcount.

Terrific. Thanks a lot.

Thanks, Robby.

Your next question comes from the line of Mr. Jim Chartier of Monness, Crespi, & Hardt. Please proceed, sir.

Good morning. I have a few questions.

Hi, Jim.

First, could you tell us what the revenue contribution from Ecko was in the quarter?

We don't go down to the brand level.

Okay. And then Zoo York I believe is not going to hit Kohl's or JCPenney's until fall? Is that correct?

Yes.

That's correct.

Are you guys getting the full benefit of revenues from that license agreement in 2010? Or are you getting a half year of revenues? How does that work?

We're getting a half year but overall it will substantially increase that brand. Zoo York has been, as I'm sure you know, just a limited distribution. This will take it through Kohl's, Penney's, and probably the broader mid-tier landscape.

Okay. So in 2011, you should get a nice growth in that business. Is that correct?

Yes.

Warren, could you tell us what the deal costs for the Peanuts acquisition are and when that will hit the P&L?

We haven't specifically given the exact deal cost but we said inclusive of the whole Peanuts and depending on when it closes our kind of EBITDA margins are going to be about 60% for the full year for this year.

Okay. And then Joe Boxer, it's great to see it in all Sears doors. Is it in all categories in all Sears stores or how do you expect the category to roll out over time?

I think what we'll see right now and throughout the year is a sportswear and underwear-loungewear collection. Hopefully over time those categories will increase. Definitely if you've seen Joe Boxer in a Kmart, we have a broader assortment today but that could potentially increase in Sears as well.

Okay. And then --

Neil, please press star-one.

Star-one? Okay. Did you lose me?

Hi, could you please press star-one to enter the queue?

Okay. Can you not hear the Company now?

Correct. Mr. Chartier? Please press star-one. Thank you. Your line is now open.

Hello?

Yes, Jim. Go ahead.

I'm sorry. Any concern about the complexity of the business increasing for you and managing what seems like somewhat of a new business line for you with the character representation?

Not really because they have a great team. We're lucky to have the Schulz family who has been doing it for the last 60 years and so, steady royalty flow. We really believe that we could only hopefully add growth and add value and no concern on the downside.

Okay. And then finally, last year you thought OP was going to turn into a lifestyle brand at Wal-Mart. What are you thinking about that today and what's built into your expectations for this year?

It's happening if you go in over the next 30 days you'll get to see a wonderful OP presence. We're pretty excited about it. We planned it conservatively but each week we're more happy than we planned. So, we're pretty excited about what we see over the next six months.

Sounds good. Thanks a lot.

Thanks, Jim.

With no further questions in the queue, I would like to turn the call back over to Mr. Neil Cole for closing remarks.

Thank you, everybody, for joining us today and for your interest in Iconix. As always, our management team is available all day for questions, throughout the day. We'll talk to you soon. Thank you very much.

Thank you for joining today's conference. That concludes the presentation. You may now disconnect and have a great day.