Icon Energy Corp (ICON) 2010 Q3 法說會逐字稿

Good day ladies and gentlemen, and welcome to the third-quarter 2010 Iconix Brand Group earnings conference call.

At this time, all participants are in listen-only mode. We will be conducting a question-and-answer session towards the end of the conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

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 protect, 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 your host for today's call, Mr. Neil Cole, Chief Executive Officer, Yehuda Shmidman, Chief Operating officer, and Warren Clamen, Chief Financial Officer. Please proceed.

Good morning, everyone, and welcome to the Iconix Brand Group third-quarter 2010 earnings conference call. Today, we will review our quarterly performance, provide you with an update on our most recent business initiative, and discuss our 2010 and 2011 outlook.

Reviewing our results for the third quarter ended September 30, 2010, our company reported record third-quarter revenue and earnings. Total revenue was approximately $96.9 million, a 63% increase as compared to $59.4 million in the prior-year quarter. The driving factors for the increase were a full quarter of the Peanuts revenue, which includes the new contract we entered into with ABC to air the Peanuts holiday specials, a full quarter of the Ecko brand, as well as healthy performance across our overall portfolio.

In the third quarter, our non-GAAP net income, which excludes non-cash interest related to the convertible debt, increased 32% to $29.8 million. Our diluted non-GAAP earnings per share was $0.40 compared to $0.31 in the prior-year quarter.

Our EBITDA increased 21% to $52.1 million. Our EBITDA margin for the quarter was 54%. As we had previously said, the lower EBITDA margin was anticipated, as it includes a full quarter of the Peanuts brand, which runs at lower margins compared to our fashion and home brands.

Reviewing our results for the nine months ended September 30, 2010, we achieved strong top and bottom-line growth. Our revenue increased 47% to approximately $244.6 million. Our non-GAAP net income, as previously defined, increased 36% to approximately $83.3 million, and our EBITDA increased 25% to $150.9 million.

Free cash flow attributed to Iconix for the nine-month period increased 19% to $121.1 million. Free cash flow per diluted share for the nine-month period was $1.62. We believe free cash flow is an important metric to look at for our company because there is a large non-cash component to our expense and tax provision. We estimate the incremental cash to our net income in 2010 to be over $60 million, which includes non-cash taxes, non-cash interest, amortization, and non-cash compensation.

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 morning or on our website, IconixBrand.com.

Our cash balance as of today is over $100 million. We believe that our cash on hand, combined with our ability to access the capital markets, will enable us to continue to execute on our acquisition strategy.

With regard to the ABC contract we signed this quarter for Peanuts, it amounted to revenue of approximately $12.5 million. This revenue represents the present value of the minimum royalty payments due from ABC over this new five-year -- over the new five-year life of this contract, and translates to approximately $0.02 per diluted EPS. This is a specific accounting treatment that relates to film and TV production agreements.

With that, I will turn the call over to Yehuda Shmidman, our Chief Operating Officer, who will provide you with an update on our business initiatives.

Three areas I would like to focus on today are the overall strength of our domestic business, an update regarding Peanuts, and the progress we are making in growing our international business.

Starting with a review of our domestic business, we are pleased to report that our licensee base of over 1400 licensees remains strong and is growing. A large contributor to our growth continues to be our direct-to-retail business, which achieved double-digit retail sales gains this quarter.

We also had several new brand launches in the third quarter that we are very excited about. The first is Material Girl, which launched at Macy's. The initial response was extremely positive and as a result, the brand will be rolling out to additional doors in 2011. In addition, we are negotiating with potential retail partners in Europe, in Canada, and in Mexico to expand the brand globally. Longer term, we believe MG Icon, our joint venture with Madonna, will generate royalties in the range of $10 million to $20 million as we expand Material Girl and launch new brands under the MG Icon umbrella.

Our Bongo launch at Kmart/Sears is also off to a great start. We worked with Kmart and Sears to promote the launch with an ad campaign featuring Audrina Patridge, the TV star from The Hills whose popularity recently skyrocketed as she competed on Dancing With The Stars. The ad campaign generated hundreds of millions of impressions online and in the press.

This quarter, we also launched a new disposable tableware collection from Waverley which is being sold throughout the mass market, including Wal-Mart and Kroger stores. Finally, we relaunched Zoo York in the mid tier and sales in this channel, especially at JCPenney, are exceeding expectations.

Moving on to Peanuts, this month marks the 60th anniversary of the Peanuts brand. To celebrate, we are launching a year-long tribute with special events, games, and merchandise that have enhanced the visibility of the brand. We also remain focused on creating new opportunities for the brand that will keep the Peanuts gang in front of the next generation.

In addition, as Warren mentioned earlier, we recently signed a new five-year deal with ABC network for the popular Peanuts holiday specials. This long-term partnership with ABC demonstrates the continued relevance of the Peanuts brand as it celebrates its 60th anniversary.

We are also making progress on integrating Peanuts into the Iconix infrastructure. As part of the integration process, we recently hired Tamra Knepfer as Executive Vice President of Peanuts Worldwide. Tamra and the team are focused on leveraging the licensing and fashion expertise within Iconix that has made the broader portfolio successful around the world. She joins our organization with nearly two decades of experience with leading licensors, including the Walt Disney Company, and Sesame Workshop.

As part of the Peanuts restructuring, we are exiting unprofitable businesses such as certain third-party representation contracts. Therefore, we expect the revenue for Peanuts Worldwide to be approximately $70 million in 2011. This number does not include any new DTRs or other new initiatives that are in-work.

On the international front for all of our brands, our team and partners are focused on expanding around the world. International business represents close to 20% of our pro forma revenue. In addition to our existing platform covering Latin America, Europe and China, we recently identified local talent based in Japan and we will soon be opening an office in Tokyo to grow our portfolio in the region.

From a longer-term perspective internationally, we continue to have high hopes for China. As many of you know, Mecox Lane, our partner for Rampage China, recently went public on NASDAQ. We believe the success of the Mecox Lane IPO is a good sign of what's to come. Beginning one year from the IPO, Iconix China has the right to put its 20% stake in Rampage China to Mecox Lane. We believe that, if Iconix China had opted to monetize its stake today, it could've realized approximately $10 million to $15 million. However, based on the store rollout plans and e-commerce growth, we feel that Rampage China is still too early in its development and that by waiting a couple of years, Iconix China's stake could be worth approximately 2 to 3 times that amount.

Overall, we continue to be encouraged with the aggressive rollout of retail stores for all five of our brands that have already launched in China. Between our five brands, there are over 100 stores open today, plans for over 200 by year-end, and 1000 stores within the next three years.

With that, I will now turn the call over to Neil Cole, our Chairman and Chief Executive officer.

Good morning. Thank you Yehuda and Warren. We are pleased to report another record quarter for our company, driven by both organic initiatives and our recent acquisition of Peanuts.

With 27 brands in our portfolio, we own some of the largest and well-known brands in the world that, in aggregate, represent $12 billion in retail sales. Diversifying our portfolio, building brand equity and driving volume have always been key to our strategy. As we look out to the future, we believe we can continue to capture market share as we expand new distribution channels, categories, and geographies.

As Yehuda mentioned earlier, international is a key piece of our organic growth. We believe, longer-term, it can represent at least a third of our business. With our three international joint ventures and our Peanuts business, we now have the platform to support this growth.

In addition, we continue to see acquisitions as an important part of our growth strategy and believe we can continue to leverage our brand management and marketing expertise, as well as our strong network of retail and wholesale partners. We continue to see availability of strong brands. However, we will continue to be disciplined and stay true to our business model as a pure-play licensing company, and not deviate from this model. As we have said in the past, we will only look to acquire IP and are committed to finding iconic brands at certain multiples that are monetized with strong credits and guaranteed royalties.

In looking at our full 2010 financial outlook, we are raising our 2010 revenue guidance to a range of $323 million to $328 million from $305 million to $315 million, and our 2010 diluted non-GAAP EPS guidance to a range of $1.38 to $1.42 from $1.35 to $1.40. Our revenue revision is primarily related to the ABC contract we entered into in the third quarter. Our earnings revision primarily reflects the strong results we achieved through the third quarter. The benefit of approximately $0.02 that we received in the third quarter from the ABC contract will be offset on a full-year basis as a result of our estimated Peanuts restructuring costs of between $2 million and $4 million, or between $0.02 and $0.03 EPS that will be incurred in the fourth quarter.

We're providing 2011 revenue guidance of approximately $340 million to $350 million, 2011 diluted non-GAAP EPS guidance of $1.53 to $1.58, and 2011 free cash flow guidance of $160 million to $165 million. When evaluating our organic growth, something that is becoming more and more important to note is that a key component is not reflected in our topline revenue. (technical difficulty) is that our three joint ventures and MG Icon, our partnership with Madonna, all fall on the equity earnings line on joint ventures, and therefore are included in the income statement down below and are not in the top. We expect these joint ventures to grow significantly in 2011. We expect royalties associated with our 50-50 joint ventures to be well over $20 million in 2011.

In closing, we are very proud of what we've accomplished so far over the course of this year. We're on track to report another record financial year for our company. To highlight some of our accomplishments, we acquired a truly Iconix-based brand that further diversifies our portfolio in Peanuts. We formed a new partnership with Madonna, which led to our first direct-to-retail with Macy's, and we repositioned Bongo to a long-term DTR partnership.

As we look to 2011, we are excited about the many opportunities ahead of us, as we continue to leverage our platform and relationships and build strong businesses for our brands across the world. Our largest growth opportunities in 2011 will come from some of our newer DTR brands. For example, Kohl's continues to be extremely vested in the rollout of Mudd as their core key denim brand and we expect to see strong growth in 2011. Next year, Material Girl will be rolling out to additional Macy's stores and be expanding internationally. We're also planning the launch of a second brand with Madonna through MG Icon which we believe can be as big and exciting as Material Girl.

In addition, we expect to see good growth internationally, specifically with London Fog and Rampage, as we continue to make progress on our China strategy and get closer to our first monetization of that.

In addition, we feel good about the strength and position of our overall portfolio and are confident that we will continue to acquire world-class brands that are already strongly monetized. We have a unique business model that continues to thrive and has proven itself to be one of the most relevant business models in the industry today.

I'd like to thank all of you for listening this morning and your continued support. I'd like now to turn it over to the operator for our question-and-answer.

(Operator Instructions). Todd Slater, Lazard Capital Markets.

Thanks very much. Hello everybody. I read in an interview this summer, Neil, where you said that you said you sort of expected organic growth to, in the back half of the year, to sort of decelerate to the low single-digit level. I'm wondering if you could talk about what you are seeing on the organic side if you include the revenues from the 50-50 JVs that are below the line. What did the organic growth look like in percentage terms in the third quarter and what is your outlook for 2011? Then I have a China question. Thanks.

A lot of it is because of the way our deals are structured where once they hit certain levels, the royalty goes down. A lot of that happens. A lot of our deals are that way, although not OP but a lot of the other bigger ones. So we definitely plan Q4 to be lower from organic as the first three quarters. As we reported today, our third quarter was a lot stronger pretty much across the board than we had originally projected. We have Q4 in there kind of conservatively. We're hoping to continue to hopefully surprise on the upside, so we planned Q4 conservatively. Overall, I think, in including the JVs, the JVs probably have it coming a little higher, but I think you'll see organic around 6% to 7% this year. In our '11 initial guidance, we probably -- I think we took it down to around 5%. But there is a lot more that comes through the JV line which is kind of explosive because we have all the Madonna businesses in there, we have China in there, we have Latin America, which is doing very well. So there's a big upside where it could be between $20 million and $30 million of revenue that comes down below that we don't get credit for.

No, I understand that. That's why I'm asking -- is if you were to include that, if you look at it, forget about how it's structured on the income statement, if you back that --

I think you --

-- include that, is that in your 6% to 7% number for this year?

No it's not.

So you're saying it's 6% to 7% not including the stuff that is actually below the line?

Correct. Hopefully, it can get us maybe to around 10%.

So -- and next year's 5%, again you are not including that joint venture revenue?

Correct.

So it's higher than that, all right. But so when you said that you expected to decelerate at the end of the year, that was a commentary on the structure. I thought that was a commentary on you thought the environment just would be a little bit softer in the back half versus the first half based on what you were seeing. More that than the structure of the deals, of the DTR deals.

Probably a little bit of both. It's the way our deals are structured where, at the end, with the decelerating royalties, but also we did believe that it was such a strong spring season. Retailers plan back to school higher, a lot of inventories, but actually the last few months have been a lot better than we thought. But we do think there is definitely a cautious atmosphere for holiday, and we plan to really -- low single digits come and hopefully we'll do -- continue to surprise on the upside.

When you say the last few months have been a little better than you thought, where in particular have things surprised you, or have you seen particular strength?

It's been -- Kohl's has done really well. Target has done well in our home businesses, and a lot of the Macy's businesses. So it's been a combination of pretty much from the mass level all the way through the department stores.

Okay. Then on China, you have a geography that could be worth $1 billion or more brands potentially and you've decided sort of go through this multitiered joint venture type system. You're talking about Rampage maybe monetizing at $10 million to $20 million or $10 million to $15 million, or maybe $30 million to $40 million a year from now as it grows, but which seems like a fraction of the overall opportunities. I'm just wondering if, given what you know now or as you learn, are you willing to relook, rethink or maybe create some different structures for some of your brands in China if you -- in terms of monetizing that opportunity?

We are really happy with the structure we have developed. We have a world-class partner in Silas Chou, and just what happened with [Nikops] being the fastest-growing Internet company and the one -- another one we're really excited about is a company called Doright which we think probably will come to market with London Fog probably quicker than Rampage, who has London Fog. We've got three other partners for Candie's and Rocawear and Badgley, great companies. What's great about it is we are going to be getting a multiple of hopefully 25, 30 times on the revenue that we own of people that are vested because they own the brand. If it was a license, I think it would be very difficult to get paid, and it's just not the mentality we are told over there.

If you look at all the US companies, no one is bringing big royalty income out of that region. I don't think it is going to happen over the next five, ten years. People have these shops and stores which I think is obviously more risky and CapEx intensive.

But no I'm very excited. If we can get anywhere between $30 million and $100 million, and we have 25 brands and I think we have incredible opportunity. And who says we have to sell? We can have these companies like, whether it be a Mecox or a Doright or some of these other great companies, and we can continue to keep the security and ride with the success of our brands. But no, we are happy with the way it's going, and it actually couldn't be better than we would have dreamed of. We're going to have over 1000 outlets within the next 24 months with our brands, building incredible equity of these young entrepreneurs who are our partners who are looking for legitimacy by owning an American brand.

Right, but instead of having any kind of an annuity stream over time over there, you're basically selling all of your IP that will eventually be -- China will be off the map at some point down the road.

Yes, but we're going to own equity in all these great companies. I wouldn't call it off the map. We just own equity rather than owning a royalty stream. We are with people who feel they own it, so I think we're going to grow dramatically quicker than anyone else who's doing it over there.

Okay. Well, listen, best of luck. Thanks.

Bob Drbul, Barclays Capital.

Good morning. I guess the first question I have is you just laid out your 2011 guidance at this point. Can you just maybe talk about the confidence level that you have in the visibility that far out, sort of what are your sort of major drivers or assumptions that we should focus on?

Actually, it is pretty constant because as you know, Bob, I think we have close to 70% is guaranteed. Having such developed businesses with Wal-Mart and Target and Kohl's and the longevity of our brands -- these brands have now been around for many years -- we really get a good feel for our base business. Yes, there is a lot of upside, whether it be with a Mudd or a Material Girl or some of the new businesses that are starting to roll out bigger than before. But we've got a pretty good range or -- definitely a lot of confidence on the downside with the stability of our business in a tough world.

Okay. Then Yehuda, I was wondering if you could maybe just give us some insights around the Wal-Mart business the last couple of months, any changes that you've seen, shelf space additions, and sort of what's been going on with your brands there, a little bit more detail.

Sure. The Wal-Mart business continues to be really strong, definitely a standout in the quarter and, as Neil mentioned, together with Kohl's and some of our other retail partners, just doing really well. We look at Starter and Danskin. As you see those categories flow into stores today, becoming more and more true to what we are hearing all collectively from Wal-Mart and that it's the big strength in basics. OP is doing well as well from categories we're coming off this year, with expansions and the hard-line side that have performed really well, so we are on multiple aisles, still plenty of categories to explore. But we think, with all three of the brands, Starter, Danskin and OP, they will be focused on the basic strategy, and we continue to see good numbers.

My last question is on the Peanuts business. Is there -- with the exit of the money-losing businesses, is there a quantification on sort of what you expect on the EBITDA margin pickup from exiting some of those segments that you are exiting?

Yes. It's Warren. We are actually forecasting 2011 EBITDA margins to improve from Q3 and Q4 from these exitings from the restructuring that we have been doing at Peanuts. It's going to be about 60%, back up to 60% for 2011, EBITDA margin as a company, the whole. Yes. So the Peanuts EBITDA margins will improve also but as a whole, we don't give specific revenue guidance by brand. But as a whole, Iconix will have 60% EBITDA margins.

Got it. Thank you very much.

Robbie Ohmes, Bank of America.

Thanks. Actually, I just wanted to follow up quickly on Todd and Bob's question. The question is more thoughts on 2011. I think, if you sort of leave the Madonna JV out of the conversation and then pull out the incremental benefit from the Peanuts acquisition, I think your revenue guidance gets to a down -- sort of a down revenue growth for the rest of the portfolio. So you sort of have told us the things that you see doing well at Kohl's, etc., for 2011. But can you help us understand? Is there maybe one brand or a small group of brands in 2011 that are going to be down, or are you looking into 2011 and it feels kind of soft from a lot of your license partners, and so you expect a lot of your other brands to be down organically next year? If you could comment on that, that would be great. And just a second quick question on Peanuts, maybe even a little more on after you do this ABC (multiple speakers)

Let's save the question because I don't want to lose the train of thought on the first one (inaudible) (multiple speakers) tough question. Actually, I think you're wrong because when you look at our revenue guidance -- and this year let's say we come in around $320 million, take out the one-time ABC and redo Peanuts at around $70 million, I think you're going to see, across the portfolio, that we are about 5% organic. So it's not down. We're talking about going from we think roughly about $310 million to somewhere around $350 million, $345 million. And then when you add JV, which could be another $20 million, $25 million, you're seeing organic growth we think getting close to around between 10%.

I'm sorry, go ahead with the second one. I jumped in. I didn't want to lose my train of thought.

Yes, no I hear you on the math, but you've got to take those things out of next year too. It just -- I think, if you pull everything out of both years, your portfolio from the licensing revenue on your guidance looks like it would be flattish to negative next year.

(multiple speakers)

We can check the math off-line. So then the other question was just on Peanuts. The ABC deal you're doing, can you maybe talk a little more about how that could help all the other licenses out there, what kind of bump you expect and the timing on that? Does it really help the core license growth their business?

First of all, I don't want to do a commercial, but tonight at eight o'clock on ABC is the Great Pumpkin, so you get to see our Charles Schultz work this evening. But just tremendous visibility. Millions and million of people, they're playing our specials I think 13 times in the next two months on nationwide TV. So having a new generation and having kids watching all the new Peanuts specials is tremendous for our brand, and just building equity for products and everything else we're going to do. So I think the ABC is definitely a good thing for exposure for our brand.

Terrific, thanks.

Eric Beder, Brean Murray.

Good morning. Congratulations. Could you talk a little bit about I know your guidance doesn't include any transactions. What are you seeing in terms of that market? I know you've talked in prior conference calls about cleaning up and I guess making your financial structure more advantageous to do deals. Could you give us some updates on both of those?

Obviously, we can't comment on specific acquisitions, but it's -- there's a lot of great opportunities. We are trying to stay disciplined and make sure that we buy clean marks. A lot of the properties we are looking at have different things on them that we have to clean up, whether it be stores or whether it be other -- not so easy just to find IP. So we have a lot of great brands and we are just hoping to continue to be aggressive, like we have been over the last few years, and as we have acquired over 20 great marks. Wonderful access to the capital markets, the Company has over $110 million of cash and will generate over $150 million, $160 million over the next 12 months. So we definitely have obviously the financial gunpowder to act on the strategy.

Is there a second part to the question?

You said before that -- in terms of the financings, you take advantage here of the low interest rates. So you maybe refinance some of your paper and clean up and streamline the structure of the paper?

I think we actually have below the lowest interest rates I think out there. Our weighted average cost of debt this quarter was about 3.3%. Definitely, we would refinance. Rates have come down but they are definitely north of that. I don't think we feel pressure right now. Again, we've said that our choice is to do it in tandem with an acquisition. As Neil said, we had over $110 million on our balance sheet right now in cash, and we will generate over $160 million of free cash flow. So the first debt comes due in 2012, which is the term which we could pay off easily with just our cash. So I think we're going to keep our eyes open, but we don't feel any pressure right now.

In terms of the ABC deal, so that's a one-time only -- we're going see that $12.5 million and there is going to be no other income statement effects from that deal going forward?

Unless there's additional airings, but based on what the contract, the minimums for five years, yes, that's the present value of the minimums for the five years, the ABC.

Finally, on China, you have now a one year -- I guess you have one year before you put that deal back to -- the Rampage deal back at your desire. Where -- what would be the next in terms of timing for the other next round of deals here? I know most of these guys have periods where you have to do something to monetize the business.

There's two other deals that we're hoping that could go public next year and possibly even with our brands. The next one is London Fog. The other one that's making rapid progress is Candie's. Candie's will have 50 stores open by the end of this year, and it's moving pretty quick. And they're pretty excited and are already talking to potential equity partners. We go side-by-side with private equity, and Sequoia was the partner in Mecox Lane, and CEC is the partner in Doright. So each of them are working -- having these aggressive private equity guys who are looking for monetizations, pretty comfortable that we will be able to make that happen over the next year or two.

As far as new deals, today we have five. We are hoping -- we're pretty close to deals with OP. Mossimo, and Bongo, seem to be the next deals that we will be adding, so hopefully we'll have at least eight done by the end of next year.

Great, thank you.

Jim Chartier, Monness, Crespi, Hardt.

Good morning. The first question -- the $10 million to $20 million of revenue potential from MG Icon, does that include the new brand you've been talking about?

Yes. That does.

And include expanding that into additional geographies beyond the US as well?

Yes. I think each brand could be between $10 million or $20 million, but it's going to be a slow build. Material Girl is going to -- a lot of times, these deals have long 18 month first years until they roll out. So when (inaudible) says $10 million to $20 million, I think that's probably the year after next. Hopefully, it could be $30 million to $50 million over the next few years based on the success of the brands.

Then OP, from what I can see in Wal-Mart, it looks like you guys have some nice floorspace in multiple categories. So is what we're seeing now kind of in line with what your expectation was last year as far as making OP a year-around brand?

Yes. Actually, we are having some of our best sell-throughs ever with OP for fall, which is pretty exciting. In the men's area, we have a lot of success happening now. So yes, actually OP is going to beat its numbers this year. We are also pretty encouraged. We hear there is -- Wal-Mart is going to be discontinuing some of the other fashion brands and OP is not one of them. So we're pretty encouraged about our positioning at Wal-Mart. I've had good discussions with Mr. Simon and the new team with Andy Barron and Lisa Rhodes. So we're pretty encouraged that we have three great brands that kind of work into their fashion "basic", which is we're selling a lot of socks and underwear in the key categories that Wal-Mart is focusing on.

Great, thanks a lot.

Ali Zipf, Telsey Advisory Group.

Thanks for taking my question. I just was wondering if you could provide us with an update on some of the brands you mentioned might have been underperforming a little bit in last quarter. I think Fieldcrest was something you had called out. Any updates there?

Right. Actually, Fieldcrest is starting to do well. We just got a five-year renewal from Target, so as far as underperforming -- unfortunately, I know (inaudible) some must be -- we've kind of projected what's happening, so there are none that are glaring like, in the past, we've had a couple like Bongo that, until we repositioned it and now it's starting to do really well. Rampage is doing well, London Fog so -- no. If there was one area that I would say we expected it to be tough, planned it, and budgeted for it, it could definitely be the Street Urban category, although Ecko is hitting its numbers and so is Rocawear. We're playing it very conservative for the next 12 to 24 months. That's a category that is kind of changing and a little more not as distinctive as Urban used to be. It's becoming more street and -- so generally across the board, we're pretty pleased with the performance of the portfolio, I think which shows in the numbers.

I guess that's good news. Thanks. I appreciate it.

Todd Slater, Lazard Capital Markets.

Thanks a lot. Just a real quickie regarding the ABC, the $12.5 million ABC deal. Is another way of looking at it is like sort of a $2.5 million or maybe more than that because it's a net present value, but $2.5 million-plus a year for five years recognized in one quarter?

Yes.

How does this compare to previous contracts? Does this include any international, possible international airings and other -- are there other possible contracts out there that can be renewed or incremental to what's happening in the US?

This is the longest deal that ABC has ever done with the Peanuts characters. The team that negotiated it, the Schulz family and Lee Mendelson, pretty excited about the deal, about the money we got and also length of the deal. So this is a unique accounting and it's also based on artwork and production that doesn't change. Obviously, this product has been as it is for I guess 10, 20 years. So that's why they make us account for it when we do it and when we get it as a quarter.

Okay. Is there a possibility for Peanuts to air, be seen in other global markets?

There is. We are on TV right now in Japan. We have -- our cartoon plays every Saturday morning. We also have a new special that hopefully is going to be coming out in the next few months developed with Warner Bros. called Blanket, which we're pretty excited about. We are hoping to get that on the air.

We're working on a lot of new development. Part of what Tamra has been charged with, with our whole new team, is looking at ways to make Peanuts more relevant to my five-year-old and making sure that the next generation grows up with Peanuts like we did.

So we are hoping -- and a lot (inaudible) more technology, whether it be more apps and more different types of products for this new generation, but it's definitely part of our strategy in building Peanuts going forward.

The one question I don't have to ask is what's happening with sourcing inflation and the cost of good line. So I'll just leave it at that. Have a good fourth quarter, guys.

I hear it's bad.

There are no further questions at this moment.

Thanks, everybody, for listening. We're going to keep doing what we're doing, and we will be available all day for those that want to do follow-up. Robbie, if you want to follow up with Warren and show how $310 million goes to $350 million, he'd love to take you through it. Thanks everybody. Have a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.