Icon Energy Corp (ICON) 2016 Q4 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Iconix Brand Group Q4 2016 earnings conference call. My name is Brian and I will be your coordinator for today.

(Operator Instructions)

As a reminder, this conference be recorded for replay purposes.

It is now my pleasure to hand the conference over to Ms. Jaime Sheinheit, Vice President Investor Relations. Ma'am, please proceed.

Good afternoon and welcome to the Iconix Brand Group fourth-quarter and full-year 2016 earnings conference call. On today's call we have with us John Haugh, our Present and Chief Executive Officer; and Dave Jones, our Chief Financial Officer.

During today's call we will be making some forward-looking statements within the meaning of the Federal securities laws. The statements 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 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 to not 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 call over to John Haugh.

Thanks, Jaime. Good afternoon, everyone, and thank you for joining us today. On today's call we will review our fourth-quarter and full-year 2016 results, we will provide guidance for 2017 and we will update you on the key initiatives for the Company.

Before going to the financial details, I would first like to share with you the progress we are making on the strategic plan that we outlined at our Investor Day in November. As highlighted in our presentation, we believe the three key elements of driving increased shareholder value are: number one, organic growth; number two, a portfolio management approach to brand ownership; and number three, an improved balance sheet. I'm pleased to be able to state today that we have taken positive steps in each of these areas.

To fuel long-term organic growth across the portfolio, we are more actively managing our brands. For example, have a stronger presence than ever this week at THE COLLECTIVE and PROJECT trade shows in Las Vegas, which is where we are today. At the shows we are featuring seven of our brands, including an expanded upstairs Danskin active wear collection, new PONY footwear collection, Ecko Function, an athleisure line for Ecko, and Starter Black, the halo of legacy Starter jackets.

We also remain focused on increasing market share in the digital space. In 2016 we embarked on a strategy to improve communication and have a stronger e-commerce business across our portfolio. We are developing content-rich brand websites for enhanced consumer engagement and communication.

We have been clear about our intentions to take a portfolio management approach to brand ownership and in December we made the decision to sell Sharper Image for $100 million. As the only consumer electronics brand in our portfolio, Sharper Image did not fit into our go-forward strategy. After careful consideration, we determined that we could better leverage our resources and generate greater returns by focusing on other areas of the business.

We generated a significant return on investment from this transaction. Iconix acquired the brand in 2011 for $65.6 million. the Company previously sold e-commerce rights in US catalogue business for $10 million and the brand generated over $60 million of royalty revenue since its acquisition. In total, we got back approximately $170 million on our original investment of $66 million. We use the net proceeds from this transaction, plus additional cash, to pay down approximately $115 million of debt.

Reducing our debt and delivering the balance sheet is a top priority for our Company. Since the beginning of 2016, we have paid down over $300 million of debt, including $105 million of our 2018 convertible notes, $113 million of our senior secured notes and $90 million of our term loan. We entered the year with a gross leverage of approximately 8.4 times, which is been reduced to approximately 7.7 times today.

With today's earnings release we have changed our segment reporting to break out international as its own segment, consistent with the way we run the business internally. The five segments we are now reporting are as follows: women's, men's, home, entertainment, and international. There international segment does not include our entertainment brand. The global results for our internment brands are recorded in the entertainment segments.

Turning now to our performance in the fourth-quarter and full-year 2016, total revenue was down approximately 7% for the fourth quarter and down 2% for the full year. This excludes revenue from the Badgley Mischka brand, which was sold in the first quarter of 2016. In the women's segment, excluding Badgley, revenue was down approximately 12% for the fourth quarter and 6% for the full year. The two largest contributors to the decline for the quarter and the year were the Candie's brand at Kohl's, which was renegotiated to a lower guaranteed minimum but at a higher royalty rate when we extended the contract through January of 2021, and the Bongo brand at Sears, which was been impacted by store closings and overall soft trends at that retailer.

In the fourth quarter, royalties were also negatively impacted by Danskin Now's tiered royalty structure, which hit a lower royalty rate earlier this year versus last year, driven by higher overall Danskin Now sales at Walmart. The Danskin brand remains one of our strongest performing brands and was up for the full year. We are also pleased to announce that we've agreed to an additional two years with Danskin Now at Walmart.

In the fourth quarter we signed additional licensees for our women's brands including kids for Candie's, kids and hosiery for Material Girl and tech accessories for London Fog. These newly signed categories are expected to launch in store in mid-2017. New licenses should help offset some of the challenges we anticipate in 2017. However, given that most of our women's business has tied to large direct-to-retail programs, we expect the women's segment to be down year over year. For our women's brands we are focused on maintaining our share within our current partnerships and will be working closely with our partners to ensure that our brands have the right positioning and product.

Our men's business was down 10% for the fourth quarter and down 12% for the year. While fourth-quarter results are a slight improvement from the third quarter, the turnaround of our men's fashion brand is taking longer than we had originally anticipated. We made a change in the management of our men's business and Mary Gleason, a veteran in the industry, will not be spear heading the men's turnaround initiatives. In the men's portfolio we are seeing good momentum for our Ecko and PONY brands. We have positioned PONY to capitalize in the resurgence of the retro trend and in spring 2017 are launching a new footwear program with plans to roll out additional categories later in the year.

For Ecko, 2016 was focused on stabilizing the brand following our transition to a new core apparel partner at the end of Q1. As enter 2017, JC Penney continues to substantially support Ecko with the attention opening mega shops in roughly 30 key doors to maximize the brand's presentation at retail. We also be launching a new collection under the Ecko Function label, targeting incremental distribution within the active department.

As we have mentioned before, our Starter brand is done at Walmart, but we are working on a number of exciting initiatives for the brand. Starter's co-branded team jackets continue to serve as a strong halo for the core business. The legacy jackets featuring retro team logos have had very strong sell throughs and are being proactively worn by a number celebrities and athletes who have great affinity for the brand. We believe some of our men's fashion and active brands offer the greatest opportunity for growth within our portfolio.

Our home business was up 9% for the fourth quarter and up 5% for the full year. Our home portfolio remains extremely stable with our strong partnerships including Royal Velvet at JC Penney, Charisma at Costco and Fieldcrest at Target. The Waverly brand is having success with new distribution at Walmart and Walgreens, two of the world's largest retailers. The brand's tremendous archive of patterns and designs plays very well in the home crafting and gifting space and we expect the Waverly business to continue to grow in 2017.

As anticipated, the entertainment segment was down as we were up against the premier of the Peanuts movie in the fourth-quarter of 2015. The entertainment segment was down 20% in the fourth quarter but up 5% for the full year. The Peanuts brand had a very strong year driven by continued momentum from the movie, which we believe speaks to the power of this global brand. In 2016 the Peanuts special, It's Your 50th Christmas, Charlie Brown won the Emmy for outstanding children's program and the Peanuts new shorts were nominated in the Best Kids Animation category for the 2016 international Emmy Kids awards. For Peanuts, in 2016 we entered into collaborations with top global designers including Gucci, Coach and [Hoff]. We opened the Snoopy Museum in Tokyo and the Snoopy and Belle in Fashion exhibit toured three international cities.

Our international business, excluding entertainment and adjusting for the sale of Badgley Mischka, was up 28% in the fourth quarter and flat for the year. The increase in the fourth quarter was partially related to easy comps in the fourth-quarter of 2015, but is also reflective of the significant progress we are making in signing new deals with key markets such as China, Southeast Asia, and Brazil. We continue to build our international platform and 2016 we expanded in-market staff in China, Brazil, Chile, Argentina and Poland. This brings our international footprint to 21 offices in 18 countries.

With 100% control and ownership of China and the shift to a more traditional licensing model in that territory we have more than doubled our revenue in China for the full year. We're also adding enhanced expertise to our business in Europe and believe with expanded talent in day-to-day operations we will see improved results. We expect our international business to continue to grow in 2017 as we reinforce the strength of our global power brands of Umbro and Lee Cooper and continue the expansion of core brands such as Starter, Ecko, Danskin, OP, Ocean Pacific, and Zoo York.

I will now turn the call over to Dave Jones, our Chief Financial Officer.

Thank you, John. Good afternoon, everyone. Our fourth-quarter 2016 financial results include a few items that I'd like to note, as they had previously not been incorporated into our guidance for the year. These include: a $28 million pretax gain related to the sale of the Sharper Image brand, which the Company sold in December for $100 million in cash; a $14.4 million pretax expense incurred as a result of the early repayment of a portion of our 11.5% term loan and the write off of related deferred financing fees; a $7.3 million gain related to the recoupment and final settlement of unearned incentive compensation from our former CEO in connection with the Company's previously announced financial restatements; and, in the fourth quarter of 2016, the Company will recognize a non-cash impairment charge related to certain of the Company's trademarks and goodwill, which is currently estimated to be approximately $443 million.

The amount of such impairment charge remains subject to review. As such, the amount of the impairment charge is subject to revision. Such revision would also result in an adjustment to the Company's operating income, income before tax, income taxes, net income, and earnings per share for the quarterly and annual periods ended December 31, 2016. Upon finalization of the impairment charge, prior to filing the Company's form 10-K for the year in December 31, 2016, the Company will record, if necessary, any resulting increase or decrease to the estimated charge in our financial results for 2016.

Obviously, trademark impairment is based on an underlying valuation of each brand. However, a significant portion of the trademark impairment was driven by the Company's continuing depressed market capitalization. Additionally, a portion of the impairment was caused by the revision to the Company's reporting segments.

Now moving on to our results for the fourth-quarter of 2016, the Company generated $87.1 million in revenue, an 8% decline as compared to $94.7 million in the prior-year quarter. Revenue in the fourth-quarter of 2015 included approximately $1.3 million of licensing revenue from the Badgley Mischka brand, for which there was no comparable revenue in the fourth-quarter of 2016.

Total SG&A expenses were $57.3 million in the fourth-quarter of 2016 as compared to approximately $56.6 million in the fourth-quarter of 2015. After adjusting for special charges, SG&A expenses were down approximately 3% in the quarter. The largest component of the decline was related to lower expenses associated with the Peanut business.

Operating income, excluding the impairment charges, for the fourth-quarter of 2016 was approximately $57.4 million, a 46% increase as compared to $39.3 million in the fourth-quarter of 2015. The increase is primarily related to the gain that the Company recorded for divesting the Sharper Image brand. Excluding the gain in impairment charges, operating income declined as result of lower revenue and higher compensation expense as we made accruals in 2016, as we've previously discussed, related to our new performance-based incentive plans.

Interest expense in the fourth quarter was approximately $23.1 million as compared to interest expense of approximately $21.3 million in the fourth-quarter of 2015. The increase was related to higher interest rates, offset somewhat by our debt reduction. The Company's reported interest expense includes non-cash interest related to its outstanding convertible notes of approximately $4.1 million in the fourth-quarter of 2016 and approximately $7.3 million in the fourth-quarter of 2015.

Non-GAAP net income was approximately $22 million in the fourth-quarter of 2016, a 79% increase as compared to $12.3 million in the fourth-quarter of 2015. Non-GAAP diluted earnings per share was approximately $0.38 as compared to $0.25 in the fourth-quarter of 2015. Fourth-quarter non-GAAP earnings per share includes approximately $0.30 related to the Sharper Image transaction.

Reviewing results for the full year, revenue was approximately $368.5 million, a 3% decline as compared to $379.2 million in 2015. 2015 revenue included approximately $5 million from Badgley Mischka brand for which there was no comparable revenue in 2016. In 2016, the Company benefited from a $3 million favorable impact as a result of foreign currency exchange rates, primarily related to the yen. Excluding Badgley Mischka and the currency impact, revenue was down approximately 2% for the year.

Effective tax rate in 2016 was approximately 31%. During 2016 we paid approximately $7.5 million in cash taxes. We expect the 2017 tax rate to be approximately 30% to 32%.

Non-GAAP earnings per share for 2016 was approximately $1.37 as compared to $1.33 in 2015. 2016 non-GAAP earnings per share includes a gain of approximately $0.32 related to the sale of the Sharper Image brand in the fourth quarter, which was not incorporated into our previously issued guidance. Excluding this gain, our non-GAAP EPS was approximately $1.05. Company generated free cash flow was approximately $250 million in 2016 and this includes approximately $98.3 million of cash from the sale of Sharper Image.

Moving on to the balance sheet, the Company currently has a cash balance of approximately $232 million and a total debt balance of approximately $1.2 billion. The Company's cash balance includes approximately $51 million of wholly owned domestic unrestricted cash, $35 million of domestic unrestricted cash in consolidated joint ventures, $70 million of unrestricted cash held internationally and $77 million of restricted cash.

Paying down debt with available cash is a top priority for our Company. Over the past 12 months, the Company has reduced its debt balance by over $300 million. As a result, our current gross leverage is approximately 7.7 times today, down from approximately 8.4 times at the beginning of 2016. As discussed in our Investor Day, our goal is to delever to approximately 5 times by 2019.

Moving on to guidance, today were initiating guidance for 2017. As part of our strategic planning process, we created a long-term strategic and financial plan which we believe supports the future growth of Iconix. In 2017, we believe we can achieve organic growth for the portfolio as we shift to a more active brand management style and prioritize investments across our portfolio of over 30 brands. We are aware of the challenges in the current retail environment, but we're confident that we have the right strategies in place to drive growth.

For 2017 we are guiding to revenue of approximately $350 million to $365 million. This would be comparable to revenue of approximately $358.5 million in 2016 when excluding revenue from divested brands. We believe this range, which implies organic growth of plus 2% to minus 2%, appropriately accounts for potential risks in the macro environment.

For 2017 we expect non-GAAP earnings per share to be in the range of $0.70 to $0.85. This would compared to non-GAAP earnings per share of approximately $0.78 in 2016 when excluding earnings and gains from brands that were divested in 2016 and using the current share count. To help bridge our 2017 earnings per share guidance from the $1.37 of non-GAAP earnings per share that we reported today, we would highlight the following. One, 2016 included approximately $0.44 from gains on the sale of divested brands, including Badgley Mischka and Sharper Image. It also included approximately $0.09 from earnings generated by those brands.

For 2017 we are estimating a diluted share count of approximately 58 million shares, consistent with where we ended 2016. However, this compares to a weighted average share count of approximately 54 million in 2016. Share count is expected to impact 2017 earnings per share by approximately $0.06. For 2017 we expect to generate approximately $105 million to $125 million of free cash flow.

I will now turn the call back over to John for some closing remarks.

Thanks, Dave. 2016 was a year of transition for Iconix and I believe the changes we have made provide the foundation for increased shareholder value. In 2016 we restructured several of our functions and hired new talent to augment the skills and capabilities of our existing team members. We added three new Board members, bringing experience and subject matter expertise to our governance.

We conducted a deep dive on our brands, our partners, our business model and the market and develop a long-term strategic plan to drive growth. We committed to more active brand management and to an enhanced tool set to improve the value proposition that we provide to our partners and we improved our financial stability by paying down $300 million of debt. Going forward, we are committed to being more active in how we manage our brands. We will continue to analyze whether each brand in the portfolio has a good strategic fit. We will continue to work to reduce our leverage.

We are focused on being as open and transparent as we can with our shareholders. I will make every effort to ensure our story is being communicated well. We hosted a successful Investor Day in November. We presented at the ICR conference for the first time in eight years this past January. We have additional events lined up for the balance of the year. We look forward to executing our long-term strategic plan and anticipate sharing some exciting new announcements with you in the coming months.

With that, I would like to thank you all for participating this afternoon. We'd now like to open the call to questions.

(Operator Instructions)

Bob Drbul, Guggenheim.

Hi, guys. Good afternoon.

Good afternoon, Bob

I guess just when you look at the 2017 outlook, I think you said, Dave, the organic growth was minus 2% to plus 2% in the 2017 guidance. Can you break down how you guys laid it out in November with the drivers, maintain brands and the incubate brands, where that's coming from and how those different segments of the business are performing if you look at it from that perspective?

Hey, Bob, it's John. Let me take a shot at that. As you would imagine, as we put this together and give a range of plus 2% to minus 2%, we're trying to be conservative. It's tough out there. But when we looked at our brands and went through every single brand, and you're right, we have categorized our brands into drivers, into sustained, and into incubate.

As you would expect, we believe the majority of the growth will come out of our drivers. If you remember, that was active. They were brands like Umbro and PONY and some Danskin. We think that, that's where the growth will come from.

Then if you remember, the other focus for us was to ensure that in the sustained bucket, we didn't have more leakage than we could kind of sustain. We know in some of those relationships there could be potentially a troubled retailer and so we were going to have to do our best to balance that out. We did get nicked in some of those businesses in 2016, so we spent a lot of energy to say in 2017, how do we not give up too much in the sustained.

The incubate is a small. If you remember, when we talked about it -- I'll be off here, but I want to say was 8% of our total volume, so that's not going to be driving our volume one way or another. Long answer to your question is, the growth should come from the drivers, and if we can hold the sustained and not allow to much leakage out of that, that's where we think our growth will come from.

Okay. If you spend a little bit more time on the active brands themselves in terms of the Danskin business and the Starter business, just really what you're seeing from the market in those areas. I think you focused a little bit more on PONY in terms of some of the retro stuff. Can you just elaborate a little bit more in terms of that piece of the business for us?

Sure. John again. Let me take a shot. Danskin, as I mentioned earlier, we were at the PROJECT, which is women's piece of the Old Magic. We haven't been here in years. We were here with our partners on both the upstairs line as well as an intimate line on Danskin. We had Jenna Dewan Tatum, who is our spokesperson for Danskin, was in the booth. 100-plus people lined up to take pictures and to share their stories of how they grew up with Danskin.

Person after person, we actually had the Board out here, Bob, to walk our Board of Directors through the show because it's a powerful way that we demonstrate how we bring our product to market. The press that wanted to talk to Jenna and wanted to talk to us, the consumers that wanted to look at the new line, this is an upstairs Danskin that we just haven't, frankly, pursued before. We have every intention have been writing orders in Danskin for Q4 delivery. It's not for 2018 and 2019; we were out here to show the new line, talk about both Jenna as well as an intimate business, which hadn't had before, and write orders for 2017.

I think you said Starter as well. We were out here with our partners at G3 and our Starter Black had a booth as well, well represented by the whole team, including Carl, I think their president of the League business over there. Also excellent feedback. We saw jackets that were worn at the NBA All-Star game on Sunday. We had some of those in the booth. We continue to get a lot of positive juice out of Starter Black and obviously the reason we do that, that's not what keeps the lights on around here, but that drives a lot of great brand street cred to Starter, which will help us make Starter a strong brand this year and in the future.

Okay, great. Thank you very much.

Thanks, Bob.

Dave King, ROTH Capital.

Thanks, good afternoon. I guess first off on the EPS guidance for 2017, what does that assume in interest expense? I'm trying to better understand how to be thinking about operating margins versus what you did in 2016, kind of on an organic basis, I guess, if you will. What sort of the puts and takes there? I guess I think, there was sort of a double counting of bonuses in 2016, that I would think would be gone a little bit, but then I feel like there might even some margin degradation sort of assumed in the guidance, but I want to make sure I'm understanding that correctly. Some help there would be appreciated. Thank you.

Okay. Hi, Dave. It's Dave Jones. We've got about $71 million in non-GAAP interest expense for 2017 and that obviously includes the current debt that we have today, so albeit reduced term loan, the securitization and both of which the term loan and the securitization amortize through the year and then the convertible notes which, as you know, we are working on refinancing. That is the effectively the cash interest that is included in our non-GAAP guidance. The GAAP number, obviously, would be higher because we've got non-cash interest related to the converts. I think hopefully that answers the first question.

It does.

Okay, great. As we think about margins, we think about mid- to high-40%s going forward, and so I'm just trying to -- I'm struggling to remember the balance of your question.

Basically it's trying to get a sense of, so it's mid- to high-40%s, I have to look at that and see what comparison to 2016, but I'm basically trying to get a sense of -- it seems to me like there's some -- a little bit of degradation in there if I'm looking at that right and I'm trying to figure out what's sort of driving that.

I would tell you Dave, that's comparable to 2016. I think we wound up at about 48% margin in 2016.

Okay. Then what's sort of driving the degradation there, investments in what areas, what's sort of -- how should we be thinking about it?

Right, we've got a plan, as John has talked about quite a bit, on marketing. Every year, this year included, we -- in the beginning of the year when doing our budget, we think about how much we want to invest in the brand. The more we can invest, the better, so we've got a little bit of assumed investment in there. I would tell you that's probably what's driving it. The other items that go into operating margin are pretty consistent.

Okay. That's helpful. In terms of thinking about the free cash flow guidance, it seems like that's, if I take the midpoint of that, it's sort of $15 million or so below what you sort of highlighted at the Analyst Day on an annual basis for $130 million. How should we be thinking about that in terms of does it accelerate at all?

Any asset sale plans or slow any of your debt pay down plans at all or is that still consistent what we've been thinking? How should we be thinking about that over the course of the debt pay downs, et cetera, over the course of the next two to three years? Is that still sort of on plan? I guess I'll stop there.

Yes, I think it is on plan. We're comfortable with that. The number is a little bit lower because of Sharper. Obviously, when we, at Investor Day we did not have Sharper factored in there. And we are anticipating growth for 2018 and 2019, so in terms of the plan, I think we are on target today.

Okay, perfect. Maybe one more and I'll step back. On the men's business, it seems like Ecko's turned the corner. John, you highlighted some other areas where you have momentum, with PONY and et cetera. Is the major drag still with Rocawear and Ed Hardy? Can you talk about what you're planning to do to maybe help that not be as big of a drag or are we even getting to a point where they're small enough yet that they're not going to be as big of a drag? Just some thoughts around that and what you're doing to try to maybe continue getting that business turned around overall, men's overall, would be helpful. Thanks.

Rocawear, we've all been doing business for a long time. You think you're at the floor and then somehow you find a new floor and frankly, that happened to us. If you remember, we said to you and we've said to all the people that follow us, Q3 we should turn it around, didn't; said don't worry, Q4 will turn it around and to be fair we made modest improvements. We were down 8% instead of down 10% or something like that. We hadn't turned the corner. The fashion has been tricky.

We feel very good. We're out here in the men's side of the show of the Old Magic, I think it's called Curve -- Collective, excuse me, called Collective. We had in a very prominent strong Rocawear booth, the women's side of the house, with a strong licensee partner that we've known for years and the men's side of the house, with a licensee partner it's only a year with us.

Both of these individuals, obviously they want to sound positive, but I think both genuinely felt like we are starting to make some traction, that there is a market for this customer. This customer needs to be served and frankly it's not being served. It's not easy because the old homes just have a strong presence in departments stores and things like. We don't think it will land in there right away. We think it's going to be a little bit more of a grassroots and we'll get some of the smaller guys making stronger presence -- stronger purchases.

Today on Rocawear, I'm crossing my fingers, I'm knocking on wood, I'm doing everything that we have on the floor and the product looks good. The product really looks good that our licensee partners have developed. Now we've got to get some people to buy it. But I can tell you, having talked to the guys yesterday and today, they feel like they had a lot of good traction today.

Remember, we've been out at the men's side, Collective, before but we were always, again, what I'll call passive. This was the year that we made the investment. These were our booths, we designed them and then hosted our licensee partners whereas historically the licensee partner would have a booth and we'd be kind of hanging around. So that's Rock.

Mark Ecko -- excuse me, Ed Hardy, interestingly we also think has some green shoots. There are a couple categories that we have signed that we think we can have some business for Q4 of 2017. Mary Gleason, whom I mentioned earlier, jumped onto that when she joined us four or five months ago, now is doing a few more things but jumped on that one right away. We did some re-looking at the brand. We looked at where it stood, who was buying it, and it had more traction than we thought.

If you remember back at our Investor Day, we said we are really going to go under the hood of the brand and make sure were positioning them correctly and we were putting them in the right channels and we have done that. We think we're actually a little bit of success out of Ed Hardy. It's not going to again fundamentally change our business, but we think these two brands, which have been drags, to use your word, but an accurate word, for a long time. We think we have found the floor. We think we're going to start to see some positive momentum on those two brands.

Okay, that's great color. Good luck going forward. Thank you.

(Operator Instructions)

John Kernan, Cowen and Company.

This is Dave Buckley on for John Kernan. Thanks for taking our question, guys. At the Analyst Day, you guy mentioned some new distribution channels as key opportunities for your drivers. Could you just address what brands of specific channels you are targeting for 2017?

What I would do -- I don't know that I want to be quite that specific. I think if you remember, thanks for bringing it up, we talked about what we were calling the addressable market and how big it was and that we really spent the majority of our time in what we call mass and mid-tier. I want to say it's 82%, 83% our business.

We talked about whole segments that we just haven't had a lot of presence in. We use three that we thought we had some runway. One is pure-play e-com, the second was drug, and the third was the dollar channel. We have had, I think, several very good meetings with some respective players in that space. We put several brands in front of them and while it takes a little while to kind of reestablish why the concept makes sense -- remember, these channels have been out there before, we just have not chased them. We've had good meetings and we have several proposals that we're working on that we think we're going to make some traction on.

So premature to kind of tell you where and with what brand, but I can tell you our team, Carolyn, Mary and others, have been out there having a lot of good top to top, talking about why our brand could be -- why one of our brands could be an enhancement to what they do to serve their customer every single day, so we believe we'll have some news to announce, not tomorrow, but I think in the relatively short term.

Okay, that's helpful. Thank you. Is the -- your current guidance, organic sales growth guidance, for the year not assuming new channels right now?

No, I think Dave gave a range of a plus 2% to a minus 2%. In a tough retail market, we have every intention and we've told our team we are expecting the plus 2% side, not the minus 2%. That will require our current business to work and to make one or two of these new ideas stick. If nothing sticks, we could be on the low end. If several things stick, we could be on the high. That's really why we give you the range.

We're pursuing these things passionately. Some things are under our control, some aren't, right? We can go with the greatest proposal in the world it's got to fit with our partners timeframe and needs. So if a couple of these things stick, we feel good and if we can't get anything, that will nick us a little bit in 2017 but the work will start to pay itself off in 2018. This is all great investment. We hope we'll get some of it in 2017. We certainly will get some in 2018 and 2019 as we go forward.

All right, great. Thank you. On the pure-play e-com, can you talk about what percentage of your revenue was generated in that channel this year and what your outlook is on the growth of that channel in 2017?

Sure. I would think of the smallest number you can come up with and that's about where it would be. We literally have not played there. We've talked about it as a need or as an opportunity both from a value standpoint but also a consumer insight. Some pure play we've not had a lot of business there.

However, I want to remind everybody that we are in e-com. We are in Target and we are in Target.com. We're in Macy's and we're in Macys.com. We're in Walmart and we're in Walmart.com. We're in JC Penney and we're in JCpenney.com. We have a good strong omni business, but in terms of the pure play, new opportunity for us, really talked to everybody about it last November.

As you can imagine, these things think take a little while, but as I mentioned on some of the other things, we think there is some room here. I think the number that you'll tend to hear the marketplace is omni or e-com can be as much as low 20%s of some of the categories we compete in, so I think we have presence, again, with our brick-and-mortar partners where they have put so much great work and insight and effort into the dot com. We will continue to support that in every way we can and then we think there a couple of pure play and we'll see if we can put some points on the board there.

Okay, great. Thank you very much and best of luck.

Thank you very much.

Steve Marotta, CL King & Associates

Good evening, everybody. I know that you don't guide on a quarterly basis, but as it pertains specifically to the sales growth projections for the year, is that expected to be weighted in any particular fashion, either first half or second half or in between quarters?

Yes. Steve, it's Dave. I think with any plan, as we are reinventing and rethinking this business, there's -- our initiatives are weighted towards the back half. As you know well, the lead times in this business are fairly long, so even when we take an order today, the best we could do is expect that to be fulfilled in end of third quarter, beginning of fourth quarter. So yes, we certainly do have some of that timing in the plan.

You probably went over this and perhaps I missed it, so the plan then absolutely assumes new licenses that are not yet signed that will be signed and still monetize at some point in 2017?

Yes, absolutely. We -- in every year, we have an assumption of new business. Our guys are out there looking for new licensees all the time and we definitely have, in the 2017 plan, similar to any other year. Will we get all of it? We hope so, but we'll certainly get a good percentage of it.

Could you quantify that, even a little?

I don't have that in front of me now, but it's certainly something we can get back to you on.

Okay. My follow-up question is, as it pertains to the converts, is there a particular drop dead date that you want these satisfied by? I mean, clearly would be March of next year, but I'm sure that you want it done long before that. Is there a sort of fulcrum point that we should be looking for?

No, we are absolutely -- we're currently working with our bankers on one, the VFN, which is also a Q1 2018 maturity, as well as the convert. My goal, I'd love to have a fairly substantial plan by the time we're reporting Q1, but nothing formal in place. But we've done this before and so we know the pitfalls of waiting too long and we are sensitive to that.

Okay, that's great. Thank you so much. That's helpful.

Thanks, Steve.

Patrick Marshall, Cowen and Company.

Hi, guys. I was wondering, I just want to follow up on one of your points with -- so your brick-and-mortar partners obviously sell a fair amount of your products through their websites. Are you able to quantify that in any way, like for Target, how much of their sales are brick-and-mortar versus their websites?

Yes, it's John. Not really. To be clear, we work, in this case, Target, I'll use Fieldcrest, we work closely with our partners in Minneapolis and we want to ensure that the brand is portrayed well on target.com, all the features and benefits of the bedding. We know what their percent business happens to be. We tend to run with that. As you would imagine, in the dot com space there's always more SKUs in dot come than there are on the floor, because the space is unlimited.

I always -- the rule I always use is, if we're 10% of space on the floor, we'll tend to be smaller than that in the dot com space because there are just more options. But what we have found is important for our partners is how do we bring insight, how do we bring great ways to display the product, make sure that the features and benefits are very apparent to the shopper, how do you navigate to our brands. But our goal is purely to support all their efforts because they're good at this. They spend a lot of money in this, a lot of investment, a lot of R&D and what we do is try to make our brands make their websites even more appealing to their consumers.

Okay, that's helpful. This is a minor housekeeping question. Your corporate operating income, that includes the $28 million gain from the sale of the Sharper?

That is correct, yes.

Okay. Is there anything else in that number or that's primarily -- that's the big one?

No, that's the big one. You may remember, we've historically always included gains on trademark sales in our operating income and it's really the theory that we are brand management company, we're managing the portfolio of brands, and the monetization of a brand via sale is very similar to generating royalty revenue for us, so we consider it an operating item.

Right, okay. I was wondering if you all would be willing to give any kind of color as to -- obviously, there were the big write-downs during the quarter and you guys -- was very helpful giving the breakdown of the impairments by segment, but I was wondering if you all would be willing to speak to maybe a couple of the brands that might've been taking -- that took these write-downs in each segment.

Yes, let me try to give you a little more color on it. Obviously, we start with an underlying valuation of each of the brands. Our business is unique in that we've got 30-plus brands and we have to value each one of them. Unfortunately, if you get a little ding in one of them, you could have substantial fair market value in another well in excess of book value, but it doesn't help on one that has a little bit of an impairment.

A couple of the brands that are generating that this year, PONY is a good example. PONY is a brand that we obviously believe in very much. It's one of our growth brands, but it's really been a restart for PONY. At the beginning of last year when we did our impairment testing, we had a plan for PONY. 2016, unfortunately, we had a couple of stumbles with it, but at the end of the day when John got here, John worked on the relationship with our key licensee and actually we're in a very, very good spot today and we think there's a lot of potential with PONY, but it's a ramp up, so when we do the math on the impairment, we don't necessarily get a lot of credit for all of that potential. We have to be pretty conservative when we're putting the numbers on the paper.

Just in very high-level terms, I would tell you that the underlying valuations on each of the brands generated probably about $70 million of the impairment. Then we had a little bit of a mechanical issue in that we had a new segment this year, so that causes us to relook at our impairment testing a little bit differently with the new segment, and that actually caused about $170 million of the impairment.

Finally, we've got this market cap test that you typically do and like I mentioned, because of we got this continuing drag on the Company, which we think is somewhat artificial and we all know there's a couple of overhangs, so -- but nonetheless, that market cap test, we don't necessarily get to add back those overhangs and we think that generated about $185 million of the impairment. Those are really the areas that it's coming from.

Okay. When you do your intrinsic valuation, that's like a DCF?

Yes, that's correct.

Okay. That's very helpful. Thank you.

Thank you.

There are no further questions in queue so I'd now like to hand the conference back over to Mr. John Haugh, Chief Executive Officer of Iconix Brand Group, for closing comments and remarks. Sir?

Thank you very much. Dave, thank you. Jaime, thank you. Thanks to everybody for listening. We appreciate your continued support. We're optimistic about where we can go in 2017 and we look forward to talking to you at the conclusion of our first quarter. Thank you, everybody.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude the program and you may all disconnect. Everybody, have a wonderful day.