Icon Energy Corp. (ICON) Q4 2016 Earnings Report, Transcript and Summary

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 is being recorded for replay purposes. It is now my pleasure to hand the conference over to Ms. Jaime Sheinheit, Vice President of 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 President 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 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 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 into the financial details, I would first like to share with you the progress we're 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 to drive an increased shareholder value are number one; organic growth, number two, a portfolio management approach to brand ownership, and number three, an improved balance sheet data. 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, we 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, a 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’ve 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 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 the e-commerce rights in U.S. 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 delevering 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 has been reduced to approximately 7.7 times today. With today's earnings release we have changed our segment reporting to break out the 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. The international segment does not include our entertainment brands. The global results for our entertainment 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 was the Candies 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 2021 and the Bongo brand at Sears, which has been impacted by store closings in 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 of 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 have 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 licensees should help to offset some of the challenges we anticipate in 2017, however given that most of our women's business is tied to large direct retail programs, we expect the women 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 were slight improvement from the third quarter, the turnaround of our men's fashion brand is taking longer than we had originally anticipated. We have made a change in the management of our managed business and Mary Gleason, a veteran in the industry will now be spearheading the men's turnaround initiatives. In the men's portfolio we are seeing a good momentum for our Ecko and PONY brands. We have positioned PONY to capitalize on 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 we entered 2017, JCPenney continues to be substantially support Ecko with the intention of opening mega shops in roughly 30 key doors to maximize the brands presentation of retail. We will 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 down 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 of celebrities and athletes, we have great affinity for the brand. We believe some of our men's fashion and active brand are of 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 JCPenney, 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're 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 towards 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're making in signing new deals in key markets such as China, Southeast Asia and Brazil. We continue to build out our international platform and in 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 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 would 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 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 10K for the year ended 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 reported segments. Now moving on to our results for the fourth quarter of 2016. The Company generated $87.1 million of 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 Peanuts business. Operating income excluding the impairment charges in 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 Company recorded for divesting the Sharper Image brand. Excluding the gain in impairment charges, operating income declined as a result of lower revenue and higher compensation expense as we made accruals in 2016 as we previously discussed related to our new performance-base 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 to 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 the 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. The effective tax rate in 2016 was approximately 31%. During 2016 we paid approximately $7.5 million in cash taxes. We expect that 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 of approximately $250 million in 2016 and this includes approximately $98.3 million of cash from 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 of $1.2 billion. The Company's cash balance includes approximately 51 million of wholly-owned domestic unrestricted cash, 35 million of domestic unrestricted cash and 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 de-lever to approximately five times by 2019. Moving on to guidance. Today we are 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 are 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 will 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%, 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 compare the non-GAAP earnings per share of approximately $0.78 in 2016 when excluding earnings and gains from brand that were divested in 2016 and using the current share account. 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 talents 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 in the market and developed a long-term strategic plan to drive growth. We committed to more active brand management and to enhance tools set to improve the value proposition that we provide to our partners and we improved our financial stability by paying down $300 million in debt. Going forward we are committed to be 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 8 years this past January, we've additional events lined up for the balance of the year. We look forward to executing on 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 now like to open the call to questions.

[Operator Instructions] Our first question will come from the line of Bob Drbul with Guggenheim. Please proceed.

Hi guys, good afternoon. 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 breakdown how you guys laid out in November with the drivers, maintain brands and incubate brands like where that's coming from and how those different segments of the business are performing as if you look at it from that perspective?

Hi Bob, it's John, let me take a shot at that. As you would imagine as we put this together and gave 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 sustain, 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, there were brands like Umbro and PONY and some Danskin. So we think that's where the growth will come from. And then if you remember the other focus for us was to ensure that in the sustained market, we didn't have more leakage than we could kind of sustain. So we know in some of those relationships, there could be potentially troubled retailer and so we're going 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 sustain. The incubate is small and if you remember we talked about it – but I want to say it was 8% of our total volume so that's not only driving our forward one way or another. So long answer to your question is the gross should come from the drivers and if we can hold the sustain and not allow too much leakage out of that, that's where we think our growth will come from.

Okay. And then I guess if you could spend a little bit more time on the active bridge 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 focus a little bit on PONY in terms of some of the retro stuff, can you just elaborate little bit more in terms of that piece of the business for us.

Sure. Let me take a shot, so Danskin - as I mentioned earlier we were at - to the project which is the women's piece of the old magic and we've been hearing 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 sportsperson for Danskin was in the booth, 100 plus people lined up to take pictures and to share their stories of how they grow up with Danskin and person after person we actually have the board out here, Bob to walk our Board of Directors through the show because it's powerful way that we demonstrate how we bring our product to market. And the press that wanted to talk to Jenna and wanted to talk to us, the consumers that wanted to look at the new lines, this is an upstairs Danskin that we have just haven’t frankly pursued before. So, we have every intention and have been writing orders in Danskin for Q4 delivery, it is not for 2018 and 2019, we were out here to show the new line, talk about Jenna, as well as an intimate business which we haven't had before and write orders for 2017. I think this has started as well, we were out here with our partners HE3 and our Starter Black had a booth as well, well represented by the whole team including Carl there, I think the President of the lead business over there. Also excellence feedback we saw jackets that were worn at the NBA All-Star game on Sunday, we had some of those in the booth, so 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 turn around here but that drives a lot of great brand, Street Credit Starter which will help us make Starter a strong brand this year and in the future.

Okay, great. Thank you very much.

Thank you. Our next question will come from the line of David King with ROTH Capital. Please proceed.

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

Hi David, it's Dave Jones. We have got about $71 million in non-GAAP interest expense for 2017 and that obviously includes the current debt that we have today. So it albeit reduced term loan, the securitization and both of which the term loan and the securitization amortized through the year. And then the convertible notes which as you know we’re working on refinancing. So that is the effectively the cash interest that is included in our non-GAAP guidance. The GAAP number obviously will be higher because we've got non-cash interest related to the coverts. So, I think hope that answers the first question.

It does.

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

I mean basically it's trying to get a sense of so mid to high 40s I have to look at that and see what that compares to 2016 but I’m basically trying to get a sense of its seems to be like there some little bit of degradation in there, that I’m looking at that right and then I’m trying to figure out what sort of driving that.

I would tell you Dave the – it's best comparable to 2016 I think we round up about 48% margin in the 2016.

Okay. And so then what sort of driving the degradation there, investments in what areas, what sort of - how should we will be thinking about it.

Right, we've got a plan as John has talked about a quite a bit on marketing. Every year this year included we and the beginning of the year in 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 and I’ll tell you that's probably what's works driving it. The other items that go into operating margin are pretty consistent.

Okay, that's helpful. And then in terms of thinking about the free cash flow guidance, it seems like that’s if I take the midpoint of that it sort of $15 million or so below what you’ve sort of highlighted at the Analyst Day on an annual basis for $130 million. How should we be thinking about in terms of, does that accelerate at all any asset sale plans or slowing your debt pay down plans at all or is that still consistent with what you have been thinking and how should we be thinking about that over the course of the debt paid down et cetera over the course of the next two to three years is that still sort of unplanned I guess will stop there.

No, I think it is unplanned. We’re comfortable with that. The numbers are little bit lower, because they are sharper obviously when we at Investor Day we do not have sharper factored in there and we're anticipating growth for 2018 and 2019. So in terms of the plan I think we're on target to that.

Okay, perfect. And then may be one more and I'll back on the Men's business seems like Ecko has 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 and can we talk about what you’re planning to do to may be help that not be as a big of a drag I mean, even getting to your point where there is small enough yet but there is not going to be as big of a drag, I guess just some thoughts around that and what you're doing to try to maybe continue getting that business turnaround overall - Men's overall would be helpful. Thanks.

So, Rocawear we all been doing business for long time, you think to floor and you find a new floor and frankly that happened to us. If you remember we said to you, and we said to all the people follow us, Q3 we should turn it around, didn’t - don’t forward turn around and to be fair we made modest improvements were down 8 instead of down 10 or something like that. We haven't turn the corner, the fashion has been tricky. We feel very good and we are out here in the men's side of the show your view the collective - called collective. We had in a very, I think prominent strong Rocawear booth, the women side of the house with a strong licensing partner that was known for years and the men side of the house where they licensing part is only year with us. Both of these individuals obviously they want to some 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 been served and it's not easy because the old homes, used to have a strong presence in department store and things like that, we don't think it will land there right way, we think it's going to be little bit of grassroots and we’ll get some of the smaller guides, making stronger presence, stronger purchases. So I think Rocawear I'm crossing my fingers, I’m not going to aware I’m doing everything that we have on the floor and the products looks good. The product really looks good that our licensing partners have developed. Now we get to able to buy it but I can tell you having talk to the guys yesterday, and today they feel like to 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 call passive, this was the year that we made the investment, these were our boots we designed them and then hosted our licensing partners where it is historically the licensing partner whatever booth we will be kind of hanging around. So, that's Roc. Marc Ecko - Ed Hardy interestingly we also think has some green shoes. 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 on to that when he joined us four, five months ago, now he is doing a few more things but jumped on that one right away and we did so relooking at the brand, we looked at where it stood, who was buying it and it had more traction then we thought. If you remember back at our Investor Day we said we're really going to go under the - under the hood of the brand and make sure we will position them correctly, that we'll put them in the right channels and we have done that and we think we’re actually going to get 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 a word but in accurate word for a long time we think we've 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] Our next question will come from line of John Kernan with Cowen and Company. Please proceed.

Hi, this is David Buckley on for John Kernan. Thanks for taking our question guys. At the Analyst Day, you guys mentioned some new distribution channels as key opportunities for your drivers, could you just address what brands or specific channels you're 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 to bringing it up, we talked about what we would call addressable market and how big it was and that we really spent the majority of our time and what we call mass and mid-tier it is 82%, 83% of our business, we talked about all segments that we just haven’t had a lot of presence in. We used three that we thought we had some runway, one is pureplay ecom, the second was Drog 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 that concept makes sense, remember these channels have been out there before we just have not chased them, we had good meetings and we have several proposals that we are working on that we think we are going to make some traction on. So it's premature to kind of tell you where and with what brand but I can tell you our team Carolyn, Mary and others who have been out there having a lot of good top to top talking about where our brands would 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 will have some news to announce not tomorrow but I think in the relatively short term.

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

No I think when - Dave gave a range of a plus 2 to minus 2 in a tough retail market, we have every intention we have told our team we are expecting the plus 2 side, not the minus 2, that would require our current businesses to work into to make one or two of these new ideas stick but nothing sticks, we could be on the low end of the several things strictly be on high end. So that's really why we gave you the range. So we are pursuing this passionately, some things are under our control, some aren’t right. If we can go with the proposal in the world but it has got to fit with our partners timeframe and needs and so couple of 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 fit our balcony in 2018. So this is all great investment. We hope we'll get some of in 2017, we certainly will get some in 2018 and 2019 as we go forward.

All right. Great, thank you. And then on the pureplay ecom can you just - can you talk about what percentage of your revenue was generated in that channel this year and like your outlook, 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 it. We literally have not played there. We've talked about it as the need or as an opportunity both from value standpoint but also a consumer insight. So pureplay we have not had a lot of business there however I want to remind everybody that we are in ecom, we are in Target we're in target.com, and we are in Macy's and were in Macy’s.com and we're Walmart, we are Walmart.com, we're JCPenney, we're JCPenney.com. So we have a good strong how many business but in terms of the pureplay new opportunity for us really talked to everybody about last November as you can imagine this things take a little while but as I mentioned some of other things we think there is some room here, I think the number you tend to hear in the marketplace is omni or ecom can be as much as both 20s of some of the categories we compete in. So, I think we have presence again with our brick-and-motor partners when they have put so much great work and insight and effort into the .com, we will continue to support that in every way we can and then we think there are couple of pureplay 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. Our next question will come from Steven Marotta with C.L. King and Associates. Please proceed.

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

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

You probably on went over this and perhaps I missed this. The plan then absolutely assumes new licenses that are not yet signed, they will be signed and still monetized 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 2017 plan similar to any of the year where 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. And then my just follow up question is as it pertains to the converts, is there particular drop that Dave that you want these satisfied by - clearly with the March of next year but I’m sure that you want it done long before that and is there a sort of full complain that we should be looking for.

We’re absolutely - we are currently working with our bankers on one [DFM] [ph] 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're sensitive to that.

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

Thank you. Our next question will come from Patrick Marshall with Cowen and Company. Please proceed.

Hi, guys. So I was wondering - I just wanted to follow up on one of your points with - so your brick-and-mortar partner is obviously sell a fair amount of your products through their websites. Do you - are you able to quantify that in anyway 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 feel [theoretic] [ph]. We worked closely with our partners in Minneapolis and we want to ensure that the brand is portrayed well on target.com, features the benefits of the betting. We know what the percent of business happens to be. We tend to run with that. As you would imagine in the .com space there is always more risk to use in .com then there are on the floor right because the basis is unlimited. So, I always - down always use 10% of the space on the floor where tend to be smaller than that in the .com because there are just more option but what we have found is important for our partners, as how do we bring insights, how do we bring great ways to display the product, make sure that the features and benefits are very occurring to the shopper, how do you navigate to our brands but our goal is purely to support all their efforts because their good at business, they spent a lot of money in this, lot of investment, lot of R&D and what we do is trying to make our brands make their websites even more appealing to their consumers.

Okay. That’s helpful. And then this is the minor housekeeping question. Your corporate operating income that includes the $28 million gain from the sales of the shopper?

That is correct, yes.

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

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

Great, okay. And then I was wondering if you all be willing to give any kind of color as to like obviously the big write-down's during the quarter and you guys was very helpful giving the breakdown of the impairments by segment but I was wondering if you all be willing to speak to maybe a couple of the brands that might have been taking - that took these write-downs in each segments.

Yes let me try and give you a little more color on it. So obviously we start with an underlying valuation of each of the brands and our business is unique in that we got 30 plus brands and we have to value each one of them and unfortunately if you get a little Dan in one of them, you could have substantial fair market value and another well on excessive book value but it doesn’t help on one that has little bit of an impairment. So couple of brands that are generating that this year, PONY is a good example, so 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, so 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 licensee and actually we are in a very, very good spot today and we think there is 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 pretty conservative where we are putting the number on the paper. So 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 the mechanical issue in that, we had a new segment this year so, that causes us to relook at our impairment testing, little bit differently with a new segment and that actually caused about $170 million of the impairment. And then finally we got this market cap test that you typically do and like I mentioned because of this – we've got this continuing drag on the company which we think is somewhat artificial and we all know there is a couple of overhang. 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. So those are really the areas that its coming from.

Okay. And then when you do your intrinsic valuation – that's like the DCF…

Yes, that's correct.

Okay. 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 or 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.