sqbg_Current_Folio_8K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8‑K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): March 6, 2019

SEQUENTIAL BRANDS GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware

001‑37656

47‑4452789

(State or other jurisdiction of incorporation)

(Commission File Number)

(I.R.S. Employer Identification No.)

 

601 West 26th Street, 9th Floor, New York, NY 10001

(Address of Principal Executive Offices/Zip Code)

(646) 564‑2577

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8‑K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

Soliciting material pursuant to Rule 14a‑12 under the Exchange Act (17 CFR 240.14a‑12)

 

 

Pre-commencement communications pursuant to Rule 14d‑2(b) under the Exchange Act (17 CFR 240.14d‑2(b))

 

 

Pre-commencement communications pursuant to Rule 13e‑4(c) under the Exchange Act (17 CFR 240.13e‑4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b‑2 of the Securities Exchange Act of 1934 (§240.12b‑2 of this chapter).

Emerging growth company ◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

 

 

 

 


 

Item 2.02. Results of Operations and Financial Condition.

On March 6, 2019, Sequential Brands Group, Inc. (“Sequential”) issued a press release reporting its results of operations for the fourth quarter and full fiscal year ended December 31, 2018. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

As noted in the press release, Sequential has provided certain non–U.S. generally accepted accounting principles (“GAAP”) financial measures and a reconciliation of the non–U.S. GAAP measures to U.S. GAAP measures. Sequential believes these non-U.S. GAAP financial measures provide useful information to investors because they allow for a more direct understanding of Sequential’s business. Readers should consider non–U.S. GAAP measures in addition to, and not as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP.

The information contained herein and in the press release furnished as an exhibit hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, is not subject to the liabilities of that section and is not deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing. In addition, the press release contains statements intended as “forward-looking statements” which are subject to the cautionary statements about forward-looking statements set forth in such press release.

Item 7.01. Regulation FD Disclosure

The information set forth in Item 2.02 above is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits

 

(d)

Exhibits.

 

 

 

Exhibit Number

    

Description

99.1

 

Press release issued by Sequential on March 6, 2019 reporting fourth quarter and full fiscal year 2018 results of operations.

 

2


 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

Sequential Brands Group, Inc.

 

 

 

Date:  March 6, 2019

By:

/s/ Peter Lops

 

Name:

 Peter Lops

 

Title:

 Chief Financial Officer

 

3


sqbg_Ex99_1

Exhibit 99.1

Sequential Brands Group Announces Fourth Quarter and Full Year 2018 Results

NEW YORK, March 06, 2019 (GLOBE NEWSWIRE) -- Sequential Brands Group, Inc. (“Sequential” or the “Company”) (Nasdaq:SQBG) today announced financial results for the fourth quarter and full year ended December 31, 2018.

“2018 was a productive year for Sequential with strength across our portfolio of brands both with new and existing business,” said Karen Murray, CEO of Sequential Brands Group. “Moving ahead, we continue to execute against our strategy of driving organic growth, improving our cost structure and strengthening our balance sheet.”

As previously disclosed, effective January 1, 2018, the Company adopted a new revenue recognition standard ("ASC 606"), which impacted the Company’s reported revenue. The Company adopted ASC 606 using the modified retrospective method, which means that the total amount of revenue reported for the 2017 periods has not been restated in the current financial statements. In the interest of comparability during the transition year to ASC 606, the Company is providing 2018 revenue, net income and earnings per share information in accordance with both ASC 606 and the prior year’s revenue recognition rules, ASC 605.

Fourth Quarter 2018 Results:

·

Revenue for the fourth quarter 2018 was $48.9 million.  Under ASC 605, revenue for the fourth quarter 2018 would have been $49.9 million, compared to $46.9 million in the fourth quarter 2017.

·

On a GAAP basis, net loss for the fourth quarter 2018 was $(2.2) million or $(0.03) per diluted share. Under ASC 605, GAAP net loss for the fourth quarter 2018 would have been $(1.2) million or $(0.02) per diluted share, compared to the net loss of $(162.9) million or $(2.58) per diluted share in the fourth quarter 2017.  Included in the net loss for the fourth quarter 2018 was a $3.2 million expense related to a legacy litigation matter.

·

On a non-GAAP basis, net income for the fourth quarter 2018 was $7.8 million, or $0.12 per diluted share.  Under ASC 605, non-GAAP net income for the fourth quarter 2018 would have been $9.0 million or $0.14 per diluted share, compared to $7.8 million, or $0.12 per diluted share, in the prior year period.  See Non-GAAP Financial Measure Reconciliation tables below for a reconciliation of GAAP to non-GAAP measures.

·

Adjusted EBITDA (defined under “Non-GAAP Financial Measures” below) for the fourth quarter 2018 was $25.0 million. Under ASC 605, Adjusted EBITDA for the fourth quarter 2018 would have been $26.3 million, compared to $27.4 million in the prior year quarter. 

Year-to-Date 2018 Results:

·

Revenue for the year ended December 31, 2018 was $170.0 million.  Under ASC 605, revenue for the year ended December 31, 2018 would have been $173.5 million, compared to $167.5 million in the prior year.

·

On a GAAP basis, net loss for the year ended December 31, 2018 was $(10.5) million or $(0.16) per diluted share. Under ASC 605, GAAP net loss for the year ended December 31, 2018 would have been $(7.8) million or $(0.12) per diluted share, compared to the net loss of $(185.7) million or $(2.95) per diluted share in the prior year.  Included in the net loss for the year ended December 31, 2018 was a $3.2 million expense related to a legacy litigation matter, a $4.2 million expense related to a settlement with a licensee as part of a strategic shift to a direct-to-retail license with Walmart for the AVIA brand and non-cash impairment charges of $17.9 million related to trademarks of two of the Company’s brands.

·

On a non-GAAP basis, net income for the year ended December 31, 2018 was $21.2 million, or $0.33 per diluted share.  Under ASC 605, non-GAAP net income for the year ended December 31, 2018 would have been $24.8 million, or $0.38 per diluted share, compared to $27.9 million, or $0.44 per diluted share, in the prior year.  Non-GAAP net income for the year ended December 31, 2018 includes a $4.2 million expense as indicated above. See Non-GAAP Financial Measure Reconciliation tables below for a reconciliation of GAAP to non-GAAP measures.

·

Adjusted EBITDA for the year ended December 31, 2018 was $91.5 million. Under ASC 605, Adjusted EBITDA for the year ended December 31, 2018 would have been $95.1 million, compared to $98.4 million in the prior year.  Adjusted EBITDA for the year ended December 31, 2018 includes a $4.2 million expense as mentioned above. Excluding this expense, Adjusted EBITDA would have been $99.3 million.


 

Investor Call and Webcast:

Management will provide further commentary today, March 6, 2019, on the Company’s financial results and financial update via a conference call and webcast beginning at approximately 8:30 am ET. To join the conference call, please dial (877) 407-0789 or visit the investor relations page on the Company’s website www.sequentialbrandsgroup.com. A replay of the conference call is available on the Company’s website.

Non-GAAP Financial Measures:

This press release contains historical and projected measures of Adjusted EBITDA, non-GAAP net income and non-GAAP earnings per diluted share. The Company defines Adjusted EBITDA as net income attributable to Sequential Brands Group, Inc. and Subsidiaries, excluding provision for (benefit from) income taxes, interest income or expense, non-cash compensation, depreciation and amortization, deal advisory costs, Martha Stewart Living Omnimedia (MSLO) shareholder and pre- acquisition litigation costs, write-off of deferred financing costs, debt refinancing costs, non-cash mark-to-market adjustments to equity securities, loss on sale of assets, net of non-controlling interest, non-cash impairment of trademarks, net of non-controlling interest, realized loss on the sale of equity securities, costs incurred in connection with CEO transition, MSLO pre-acquisition sales tax refunds, other non-cash items and severance. Non-GAAP net income and non-GAAP earnings per share are non-GAAP financial measures which represent net income (loss) attributable to Sequential Brands Group, Inc. and Subsidiaries, excluding deal advisory costs, non-cash mark-to-market adjustments to stock-based compensation provided to non-employees, MSLO shareholder and pre-acquisition litigation costs, write-off of deferred financing costs, debt refinancing costs, non-cash mark-to-market adjustments to equity securities, loss on sale of assets, net of non-controlling interest, non-cash impairment of trademarks, net of non-controlling interest, realized loss on the sale of equity securities, costs incurred in connection with CEO transition, MSLO pre-acquisition sales tax refunds, other non-cash items and adjustments to taxes. These non-GAAP metrics are an alternative to the information calculated under U.S. generally accepted accounting principles (“GAAP”), as provided in the reports the Company files with the Securities and Exchange Commission, may be inconsistent with similar measures presented by other companies and should only be used in conjunction with the Company’s results reported according to GAAP. Any financial measure other than those prepared in accordance with GAAP should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. We consider these measures to be useful measures of our ongoing financial performance because they adjust for certain costs and other events that the Company believes are not representative of its core licensing business. See below for a reconciliation of these non-GAAP metrics from the most directly comparable GAAP measure.

About Sequential Brands Group, Inc.

Sequential Brands Group, Inc. (Nasdaq:SQBG) owns, promotes, markets, and licenses a portfolio of consumer brands in the home, active and fashion categories. Sequential seeks to ensure that its brands continue to thrive and grow by employing strong brand management, design and marketing teams. Sequential has licensed and intends to license its brands in a variety of consumer categories to retailers, wholesalers and distributors in the United States and around the world. For more information, please visit Sequential’s website at: www.sequentialbrandsgroup.com . To inquire about licensing opportunities, please email: newbusiness@sbg-ny.com .

Forward-Looking Statements

Certain statements in this press release and oral statements made from time to time by representatives of the Company are forward-looking statements ("forward-looking statements") within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made as of the date hereof and are based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. The Company's actual results could differ materially from those stated or implied in forward-looking statements. Forward-looking statements include statements concerning estimates of GAAP net income, non-GAAP net income, Adjusted EBITDA, revenue (including guaranteed minimum royalties), and margins, guidance, plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events, performance or products, underlying assumptions and other statements that are not historical in nature, including those that include the words "subject to," "believes," "anticipates," "plans," "expects," "intends," "estimates," "forecasts," "projects," "aims," "targets," "may," "will," "should," "can," "future," "seek," "could," "predict," the negatives thereof, variations thereon and similar expressions. Such forward-looking statements reflect the Company's current views with respect to future events, based on what the Company believes are reasonable assumptions. Whether actual results will conform to expectations and predictions is subject to known and unknown risks and uncertainties, including: (i) risks and uncertainties discussed in the reports that the Company has filed with the Securities and Exchange Commission (the "SEC"); (ii) general economic, market or business conditions; (iii) the Company's ability to identify suitable targets for acquisitions and to obtain financing for such acquisitions on commercially reasonable terms; (iv) the Company's ability to timely achieve the anticipated results of recent acquisitions and any potential future acquisitions; (v) the Company's ability to successfully integrate acquisitions into its ongoing business; (vi) the potential impact of the consummation of recent acquisitions or any potential future acquisitions on the Company's relationships, including with employees, licensees, customers and competitors; (vii) the Company's ability to achieve and/or manage growth and to meet target metrics associated with such growth; (viii) the Company's ability to successfully attract new brands and to identify suitable licensees for its existing and newly acquired brands; (ix) the Company's substantial level of indebtedness, including the possibility that such indebtedness and related restrictive covenants may


 

adversely affect the Company's future cash flows, results of operations and financial condition and decrease its operating flexibility; (x) the Company's ability to achieve its guidance; (xi) continued market acceptance of the Company's brands; (xii) changes in the Company's competitive position or competitive actions by other companies; (xiii) licensees' ability to fulfill their financial obligations to the Company; (xiv) concentrations of the Company's licensing revenues with a limited number of licensees and retail partners; and (xv) other circumstances beyond the Company's control. Refer to the section entitled "Risk Factors" set forth in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for a discussion of important risks, uncertainties and other factors that may affect the Company's business, results of operations and financial condition. The Company's stockholders are urged to consider such risks, uncertainties and factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. The Company is not under any obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. Readers should understand that it is not possible to predict or identify all risks and uncertainties to which the Company may be subject. Consequently, readers should not consider such disclosures to be a complete discussion of all potential risks or uncertainties.

For Media and Investor Relations inquiries, contact:

Sequential Brands Group, Inc.

Katherine Nash
T: +1 512-757-2566
E: knash@sbg-ny.com


 

SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

December 31, 

    

December 31,

    

 

 

    

January 1,

 

 

2018

 

2017

 

 

 

 

2018

 

 

(Unaudited)

 

 

 

 

 

 

(Unaudited)

 

 

As

 

As

 

(Unaudited)

 

ASC 606

 

 

Reported

 

Reported

 

ASC 606

 

Opening

 

 

ASC 606

 

ASC 605

 

Adjustments

 

Balance Sheet

Assets

 

 

  

 

 

  

 

 

  

 

 

  

Current Assets:

 

 

  

 

 

  

 

 

  

 

 

  

Cash

 

$

14,106

 

$

18,902

 

$

 -

 

$

18,902

Restricted cash

 

 

2,032

 

 

1,531

 

 

 -

 

 

1,531

Accounts receivable, net

 

 

66,202

 

 

60,102

 

 

6,335

 

 

66,437

Prepaid expenses and other current assets

 

 

11,224

 

 

8,635

 

 

 -

 

 

8,635

Total current assets

 

 

93,564

 

 

89,170

 

 

6,335

 

 

95,505

 

 

 

  

 

 

  

 

 

  

 

 

  

Property and equipment, net

 

 

8,971

 

 

7,035

 

 

 -

 

 

7,035

Intangible assets, net

 

 

964,911

 

 

995,170

 

 

 -

 

 

995,170

Other assets

 

 

11,222

 

 

5,836

 

 

 -

 

 

5,836

Total assets

 

$

1,078,668

 

$

1,097,211

 

$

6,335

 

$

1,103,546

 

 

 

  

 

 

  

 

 

  

 

 

  

Liabilities and Equity

 

 

  

 

 

  

 

 

  

 

 

  

Current Liabilities:

 

 

  

 

 

  

 

 

  

 

 

  

Accounts payable and accrued expenses

 

$

23,527

 

$

19,126

 

$

 -

 

$

19,126

Current portion of long-term debt

 

 

28,300

 

 

28,300

 

 

 -

 

 

28,300

Current portion of deferred revenue

 

 

11,695

 

 

8,102

 

 

4,387

 

 

12,489

Total current liabilities

 

 

63,522

 

 

55,528

 

 

4,387

 

 

59,915

 

 

 

  

 

 

  

 

 

  

 

 

  

Long-term debt, net of current portion

 

 

582,487

 

 

602,297

 

 

 -

 

 

602,297

Long-term deferred revenue, net of current portion

 

 

8,224

 

 

11,845

 

 

 -

 

 

11,845

Deferred income taxes

 

 

67,002

 

 

67,799

 

 

463

 

 

68,262

Other long-term liabilities

 

 

12,789

 

 

6,204

 

 

 -

 

 

6,204

Total liabilities

 

 

734,024

 

 

743,673

 

 

4,850

 

 

748,523

 

 

 

  

 

 

  

 

 

  

 

 

  

Equity:

 

 

  

 

 

  

 

 

  

 

 

  

Preferred stock

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Common stock

 

 

657

 

 

635

 

 

 -

 

 

635

Additional paid-in capital

 

 

513,764

 

 

508,444

 

 

 -

 

 

508,444

Accumulated other comprehensive (loss) income

 

 

(1,554)

 

 

80

 

 

 -

 

 

80

Accumulated deficit

 

 

(234,723)

 

 

(225,369)

 

 

1,130

 

 

(224,239)

Treasury stock

 

 

(4,226)

 

 

(1,799)

 

 

 -

 

 

(1,799)

Total Sequential Brands Group, Inc. and Subsidiaries stockholders’ equity

 

 

273,918

 

 

281,991

 

 

1,130

 

 

283,121

Noncontrolling interests

 

 

70,726

 

 

71,547

 

 

355

 

 

71,902

Total equity

 

 

344,644

 

 

353,538

 

 

1,485

 

 

355,023

Total liabilities and equity

 

$

1,078,668

 

$

1,097,211

 

$

6,335

 

$

1,103,546

 


 

SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 

 

 

2018

 

2017

 

    

As

    

 

 

    

 

 

    

As

 

 

Reported

 

 

 

 

 

 

 

Reported

 

 

ASC 606

 

Adjustments

 

ASC 605

 

ASC 605

Net revenue

 

$

48,874

 

$

(1,043)

 

$

49,917

 

$

46,895

Operating expenses

 

 

27,753

 

 

226

 

 

27,527

 

 

22,064

Impairment charges

 

 

 -

 

 

 -

 

 

 -

 

 

304,123

Income (loss) from operations

 

 

21,121

 

 

(1,269)

 

 

22,390

 

 

(279,292)

Other expense

 

 

828

 

 

 -

 

 

828

 

 

30

Interest expense, net

 

 

15,478

 

 

 -

 

 

15,478

 

 

15,291

Income (loss) before income taxes

 

 

4,815

 

 

(1,269)

 

 

6,084

 

 

(294,613)

Provision for (benefit from) income taxes

 

 

6,144

 

 

(292)

 

 

6,436

 

 

(132,393)

Net loss

 

 

(1,329)

 

 

(977)

 

 

(352)

 

 

(162,220)

Net income attributable to noncontrolling interest

 

 

(863)

 

 

(8)

 

 

(855)

 

 

(668)

Net loss attributable to Sequential Brands Group, Inc. and Subsidiaries

 

$

(2,192)

 

$

(985)

 

$

(1,207)

 

$

(162,888)

 

 

 

  

 

 

  

 

 

  

 

 

  

Loss per share attributable to Sequential Brands Group, Inc. and Subsidiaries:

 

 

  

 

 

  

 

 

  

 

 

  

Basic and diluted

 

$

(0.03)

 

$

(0.01)

 

$

(0.02)

 

$

(2.58)

 

 

 

  

 

 

  

 

 

  

 

 

  

Weighted-average common shares outstanding:

 

 

  

 

 

  

 

 

  

 

 

  

Basic and diluted

 

 

64,061,983

 

 

64,061,983

 

 

64,061,983

 

 

63,055,188

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 

 

 

2018

 

2017

 

    

As

    

 

 

    

 

 

    

As

 

 

Reported

 

 

 

 

 

 

 

Reported

 

 

ASC 606

 

Adjustments

 

ASC 605

 

ASC 605

Net revenue

 

$

169,956

 

$

(3,553)

 

$

173,509

 

$

167,464

Operating expenses

 

 

87,767

 

 

226

 

 

87,541

 

 

79,443

Impairment charges

 

 

17,899

 

 

 -

 

 

17,899

 

 

340,628

Loss on sale of assets

 

 

7,117

 

 

 -

 

 

7,117

 

 

 -

Income (loss) from operations

 

 

57,173

 

 

(3,779)

 

 

60,952

 

 

(252,607)

Other expense

 

 

693

 

 

 -

 

 

693

 

 

1,583

Interest expense, net

 

 

62,152

 

 

 -

 

 

62,152

 

 

59,891

Loss before income taxes

 

 

(5,672)

 

 

(3,779)

 

 

(1,893)

 

 

(314,081)

(Benefit from) provision for income taxes

 

 

(694)

 

 

(869)

 

 

175

 

 

(132,535)

Net loss

 

 

(4,978)

 

 

(2,910)

 

 

(2,068)

 

 

(181,546)

Net income attributable to noncontrolling interest

 

 

(5,506)

 

 

177

 

 

(5,683)

 

 

(4,172)

Net loss attributable to Sequential Brands Group, Inc. and Subsidiaries

 

$

(10,484)

 

$

(2,733)

 

$

(7,751)

 

$

(185,718)

 

 

 

  

 

 

  

 

 

  

 

 

  

Loss per share attributable to Sequential Brands Group, Inc. and Subsidiaries:

 

 

  

 

 

  

 

 

  

 

 

  

Basic and diluted

 

$

(0.16)

 

$

(0.04)

 

$

(0.12)

 

$

(2.95)

 

 

 

  

 

 

  

 

 

  

 

 

  

Weighted-average common shares outstanding:

 

 

  

 

 

  

 

 

  

 

 

  

Basic and diluted

 

 

63,700,081

 

 

63,700,081

 

 

63,700,081

 

 

62,861,743

 


 

SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 

 

    

2018

    

2017

Cash Provided By Operating Activities

 

$

32,900

 

$

28,210

Cash (Used In) Provided By Investing Activities

 

 

(172)

 

 

2,863

Cash Used In Financing Activities

 

 

(37,023)

 

 

(31,294)

 

 

 

  

 

 

  

Net Decrease In Cash and Restricted Cash

 

 

(4,295)

 

 

(221)

Balance — Beginning of year

 

 

20,433

 

 

20,654

Balance — End of year

 

$

16,138

 

$

20,433

 


 

Non-GAAP Financial Measure Reconciliation

(in thousands, except earnings per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Three Months Ended December 31, 

 

 

2018

 

2017

 

    

ASC 606 (1)

    

Adjustments (2)

    

ASC 605 (2)

    

ASC 605 (2)

Reconciliation of GAAP net loss to non-GAAP net income:

 

 

  

 

 

  

 

 

  

 

 

 

GAAP net loss attributable to Sequential Brands Group, Inc. and Subsidiaries

 

$

(2,192)

 

$

(985)

 

$

(1,207)

 

$

(162,888)

 

 

 

  

 

 

  

 

 

  

 

 

  

Adjustments:

 

 

  

 

 

  

 

 

  

 

 

  

Deal advisory costs (a)

 

 

315

 

 

 -

 

 

315

 

 

347

Non-cash mark-to-market adjustments to stock-based compensation (b)

 

 

(298)

 

 

 -

 

 

(298)

 

 

(124)

MSLO shareholder and pre-acquisition litigation (c)

 

 

2,894

 

 

 -

 

 

2,894

 

 

(38)

Debt refinancing costs (d)

 

 

43

 

 

 -

 

 

43

 

 

 -

Non-cash mark-to-market adjustments to equity securities (e)

 

 

858

 

 

 -

 

 

858

 

 

 -

Non-cash impairment of trademarks, net (f)

 

 

 -

 

 

 -

 

 

 -

 

 

302,818

Other non-cash items (g)

 

 

 -

 

 

 -

 

 

 -

 

 

230

Adjustment to taxes (h)

 

 

6,144

 

 

(292)

 

 

6,436

 

 

(132,518)

Total non-GAAP adjustments

 

 

9,956

 

 

(292)

 

 

10,248

 

 

170,715

Non-GAAP net income (3)

 

$

7,764

 

$

(1,277)

 

$

9,041

 

$

7,827

Non-GAAP weighted-average diluted shares (i)

 

 

64,316

 

 

64,316

 

 

64,316

 

 

63,086

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Three Months Ended December 31, 

 

 

2018

 

2017

 

    

ASC 606 (1)

    

Adjustments (2)

    

ASC 605 (2)

    

ASC 605 (2)

Reconciliation of GAAP Diluted EPS to non-GAAP Diluted EPS:

 

 

  

 

 

  

 

 

  

 

 

  

GAAP loss per share attributable to Sequential Brands Group, Inc. and Subsidiaries

 

$

(0.03)

 

$

(0.01)

 

$

(0.02)

 

$

(2.58)

 

 

 

  

 

 

  

 

 

  

 

 

  

Adjustments:

 

 

  

 

 

  

 

 

  

 

 

  

Deal advisory costs (a)

 

 

0.00

 

 

 -

 

 

0.00

 

 

0.00

Non-cash mark-to-market adjustments to stock-based compensation (b)

 

 

(0.00)

 

 

 -

 

 

(0.00)

 

 

(0.00)

MSLO shareholder and pre-acquisition litigation (c)

 

 

0.05

 

 

 -

 

 

0.05

 

 

(0.00)

Debt refinancing costs (d)

 

 

0.00

 

 

 -

 

 

0.00

 

 

 -

Non-cash mark-to-market adjustments to equity securities (e)

 

 

0.01

 

 

 -

 

 

0.01

 

 

 -

Non-cash impairment of trademarks, net (f)

 

 

 -

 

 

 -

 

 

 -

 

 

4.80

Other non-cash items (g)

 

 

 -

 

 

 -

 

 

 -

 

 

0.00

Adjustment to taxes (h)

 

 

0.09

 

 

(0.01)

 

 

0.10

 

 

(2.10)

Total non-GAAP adjustments

 

$

0.15

 

$

(0.01)

 

$

0.16

 

$

2.70

Non-GAAP earnings per share (3)

 

$

0.12

 

$

(0.02)

 

$

0.14

 

$

0.12

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Three Months Ended December 31, 

 

 

2018

 

2017

 

    

ASC 606 (1)

    

Adjustments (2)

    

ASC 605 (2)

    

ASC 605 (2)

Reconciliation of GAAP net loss to Adjusted EBITDA:

 

 

  

 

 

  

 

 

  

 

 

  

GAAP net loss attributable to Sequential Brands Group, Inc. and Subsidiaries

 

$

(2,192)

 

$

(985)

 

$

(1,207)

 

$

(162,888)

 

 

 

  

 

 

  

 

 

  

 

 

  

Adjustments:

 

 

  

 

 

 

 

 

  

 

 

  

Provision for (benefit from) income taxes

 

 

6,144

 

 

(292)

 

 

6,436

 

 

(132,393)

Interest expense, net

 

 

15,478

 

 

 -

 

 

15,478

 

 

15,291

Non-cash compensation

 

 

325

 

 

 -

 

 

325

 

 

2,068

Depreciation and amortization

 

 

1,033

 

 

 -

 

 

1,033

 

 

1,244

Deal advisory costs (a)

 

 

315

 

 

 -

 

 

315

 

 

347

MSLO shareholder and pre-acquisition litigation (c)

 

 

2,894

 

 

 -

 

 

2,894

 

 

(38)

Debt refinancing costs (d)

 

 

43

 

 

 -

 

 

43

 

 

 -

Non-cash mark-to-market adjustments to equity securities (e)

 

 

858

 

 

 -

 

 

858

 

 

 -

Non-cash impairment of trademarks, net (f)

 

 

 -

 

 

 -

 

 

 -

 

 

302,818

Other non-cash items (g)

 

 

 -

 

 

 -

 

 

 -

 

 

230

Severance (j)

 

 

121

 

 

 -

 

 

121

 

 

706

Total Adjustments

 

 

27,211

 

 

(292)

 

 

27,503

 

 

190,273

Adjusted EBITDA (4)

 

$

25,019

 

$

(1,277)

 

$

26,296

 

$

27,385

 


 

Non-GAAP Financial Measure Reconciliation

(in thousands, except earnings per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Year Ended December 31, 

 

 

2018

 

2017

 

    

ASC 606 (1)

    

Adjustments (2)

    

ASC 605 (2)

    

ASC 605 (2)

Reconciliation of GAAP net loss to non-GAAP net income:

 

 

  

 

 

  

 

 

  

 

 

  

GAAP net loss attributable to Sequential Brands Group, Inc. and Subsidiaries

 

$

(10,484)

 

$

(2,733)

 

$

(7,751)

 

$

(185,718)

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

  

 

 

  

 

 

  

 

 

  

Deal advisory costs (a)

 

 

1,402

 

 

 -

 

 

1,402

 

 

1,262

Non-cash mark-to-market adjustments to stock-based compensation (b)

 

 

(321)

 

 

 -

 

 

(321)

 

 

(549)

MSLO shareholder and pre-acquisition litigation (c)

 

 

4,740

 

 

 -

 

 

4,740

 

 

521

Write-off of deferred financing costs (k)

 

 

148

 

 

 -

 

 

148

 

 

 -

Debt refinancing costs (d)

 

 

1,174

 

 

 -

 

 

1,174

 

 

 -

Non-cash mark-to-market adjustments to equity securities (e)

 

 

858

 

 

 -

 

 

858

 

 

 -

Loss on sale of assets, net (l)

 

 

6,402

 

 

 -

 

 

6,402

 

 

 -

Non-cash impairment of trademarks, net (f)

 

 

17,899

 

 

 -

 

 

17,899

 

 

336,689

Realized loss on the sale of equity securities (m)

 

 

 -

 

 

 -

 

 

 -

 

 

1,916

Costs incurred in connection with CEO transition (n)

 

 

 -

 

 

 -

 

 

 -

 

 

6,713

MSLO pre-acquisition sales tax refunds (o)

 

 

 -

 

 

 -

 

 

 -

 

 

(115)

Other non-cash items (g)

 

 

88

 

 

 -

 

 

88

 

 

230

Adjustment to taxes (h)

 

 

(694)

 

 

(869)

 

 

175

 

 

(133,035)

Total non-GAAP adjustments

 

 

31,696

 

 

(869)

 

 

32,565

 

 

213,632

Non-GAAP net income (3)

 

$

21,212

 

$

(3,602)

 

$

24,814

 

$

27,914

Non-GAAP weighted-average diluted shares (i)

 

 

64,992

 

 

64,992

 

 

64,992

 

 

63,093

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Year Ended December 31, 

 

 

2018

 

2017

 

    

ASC 606 (1)

    

Adjustments (2)

    

ASC 605 (2)

    

ASC 605 (2)

Reconciliation of GAAP Diluted EPS to non-GAAP Diluted EPS:

 

 

  

 

 

  

 

 

  

 

 

  

GAAP loss per share attributable to Sequential Brands Group, Inc. and Subsidiaries

 

$

(0.16)

 

$

(0.04)

 

$

(0.12)

 

$

(2.95)

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

  

 

 

  

 

 

  

 

 

  

Deal advisory costs (a)

 

 

0.02

 

 

 —

 

 

0.02

 

 

0.02

Non-cash mark-to-market adjustments to stock-based compensation (b)

 

 

(0.00)

 

 

 —

 

 

(0.00)

 

 

(0.01)

MSLO shareholder and pre-acquisition litigation (c)

 

 

0.07

 

 

 —

 

 

0.07

 

 

0.01

Write-off of deferred financing costs (k)

 

 

0.00

 

 

 —

 

 

0.00

 

 

 —

Debt refinancing costs (d)

 

 

0.02

 

 

 —

 

 

0.02

 

 

 —

Non-cash mark-to-market adjustments to equity securities (e)

 

 

0.01

 

 

 —

 

 

0.01

 

 

 —

Loss on sale of assets, net (l)

 

 

0.10

 

 

 —

 

 

0.10

 

 

 —

Non-cash impairment of trademarks, net (f)

 

 

0.28

 

 

 —

 

 

0.28

 

 

5.34

Realized loss on the sale of equity securities (m)

 

 

 —

 

 

 —

 

 

 —

 

 

0.03

Costs incurred in connection with CEO transition (n)

 

 

 —

 

 

 —

 

 

 —

 

 

0.11

MSLO pre-acquisition sales tax refunds (o)

 

 

 —

 

 

 —

 

 

 —

 

 

(0.00)

Other non-cash items (g)

 

 

0.00

 

 

 —

 

 

0.00

 

 

0.00

Adjustment to taxes (h)

 

 

(0.01)

 

 

(0.01)

 

 

(0.00)

 

 

(2.11)

Total non-GAAP adjustments

 

$

0.49

 

$

(0.01)

 

$

0.50

 

$

3.39

Non-GAAP earnings per share (3)

 

$

0.33

 

$

(0.05)

 

$

0.38

 

$

0.44

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Year Ended December 31, 

 

 

2018

 

2017

 

    

ASC 606 (1)

    

Adjustments (2)

    

ASC 605 (2)

    

ASC 605 (2)

Reconciliation of GAAP net loss to Adjusted EBITDA and Adjusted Free Cash Flow:

 

 

  

 

 

  

 

 

  

 

 

  

GAAP net loss attributable to Sequential Brands Group, Inc. and Subsidiaries