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): May 15, 2020

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))

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

SQBG

NASDAQ Capital Market

 

 

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 May 15, 2020, Sequential Brands Group, Inc. (“Sequential”) issued a press release reporting its results of operations for the first quarter ended March 31, 2020.    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 May 15, 2020 reporting first quarter 2020 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:  May 15, 2020

By:

/s/ Daniel Hanbridge

 

Name:

 Daniel Hanbridge

 

Title:

 Senior Vice President and Interim Chief Financial Officer

 

3

sqbg_Ex99_1

Exhibit 99.1

Sequential Brands Group Announces First Quarter 2020 Results

NEW YORK, May 15, 2020 (GLOBE NEWSWIRE) -- Sequential Brands Group, Inc. (“Sequential” or the “Company”) (Nasdaq:SQBG) today announced financial results for the first quarter ended March 31, 2020.

“While the coronavirus pandemic has significantly impacted the U.S. economy and the apparel and accessories industry, we plan to weather the storm by remaining laser focused on managing cash in-flows, instituting further expense reductions, and negotiating short-term lender relief.  I believe that the steps we are taking, coupled with our diversified portfolio of brands and channels of distribution, will assist us in tackling these challenging times while we also explore opportunities that best position the Company for long-term success and maximize value,” said Sequential Brands Group CEO David Conn.

 

First Quarter 2020 Results from Continuing Operations:

Total revenue from continuing operations for the first quarter ended March 31, 2020 was $20.2 million, compared to $25.5 million in the prior year quarter. On a GAAP basis, loss from continuing operations for the first quarter 2020 was $(85.3) million or $(1.30) per diluted share compared to loss from continuing operations for the first quarter 2019 of $(4.8) million or $(0.07) per diluted share.  Included in the net loss from continuing operations for the first quarter 2020 were non-cash impairment charges of $85.6 million for indefinite-lived intangible assets related to the trademarks for the Jessica Simpson,  Gaiam,  Joe’s and Ellen Tracy brands reflecting the financial impacts of COVID-19.  Non-GAAP net loss from continuing operations for the first quarter 2020 was $(10.4) million, or $(0.16) per diluted share, compared to $(4.3) million, or $(0.07) per diluted share, in the prior year quarter. See Non-GAAP Financial Measure Reconciliation tables below for a reconciliation of GAAP to non-GAAP measures.  Adjusted EBITDA from continuing operations (defined under “Non-GAAP Financial Measures” below) for the first quarter of 2020 was $9.8 million, compared to $11.3 million in the prior year quarter.

 

Impact of COVID-19:

 

The COVID-19 pandemic has resulted in state-government mandated store closures and social distancing measures throughout most of the U.S.  These actions have caused many retailers carrying the Company’s products to close in March, April and May, which has affected retailers, as well as Sequential’s licensees who sell to these retailers. As some (but not all) states relax restrictions, the Company is unsure when retailers will reopen, at what capacity, or if additional periods of store closures will be needed or mandated.  Accordingly, the COVID-19 pandemic has adversely affected Sequential’s near-term and long-term revenues, earnings, liquidity and cash flows. However, the situation is dynamic, and the Company is not currently able to predict the full impact of COVID-19 on its results of operations and cash flows. Sequential ended the first quarter with $13.3 million in cash, including restricted cash.

 

In response to COVID-19, the Company has taken several proactive actions to enhance liquidity including the following:

 

·

Increasing available cash on hand including utilizing revolver borrowings under the Third Amendment to the Third Amended and Restated First Lien Credit Agreement with Bank of America, N.A. as administrative and collateral agent (the “Amended BoA Credit Agreement”). The Company made net revolver borrowings of $14.1 million, excluding lender fees, under the Amended BoA Credit Agreement through May 15, 2020;

·

Implementing temporary salary reductions across the Company;

·

Decreasing operating expenses through marketing spend reductions and deferral of non-essential spending; and

·

Proactively partnering with our lender base to provide more flexibility.

 

Liquidity and Financing Update:

 

Sequential currently believes that cash from operations and our currently available cash (including available borrowings under our existing financing arrangements) will be sufficient to satisfy our anticipated working capital requirements for at least twelve months from today. However, Sequential is not currently able to predict the full impact of COVID-19 on our results of operations and cash flows. As of March 31, 2020, the Company was party to the Amended BoA Credit Agreement and the Fourth Amendment to the Third Amended and Restated Credit Agreement with Wilmington Trust, National Association as administrative agent and collateral agent (the “Amended Wilmington Credit Agreement”), referred to as its loan agreements (“Loan Agreements”). The Loan Agreements contain financial covenants and the Company is in compliance with its financial covenants included in its Loan Agreements as of March 31, 2020. However, as a result of the impacts of the COVID-19 pandemic, the Company is not currently forecasted to be able to comply, in the next twelve months, with certain of the financial covenants under the Amended Wilmington Credit Agreement. If the Company fails to comply with such financial covenants, an event of default under the Loan Agreements would be triggered and its obligations under the Loan Agreements may be accelerated. The Company’s management plans to work with the lenders under the Amended Wilmington Credit Agreement to amend such financial covenants in the Amended Wilmington Credit Agreement in response to the current economic environment.  However, there can be no assurance that such amendments would be agreed upon or approved by such lenders. The risk of non-compliance creates a material uncertainty that casts substantial doubt with respect to the ability of the Company to continue as a going concern.  The condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of

business.  The condensed consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities that would be necessary if the Company was unable to realize its assets and settle its liabilities as a going concern in the normal course of operations.

 

Discontinued Operations:

On June 10, 2019, Sequential completed its previously announced sale of 100% of the issued and outstanding equity interests of Martha Stewart Living Omnimedia, Inc. (“MSLO”), a Delaware corporation and a wholly-owned subsidiary of Sequential. The Company’s after-tax net loss from discontinued operations was $(1.3) million and $(120.6) million for the first quarter ended March 31, 2020 and 2019, respectively. 

Investor Call and Webcast:

Management will provide further commentary today, May 15, 2020, 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) 407-9208 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 from continuing operations, non-GAAP net loss from continuing operations and non-GAAP loss per diluted share from continuing operations. The Company defines Adjusted EBITDA from continuing operations as loss from continuing operations attributable to Sequential Brands Group, Inc. and Subsidiaries, excluding benefit from income taxes, interest income or expense, non-cash compensation, depreciation and amortization, deal advisory costs, debt refinancing costs, non-cash mark-to-market adjustments to equity securities, non-cash impairment of trademarks, net of non-controlling interest, non-cash mark-to-market adjustments on interest rate swaps, and severance. Non-GAAP net loss and non-GAAP loss per diluted share from continuing operations are non-GAAP financial measures which represent net loss from continuing operations attributable to Sequential Brands Group, Inc. and Subsidiaries, excluding deal advisory costs, debt refinancing costs, non-cash mark-to-market adjustments to equity securities, non-cash impairment of trademarks, net of non-controlling interest, non-cash mark-to-market adjustments on interest rate swaps, and benefit from income 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 to 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 active and lifestyle categories. Sequential seeks to ensure that its brands continue to thrive and grow by employing strong brand management, 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 or actual events 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 any potential future acquisitions; (v) the Company's ability to successfully integrate acquisitions into its ongoing business; (vi) the potential impact of the consummation 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; (xv) risks related to the effects of the sale of the Martha Stewart brand; (xvi) uncertainties related to the timing, proposals or decisions arising from the Company’s strategic review, including the divestiture of one or more existing brands; (xvii) adverse effects on the Company and its licensees due to natural disasters, pandemic disease and other unexpected events; (xviii) uncertainties around the effects of the COVID-19 pandemic, including adverse effects on the Company's business, financial position, cash flows, ability to comply with its debt covenants and related uncertainty around the Company's ability to continue as a going concern; and (xix) 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. In addition, the global economic climate and additional or unforeseen effects from the COVID-19 pandemic amplify many of the foregoing risks. 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

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

    

 

 

2020

 

2019

 

 

 

(Unaudited)

 

 

 

Assets

 

 

  

 

 

  

 

Current Assets:

 

 

  

 

 

  

 

Cash

 

$

11,293

 

$

6,264

 

Restricted cash

 

 

2,047

 

 

2,043

 

Accounts receivable, net

 

 

36,286

 

 

39,452

 

Prepaid expenses and other current assets

 

 

7,739

 

 

4,228

 

Current assets from discontinued operations

 

 

348

 

 

6,839

 

Total current assets

 

 

57,713

 

 

58,826

 

 

 

 

  

 

 

  

 

Property and equipment, net

 

 

2,042

 

 

5,349

 

Intangible assets, net

 

 

499,158

 

 

599,967

 

Right-of-use assets - operating leases

 

 

49,600

 

 

50,320

 

Other assets

 

 

17,676

 

 

8,782

 

Total assets

 

$

626,189

 

$

723,244

 

 

 

 

  

 

 

  

 

Liabilities and Equity

 

 

  

 

 

  

 

Current Liabilities:

 

 

  

 

 

  

 

Accounts payable and accrued expenses

 

$

15,678

 

$

15,721

 

Current portion of long-term debt

 

 

14,500

 

 

12,750

 

Current portion of deferred revenue

 

 

7,032

 

 

6,977

 

Current portion of lease liabilities - operating leases

 

 

3,040

 

 

3,035

 

Current liabilities from discontinued operations

 

 

775

 

 

1,959

 

Total current liabilities

 

 

41,025

 

 

40,442

 

 

 

 

  

 

 

  

 

Long-term debt, net of current portion

 

 

438,894

 

 

433,250

 

Long-term deferred revenue, net of current portion

 

 

3,699

 

 

4,604

 

Deferred income taxes

 

 

12,860

 

 

14,351

 

Lease liabilities - operating leases

 

 

53,401

 

 

54,168

 

Other long-term liabilities

 

 

4,431

 

 

3,389

 

Total liabilities

 

 

554,310

 

 

550,204

 

 

 

 

  

 

 

  

 

Equity:

 

 

  

 

 

  

 

Preferred stock

 

 

 -

 

 

 -

 

Common stock

 

 

674

 

 

672

 

Additional paid-in capital

 

 

514,719

 

 

514,496

 

Accumulated other comprehensive loss

 

 

(4,817)

 

 

(4,096)

 

Accumulated deficit

 

 

(480,739)

 

 

(394,126)

 

Treasury stock

 

 

(3,260)

 

 

(3,230)

 

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

 

 

26,577

 

 

113,716

 

Noncontrolling interests

 

 

45,302

 

 

59,324

 

Total equity

 

 

71,879

 

 

173,040

 

Total liabilities and equity

 

$

626,189

 

$

723,244

 

 

SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

 

2020

 

2019

 

Net revenue

 

$

20,231

 

$

25,524

 

Operating expenses

 

 

17,707

 

 

15,546

 

Impairment charges

 

 

85,590

 

 

 -

 

(Loss) income from operations

 

 

(83,066)

 

 

9,978

 

Other expense (income)

 

 

2,879

 

 

(402)

 

Interest expense, net

 

 

12,443

 

 

13,853

 

Loss from continuing operations before income taxes

 

 

(98,388)

 

 

(3,473)

 

Benefit from income taxes

 

 

(1,083)

 

 

(241)

 

Loss from continuing operations

 

 

(97,305)

 

 

(3,232)

 

Net loss (income)  attributable to noncontrolling interest from continuing operations

 

 

12,006

 

 

(1,539)

 

Loss from continuing operations attributable to Sequential Brands Group, Inc. and Subsidiaries

 

 

(85,299)

 

 

(4,771)

 

Loss from discontinued operations, net of income taxes

 

 

(1,314)

 

 

(120,574)

 

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

 

$

(86,613)

 

$

(125,345)

 

 

 

 

 

 

 

 

 

Loss per share from continuing operations:

 

 

  

 

 

  

 

Basic and diluted

 

$

(1.30)

 

$

(0.07)

 

 

 

 

  

 

 

  

 

Loss per share from discontinued operations:

 

 

  

 

 

  

 

Basic and diluted

 

$

(0.02)

 

$

(1.88)

 

 

 

 

  

 

 

  

 

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

 

 

  

 

 

  

 

Basic and diluted

 

$

(1.32)

 

$

(1.95)

 

 

 

 

  

 

 

  

 

Weighted-average common shares outstanding:

 

 

  

 

 

  

 

Basic and diluted

 

 

65,424,308

 

 

64,221,687

 

 

SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (in thousands)

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

    

2020

    

2019

Continuing Operations:

 

 

 

 

 

 

 Cash Used In Operating Activities

 

$

(2,765)

 

$

(901)

 Cash Used In Investing Activities

 

 

(25)

 

 

(37)

 Cash Provided By (Used In) Financing Activities

 

 

3,830

 

 

(8,338)

 

 

 

 

 

 

 

Discontinued Operations:

 

 

 

 

 

 

 Cash Provided By Operating Activities

 

$

3,993

 

$

9,812

 Cash Used In Investing Activities

 

 

 -

 

 

(38)

 Cash Provided By Financing Activities

 

 

 -

 

 

325

 

 

 

  

 

 

  

Net Increase In Cash and Restricted Cash

 

 

5,033

 

 

823

Balance — Beginning of period

 

 

8,307

 

 

16,138

Balance — End of period

 

$

13,340

 

$

16,961

 

Non-GAAP Financial Measure Reconciliation

(in thousands, except earnings per share data)

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Three Months Ended March 31, 

 

 

2020

 

2019

Reconciliation of GAAP net loss to non-GAAP net loss from continuing operations:

 

 

  

 

 

  

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

 

$

(86,613)

 

$

(125,345)

Discontinued operations, net of tax

 

 

(1,314)

 

 

(120,574)

Loss from continuing operations

 

 

(85,299)

 

 

(4,771)

 

 

 

  

 

 

  

Adjustments:

 

 

  

 

 

  

Deal advisory costs (a)

 

 

48

 

 

1,045

Debt refinancing costs (b)

 

 

50

 

 

 2

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

 

 

(84)

 

 

(328)

Non-cash impairment of trademarks, net (d)

 

 

73,136

 

 

 -

Non-cash mark-to-market adjustments on interest rate swaps (e)

 

 

2,882

 

 

 -

Benefit from income taxes (f)

 

 

(1,083)

 

 

(241)

Total non-GAAP adjustments

 

 

74,949

 

 

478

Non-GAAP net loss from continuing operations (1)

 

$

(10,350)

 

$

(4,293)

Non-GAAP weighted-average diluted shares (g)

 

 

65,736

 

 

64,714

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Three Months Ended March 31, 

 

 

2020

 

2019

Reconciliation of GAAP Diluted EPS to non-GAAP Diluted EPS from continuing operations:

 

 

  

 

 

  

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

 

$

(1.32)

 

$

(1.93)

GAAP loss per share from discontinued operations

 

 

(0.02)

 

 

(1.86)

GAAP loss per share from continuing operations

 

$

(1.30)

 

$

(0.07)

 

 

 

  

 

 

  

Adjustments:

 

 

  

 

 

  

Deal advisory costs (a)

 

 

0.00

 

 

0.02

Debt refinancing costs (b)

 

 

0.00

 

 

0.00

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

 

 

(0.00)

 

 

(0.01)

Non-cash impairment of trademarks, net (d)

 

 

1.11

 

 

 -

Non-cash mark-to-market adjustments on interest rate swaps (e)

 

 

0.05

 

 

 -

Benefit from income taxes (f)

 

 

(0.02)

 

 

(0.01)

Total non-GAAP adjustments

 

 

1.14

 

 

0.00

Non-GAAP loss per diluted share from continuing operations (1)

 

$

(0.16)

 

$

(0.07)

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Three Months Ended March 31, 

 

 

2020

 

2019

Reconciliation of GAAP net loss to Adjusted EBITDA from continuing operations:

 

 

  

 

 

  

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

 

$

(86,613)

 

$

(125,345)

Discontinued operations, net of tax

 

 

(1,314)

 

 

(120,574)

Loss from continuing operations

 

 

(85,299)

 

 

(4,771)

 

 

 

  

 

 

  

Adjustments:

 

 

  

 

 

 

Benefit from income taxes (f)

 

 

(1,083)

 

 

(241)

Interest expense, net

 

 

12,443

 

 

13,853

Non-cash compensation

 

 

232

 

 

659

Depreciation and amortization

 

 

7,281

 

 

896

Deal advisory costs (a)

 

 

48

 

 

1,045

Debt refinancing costs (b)

 

 

50

 

 

 2

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

 

 

(84)

 

 

(328)

Non-cash impairment of trademarks, net (d)

 

 

73,136

 

 

 -

Non-cash mark-to-market adjustments on interest rate swaps (e)

 

 

2,882

 

 

 -

Severance (h)

 

 

188

 

 

161

Total Adjustments

 

 

95,093

 

 

16,047

Adjusted EBITDA from continuing operations (2)

 

$

9,794

 

$

11,276

 

 

 

 

 

 

 


(1)

Non-GAAP net loss from continuing operations and non-GAAP loss per diluted share from continuing operations are non-GAAP financial measures which represent net loss from continuing operations attributable to Sequential Brands Group, Inc. and Subsidiaries, excluding deal advisory costs, debt refinancing costs, non-cash mark-to-market adjustments on equity securities, non-cash impairment of trademarks, net of non-controlling interest, non-cash mark-to-market adjustments on interest rate swaps and benefit from income taxes. Management uses this information to measure performance over time on a consistent basis and to identify business trends relating to the Company's financial condition and results of continuing operations. Management believes that these non-GAAP measures are useful measures of ongoing financial performance because they adjust for certain costs and other events that the Company believes are not representative of its core licensing business.

(2)

Adjusted EBITDA from continuing operations is defined as net loss from continuing operations attributable to Sequential Brands Group, Inc. and Subsidiaries, excluding benefit from income taxes, interest income or expense, non-cash compensation, depreciation and amortization, deal advisory costs, debt refinancing costs, non-cash mark-to-market adjustments on equity securities, non-cash impairment of trademarks, net of non-controlling interest, non-cash mark-to-market adjustments on interest rate swaps and severance. Management uses Adjusted EBITDA from continuing operations as a measure of operating performance to assist in comparing performance from period to period on a consistent basis and to identify business trends relating to the Company's financial condition and results of continuing operations.

(a)

Represents deal advisory costs including legal, financial and accounting services that are not representative of the Company's day-to-day licensing business.

(b)

Represents expenses for professional fees associated with the Company's refinancing and amending its debt facilities.

(c)

Represents the non-cash mark-to-market adjustments to equity securities.

(d)

Represents non-cash impairment charges, net of minority interest, related to the Company's indefinite-lived intangible assets for certain brands.

(e)

Represents the non-cash mark-to-market adjustment on interest rate swaps.

(f)

Adjustment to remove GAAP benefit from income taxes.  The Company does not expect to make material cash income tax payments related to continuing operations in 2020 or 2019 because the Company's net operating losses and other tax benefits are expected to reduce any additional tax obligation. 

(g)

Represents weighted-average diluted shares the Company reported or would have reported if the Company had GAAP net income in 2020 and 2019.

(h)

Represents costs and adjustments to previously recorded costs associated with employee terminations not representative of the Company’s day-to-day compensation costs.