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): August 13, 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 August 13, 2020, Sequential Brands Group, Inc. (“Sequential”) issued a press release reporting its results of operations for the second quarter ended June 30, 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 August 13, 2020 reporting second 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:  August 13, 2020

By:

/s/ Daniel Hanbridge

 

Name:

 Daniel Hanbridge

 

Title:

 Senior Vice President and Interim Chief Financial Officer

3


Exhibit 99.1

Sequential Brands Group Announces Second Quarter 2020 Results

NEW YORK, August 13, 2020 (GLOBE NEWSWIRE) -- Sequential Brands Group, Inc. (“Sequential” or the “Company”) (Nasdaq:SQBG) today announced financial results for the second quarter ended June 30, 2020.

“Despite the ongoing challenges that the COVID-19 pandemic has presented, it has also demonstrated the durability of our business model and the demand for several of our core brands. While there is still much uncertainty in the macro-environment and the apparel and accessories industry, we believe that we’re on the right path forward to position the Company for long-term growth,” said Sequential Brands Group CEO David Conn.

Reverse Stock Split

On July 27, 2020, the Company’s previously announced 1 share-for-40 shares (1:40) reverse stock split (the “Reverse Stock Split”) of the Company’s outstanding common stock, par value $0.01 per share became effective.  All share and per share amounts in this press release have been adjusted to reflect the Reverse Stock Split.  Prior periods have been reclassified to reflect the change in the Company’s stated capital attributable to common stock which was reduced proportionately to the Reverse Stock Split ratio, and the additional paid-in capital account which was credited with the amount by which common stock was reduced.  As a result of the Reverse Stock Split, the Company is back in compliance with the minimum bid price listing rules of The Nasdaq Stock Market.

Second Quarter 2020 Results from Continuing Operations:

Total revenue from continuing operations for the second quarter ended June 30, 2020 was $22.6 million, compared to $26.4 million in the prior year quarter. On a GAAP basis, loss from continuing operations for the second quarter 2020 was $(2.9) million or $(1.78) per diluted share compared to loss from continuing operations for the second quarter 2019 of $(3.3) million or $(2.03) per diluted share.  Non-GAAP net loss from continuing operations for the second quarter 2020 was $(1.8) million, or $(1.10) per diluted share, compared to $(2.6) million, or $(1.57) 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 second quarter of 2020 was $15.1 million, compared to $13.3 million in the prior year quarter.

Year-to-Date 2020 Results from Continuing Operations:

Total revenue from continuing operations for the six months ended June 30, 2020 was $42.8 million, compared to $51.9 million in the prior year period. On a GAAP basis, net loss from continuing operations for the six months ended June 30, 2020 was $(88.2) million or $(53.80) per diluted share compared to a net loss from continuing operations for the six months ended June 30, 2019 of $(8.1) million or $(5.00) per diluted share.  Included in the net loss from continuing operations for the six months ended June 30, 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 six months ended June 30, 2020 was $(12.2) million, or $(7.40) per diluted share, compared to $(6.9) million, or $(4.21) per diluted share, in the prior year period. Adjusted EBITDA from continuing operations for the six months ended June 30, 2020 was $24.9 million, compared to $24.6 million in the prior year period.

COVID-19 Update:

 

The impact of the COVID-19 pandemic and the pace at which there are new developments has created significant uncertainty in the current economic environment. The impacts of COVID-19 have adversely affected our near-term and long-term revenues, earnings, liquidity and cash flows as certain licensees have requested temporary relief or deferred making their scheduled payments. 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.

Liquidity and Financing Update:

Sequential ended the second quarter with $16.8 million in cash, including restricted cash.

As of June 30, 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 June 30, 2020. However, due to COVID-19 and our current forecasts, we currently believe we will not be able to satisfy our covenants in our existing financing arrangements for at least twelve months from today’s date.  The Company expects that it will need to modify the loan covenants, obtain a waiver of the covenants or a waiver of a default, or otherwise restructure the terms of the Loan Agreements.  If the Company fails to


comply with its financial covenants, as modified, a default under the Loan Agreements would be triggered and the Company’s obligations under the Loan Agreements may be accelerated. The Company continues to evaluate strategic alternatives and plans to work with the lenders to amend such financial covenants in the Loan Agreement; however, there can be no assurance that such efforts will be successful. As previously noted in the Company’s filings, this 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. See our Quarterly Report on Form 10-Q for the period ended June 30, 2020 for additional information.

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 income from discontinued operations was $0.1 million for the second quarter ended June 30, 2020 compared to after-tax net loss from discontinued operations of $(1.3) million in the prior year quarter.  The Company’s after-tax net loss from discontinued operations was $(1.2) million for the six months ended June 30, 2020 compared to $(121.9) million in the prior year period.  

Investor Call and Webcast:

Management will provide further commentary today, August 13, 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 provision for (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, gain on sale of asset, 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, gain on sale of asset, non-cash impairment of trademarks, net of non-controlling interest, non-cash mark-to-market adjustments on interest rate swaps, and provision for (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) uncertainties related to the timing, proposals or decisions arising from the Company’s strategic review, including the divestiture of one or more existing brands; (xvi) adverse effects on the Company and its licensees due to natural disasters, pandemic disease and other unexpected events; (xvii) 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 (xviii) 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)

    

June 30, 

    

December 31, 

    

2020

2019

(Unaudited)

Assets

 

  

 

  

 

Current Assets:

 

  

 

  

 

Cash

$

16,034

$

6,264

Restricted cash

 

727

 

2,043

Accounts receivable, net

 

41,200

 

39,452

Prepaid expenses and other current assets

 

7,830

 

4,228

Current assets from discontinued operations

171

6,839

Total current assets

 

65,962

 

58,826

 

  

 

  

Property and equipment, net

 

1,780

 

5,349

Intangible assets, net

 

494,677

 

599,967

Right-of-use assets - operating leases

52,181

50,320

Other assets

14,956

8,782

Total assets

$

629,556

$

723,244

 

  

 

  

Liabilities and Equity

 

  

 

  

Current Liabilities:

 

  

 

  

Accounts payable and accrued expenses

$

18,315

$

15,721

Current portion of long-term debt

 

16,250

 

12,750

Current portion of deferred revenue

 

6,456

 

6,977

Current portion of lease liabilities - operating leases

3,209

3,035

Current liabilities from discontinued operations

359

1,959

Total current liabilities

 

44,589

 

40,442

 

  

 

  

Long-term debt, net of current portion

 

440,316

 

433,250

Long-term deferred revenue, net of current portion

 

2,793

 

4,604

Deferred income taxes

 

14,456

 

14,351

Lease liabilities - operating leases

53,067

54,168

Other long-term liabilities

 

3,276

 

3,389

Total liabilities

 

558,497

 

550,204

 

  

 

  

Equity:

 

  

 

  

Preferred stock

 

-

 

-

Common stock

 

17

 

17

Additional paid-in capital

 

515,442

 

515,151

Accumulated other comprehensive loss

 

(4,004)

 

(4,096)

Accumulated deficit

 

(483,523)

 

(394,126)

Treasury stock

 

(3,237)

 

(3,230)

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

 

24,695

 

113,716

Noncontrolling interests

 

46,364

 

59,324

Total equity

 

71,059

 

173,040

Total liabilities and equity

$

629,556

$

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 June 30, 

 

Six Months Ended June 30, 

2020

2019

 

2020

2019

Net revenue

$

22,594

$

26,415

$

42,825

$

51,939

Operating expenses

 

11,143

 

13,907

 

28,850

 

29,453

Impairment charges

 

-

 

-

 

85,590

 

-

Gain on sale of asset

(901)

-

(901)

-

Income (loss) from operations

 

12,352

 

12,508

 

(70,714)

 

22,486

Other expense

 

660

 

829

 

3,539

 

427

Interest expense, net

 

11,994

 

13,893

 

24,437

 

27,746

Loss from continuing operations before income taxes

 

(302)

 

(2,214)

 

(98,690)

 

(5,687)

Provision for (benefit from) income taxes

 

1,563

 

(379)

 

480

 

(620)

Loss from continuing operations

 

(1,865)

 

(1,835)

 

(99,170)

 

(5,067)

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

 

(1,062)

 

(1,455)

 

10,944

 

(2,994)

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

(2,927)

(3,290)

(88,226)

(8,061)

Income (loss) from discontinued operations, net of income taxes

143

(1,309)

(1,171)

(121,883)

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

$

(2,784)

$

(4,599)

$

(89,397)

$

(129,944)

Loss per share from continuing operations:

 

  

 

  

 

  

 

  

Basic

$

(1.78)

$

(2.03)

$

(53.80)

$

(5.00)

Diluted

$

(1.78)

$

(2.03)

$

(53.80)

$

(5.00)

 

  

 

  

 

  

 

  

Earnings (loss) per share from discontinued operations:

 

  

 

  

 

  

 

  

Basic

$

0.09

$

(0.81)

$

(0.71)

$

(75.64)

Diluted

$

0.09

$

(0.81)

$

(0.71)

$

(75.64)

 

  

 

  

 

  

 

  

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

 

  

 

  

 

  

 

  

Basic

$

(1.69)

$

(2.84)

$

(54.51)

$

(80.64)

Diluted

$

(1.69)

$

(2.84)

$

(54.51)

$

(80.64)

 

  

 

  

 

  

 

  

Weighted-average common shares outstanding:

 

  

 

  

 

  

 

  

Basic

 

1,644,446

 

1,617,130

 

1,640,027

 

1,611,368

Diluted

 

1,646,440

 

1,617,130

 

1,640,027

 

1,611,368


SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Six Months Ended June 30, 

    

2020

    

2019

Continuing Operations:

Cash Used In Operating Activities

$

(2,419)

$

(42,717)

Cash Provided By Investing Activities

 

939

 

165,811

Cash Provided By (Used In) Financing Activities

 

6,037

 

(171,548)

Discontinued Operations:

Cash Provided By Operating Activities

$

3,897

$

41,893

Cash Used In Investing Activities

 

-

 

(44)

Cash Used In Financing Activities

 

-

 

(574)

 

  

 

  

Net Increase (Decrease) In Cash and Restricted Cash

 

8,454

 

(7,179)

Balance — Beginning of period

 

8,307

 

16,138

Balance — End of period

$

16,761

$

8,959


Non-GAAP Financial Measure Reconciliation

(in thousands, except earnings per share data)

(Unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

2020

2019

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

$

(2,784)

$

(4,599)

$

(89,397)

$

(129,944)

Discontinued operations, net of tax

143

(1,309)

(1,171)

(121,883)

Loss from continuing operations

(2,927)

(3,290)

(88,226)

(8,061)

 

  

 

  

 

  

 

  

Adjustments:

 

  

 

  

 

  

 

  

Deal advisory costs (a)

 

3

 

235

 

51

 

1,280

Debt refinancing costs (b)

 

54

 

-

 

104

 

-

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

 

(209)

 

-

 

(293)

 

(328)

Gain on sale of asset (d)

(901)

-

(901)

-

Non-cash impairment of trademarks, net (e)

-

-

73,136

-

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

602

872

3,484

872

Provision for (benefit from) income taxes (g)

 

1,563

 

(379)

 

480

 

(620)

Total non-GAAP adjustments

 

1,112

 

728

 

76,061

 

1,204

Non-GAAP net loss from continuing operations (1)

$

(1,815)

$

(2,562)

$

(12,165)

$

(6,857)

Non-GAAP weighted-average diluted shares (h)

 

1,646

 

1,630

 

1,645

 

1,629

(Unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

2020

2019

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

$

(1.69)

$

(2.82)

$

(54.36)

$

(79.76)

GAAP earnings (loss) per share from discontinued operations

0.09

(0.80)

(0.71)

(74.81)

GAAP loss per share from continuing operations

$

(1.78)

$

(2.02)

$

(53.65)

$

(4.95)

 

  

 

  

 

 

  

Adjustments:

 

  

 

  

 

  

 

  

Deal advisory costs (a)

 

0.00

 

0.14

 

0.03

 

0.78

Debt refinancing costs (b)

 

0.03

 

-

 

0.06

 

-

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

 

(0.13)

 

-

 

(0.18)

 

(0.20)

Gain on sale of asset (d)

(0.54)

 

-

(0.55)

 

-

Non-cash impairment of trademarks, net (e)

-

 

-

 

44.47

 

-

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

0.37

 

0.54

 

2.12

 

0.54

Provision for (benefit from) income taxes (g)

 

0.95

 

(0.23)

 

0.30

 

(0.38)

Total non-GAAP adjustments

0.68

0.45

$

46.25

$

0.74

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

$

(1.10)

$

(1.57)

$

(7.40)

$

(4.21)


(Unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

2020

2019

2020

2019

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

 

  

 

  

 

  

 

  

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

$

(2,784)

$

(4,599)

$

(89,397)

$

(129,944)

Discontinued operations, net of tax

143

(1,309)

(1,171)

(121,883)

Loss from continuing operations

(2,927)

(3,290)

(88,226)

(8,061)

 

  

 

  

 

  

 

  

Adjustments:

 

  

 

 

  

 

  

Provision for (benefit from) income taxes (g)

 

1,563

 

(379)

 

480

 

(620)

Interest expense, net

 

11,994

 

13,893

 

24,437

 

27,746

Non-cash compensation

 

94

 

450

 

326

 

1,109

Depreciation and amortization

 

4,791

 

866

 

12,072

 

1,762

Deal advisory costs (a)

 

3

 

235

 

51

 

1,280

Debt refinancing costs (b)

 

54

 

-

 

104

 

-

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

 

(209)

 

-

 

(293)

 

(328)

Gain on sale of asset (d)

(901)

-

(901)

-

Non-cash impairment of trademarks, net (e)

-

 

-

 

73,136

-

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

602

872

3,484

872

Severance (i)

 

-

 

659

 

188

 

820

Total Adjustments

 

17,991

 

16,596

 

113,084

 

32,641

Adjusted EBITDA from continuing operations (2)

$

15,064

$

13,306

$

24,858

$

24,580


(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, gain on sale of asset, non-cash impairment of trademarks, net of non-controlling interest, non-cash mark-to-market adjustments on interest rate swaps and provision for (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 provision for (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, gain on sale of asset, 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 gain on the sale of the Nevados trademark completed in June 2020.
(e)Represents non-cash impairment charges, net of minority interest, related to the Company's indefinite-lived intangible assets for certain brands.
(f)Represents the non-cash mark-to-market adjustment on interest rate swaps.
(g)Adjustment to remove GAAP provision for (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.  

(h)Represents weighted-average diluted shares the Company reported or would have reported if the Company had GAAP net income in 2020 and 2019.
(i)Represents costs and adjustments to previously recorded costs associated with employee terminations not representative of the Company’s day-to-day compensation costs.