Xcel Brands
XCel Brands, Inc. (Form: 8-K, Received: 05/11/2017 16:04:04)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 9, 2017

 

 

 

XCEL BRANDS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware 001-37527 76-0307819
(State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.)

 

1333 Broadway, New York, New York 10018
(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s telephone number, including area code (347) 727-2474

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

 

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 ( see General Instruction A.2. below):

 

¨ 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))

 

 

 

 

 

Item 2.02 Results of Operations and Financial Conditions.

 

On May 9, 2017, the Registrant issued a press release announcing its financial results for the fiscal ended March 31, 2017. As noted in the press release, the Registrant has provided certain non–U.S. generally accepted accounting principles (“GAAP”) financial measures, the reasons it provided such measures and a reconciliation of the non–U.S. GAAP measures to U.S. GAAP measures. Readers should consider non–GAAP measures in addition to, and not as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP. A copy of the Registrant’s press release is being furnished hereto as Exhibit 99.1 and is incorporated herein by reference.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

99.1 Press Release of XCel Brands, Inc. dated May 9, 2017.

 

 

 

 

 

SIGNATURES

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

 

XCEL BRANDS, INC. (Registrant)  
     
By: /s/ James F. Haran  
  Name: James F. Haran  
  Title: Chief Financial Officer  

 

Date: May 11, 2017

 

 

 

 

 

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

 

XCEL BRANDS ANNOUNCES FIRST QUARTER 2017 FINANCIAL RESULTS

 

Company Reports First Quarter Net Revenues of $8.4 Million

 

First Quarter GAAP Pre-Tax Income of $0.1 Million; GAAP Net Loss of $0.4 Million

 

First Quarter Non-GAAP Net Income of $1.1 Million; Adjusted EBITDA of $1.9 Million

 

Company Announces Successful Launch of H Halston brand at Dillard’s

 

NEW YORK, NY (May 9, 2017) – Xcel Brands, Inc. (NASDAQ: XELB) (“Xcel” or the “Company”), a media and brand management company, today announced its financial results for the first quarter ended March 31, 2017.

 

“We are pleased by the strong performance of our interactive television business during the first quarter of 2017,” said Robert W. D'Loren, Xcel's Chairman and Chief Executive Officer. He further stated, “We continue to refine our short lead production platform in our department store business and are excited to announce the successful launch of our H Halston brand at Dillard’s.”

 

First Quarter 2017 Financial Results

 

Total net revenues for the first quarter of fiscal 2017 were $8.4 million, up approximately 1% compared with the prior year quarter. This was attributable to higher revenues from interactive television and Quick-Time-Response department store initiatives, largely offset by the expiration of the LCNY agreement in July 2016.

 

GAAP net loss was $(0.4) million for the quarter ended March 31, 2017, or $(0.02) per share, compared with a net loss of less than ($0.1) million, or ($0.00) per share, in the prior year quarter. After adjusting for certain cash and non-cash items, non-GAAP net income for the quarter ended March 31, 2017 was $1.1 million, or $0.06 per diluted share, compared with $1.2 million, or $0.07 per diluted share in the prior year quarter.

 

Adjusted EBITDA for the quarter ended March 31, 2017 decreased approximately $0.1 million to $1.9 million, compared with $2.0 million for the quarter ended March 31, 2016.

 

See reconciliation tables below for non-GAAP metrics. These non-GAAP metrics may be inconsistent with similar measures presented by other companies and should only be used in conjunction with our results reported according to U.S. generally accepted accounting principles ("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.

 

The Company's balance sheet at March 31, 2017 remains strong, with stockholders' equity of $106.1 million, cash and cash equivalents of $10.2 million, and working capital of approximately $10.5 million.

 

1333 Broadway, 10 th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 2

 

Conference Call and Webcast

The Company will host a conference call with members of the executive management team to discuss these results with additional comments and details at 5:00 p.m. Eastern Time on Tuesday, May 9, 2017. A webcast of the conference call will be available live on the Investor Relations section of Xcel's website at www.xcelbrands.com. Interested parties unable to access the conference call via the webcast may dial 800-231-9012. A replay of the conference call will be available on the Company website for 30 days following the event and can be accessed at 844-512-2921 using replay pin number 4482351.

 

About Xcel Brands

Xcel Brands, Inc. (NASDAQ:XELB) is a media and brand management company engaged in the design, production, licensing, marketing, and direct-to-consumer sales of branded apparel, footwear, accessories, jewelry, home goods, and other consumer products, and the acquisition of dynamic consumer lifestyle brands. Xcel was founded by Robert W. D’Loren in 2011 with a vision to reimagine shopping, entertainment, and social as one. Xcel owns and manages the Isaac Mizrahi, Judith Ripka, H Halston, C. Wonder, and Highline Collective brands, pioneering a ubiquitous sales strategy which includes the promotion and sale of products under its brands through interactive television, internet, brick and mortar retail, and e-commerce channels. Headquartered in New York City, Xcel Brands is led by an executive team with significant production, merchandising, design, marketing, retailing, and licensing experience, and a proven track record of success in elevating branded consumer products companies. With a team of over 100 professionals focused on design, production, and digital marketing, Xcel maintains control of product quality and promotion across all of its product categories and distribution channels. Xcel differentiates by design. www.xcelbrands.com

 

1333 Broadway, 10 th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 3

 

Forward Looking Statements

This press release contains forward-looking statements. All statements other than statements of historical fact contained in this press release, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including "anticipates," "believes," "can," "continue," "ongoing," "could," "estimates," "expects," "intends," "may," "appears," "suggests," "future," "likely," "goal," "plans," "potential," "projects," "predicts," "seeks," "should," "would," "guidance," "confident" or "will" or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements regarding our anticipated revenue, expenses, profitability, strategic plans and capital needs. These statements are based on information available to us on the date hereof and our current expectations, estimates and projections and are not guarantees of future performance. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors, including, without limitation, the risks discussed in the "Risk Factors" section and elsewhere in the Company's Annual Report on form 10-K for the year ended December 31, 2016 and its other filings with the SEC, which may cause our or our industry's actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. You should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

 

For further information please contact:

 

Jeff Sonnek/John Mills

ICR

646-277-1263

Jeff.Sonnek@icrinc.com / John.Mills@icrinc.com

 

1333 Broadway, 10 th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 4

 

 

Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

 

    March 31, 2017     December 31, 2016  
             
Assets                
Current Assets:                
   Cash and cash equivalents   $ 10,201     $ 14,127  
   Accounts receivable, net     8,706       6,969  
   Prepaid expenses and other current assets     887       807  
      Total current assets     19,794       21,903  
   Property and equipment, net     2,624       2,600  
   Trademarks and other intangibles, net     110,955       111,220  
   Goodwill     12,371       12,371  
   Restricted cash     1,509       1,509  
   Other assets     1,514       1,517  
      Total non-current assets     128,973       129,217  
Total Assets   $ 148,767     $ 151,120  
                 
Liabilities and Stockholders' Equity                
Current Liabilities:                
   Accounts payable, accrued expenses and other current liabilities   $ 2,228     $ 1,523  
   Accrued payroll     833       2,185  
   Deferred revenue     75       234  
   Current portion of long-term debt     6,193       6,427  
      Total current liabilities     9,329       10,369  
Long-Term Liabilities:                
   Long-term debt, less current portion     23,817       25,495  
   Deferred tax liabilities, net     7,357       6,901  
   Other long-term liabilities     2,202       2,181  
      Total long-term liabilities     33,376       34,577  
Total Liabilities     42,705       44,946  
                 
Commitments and Contingencies                
                 
Stockholders' Equity:                
   Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued and outstanding     -       -  
   Common stock, $.001 par value, 35,000,000 shares authorized at March 31, 2017 and                
   December 31, 2016, and 18,447,692 and 18,644,982 issued and outstanding at                
   March 31, 2017 and December 31, 2016, respectively     18       19  
   Paid-in capital     97,642       97,354  
   Retained earnings     8,402       8,801  
      Total Stockholders' Equity     106,062       106,174  
                 
Total Liabilities and Stockholders' Equity   $ 148,767     $ 151,120  

 

1333 Broadway, 10 th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 5

 

Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

 

    For the Three Months Ended March 31,  
    2017     2016  
             
Net revenues   $ 8,430     $ 8,361  
                 
Operating costs and expenses                
   Salaries, benefits and employment taxes     4,367       4,210  
   Other design and marketing costs     871       829  
   Other selling, general and administrative expenses     1,280       1,345  
   Stock-based compensation     1,083       1,212  
   Depreciation and amortization     394       426  
      Total operating costs and expenses     7,995       8,022  
                 
Operating income     435       339  
                 
Interest and finance expense                
   Interest expense - term debt     328       311  
   Other interest and finance charges     50       124  
      Total interest and finance expense     378       435  
                 
Income (loss) before income taxes     57       (96 )
                 
Income tax provision (benefit)     456       (51 )
                 
Net loss   $ (399 )   $ (45 )
                 
Basic and diluted net loss per share   $ (0.02 )   $ (0.00 )
                 
Basic and diluted weighted average common shares outstanding     18,674,943       18,458,748  

 

1333 Broadway, 10 th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 6

 

Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

    For the Three Months Ended March 31,  
    2017     2016  
             
Cash flows from operating activities                
   Net loss   $ (399 )   $ (45 )
   Adjustments to reconcile net loss to net cash                
   used in operating activities:                
      Depreciation and amortization expense     394       426  
      Amortization of deferred finance costs     50       46  
      Stock-based compensation     1,083       1,212  
      Amortization of note discount     9       80  
      Deferred income tax provision (benefit)     456       (51 )
   Changes in operating assets and liabilities:                
      Accounts receivable     (1,737 )     (1,534 )
      Prepaid expenses and other assets     (83 )     (66 )
      Accounts payable, accrued expenses and other current liabilities     (647 )     (1,110 )
      Deferred revenue     (159 )     (557 )
      Other liabilities     21       297  
Net cash used in operating activities     (1,012 )     (1,302 )
                 
Cash flows from investing activities                
     Cost to acquire intangible assets     (18 )     -  
     Purchase of property and equipment     (135 )     (246 )
Net cash used in investing activities     (153 )     (246 )
                 
Cash flows from financing activities                
    Proceeds from exercise of stock options and warrants     -       20  
    Shares repurchased including vested restricted stock in exchange for                
    withholding taxes     (795 )     (302 )
    Payment of deferred finance costs     (7 )     (69 )
    Payment of long-term debt     (1,959 )     (2,125 )
    Payment of earn-out obligations     -       (250 )
Net cash used in financing activities     (2,761 )     (2,726 )
                 
Net decrease in cash, cash equivalents, and restricted cash     (3,926 )     (4,274 )
                 
Cash, cash equivalents, and restricted cash at beginning of period     15,636       17,969  
                 
Cash, cash equivalents, and restricted cash at end of period   $ 11,710     $ 13,695  
                 
Reconciliation to amounts on consolidated balance sheets:                
  Cash and cash equivalents   $ 10,201     $ 12,586  
  Restricted cash     1,509       1,109  
  Total cash, cash equivalents, and restricted cash   $ 11,710     $ 13,695  
                 
Supplemental disclosure of cash flow information:                
  Cash paid during the period for income taxes   $ 110     $ 112  
  Cash paid during the period for interest   $ 370     $ 270  

 

1333 Broadway, 10 th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 7

 

Xcel Brands, Inc. and Subsidiaries

Reconciliation of Non-GAAP measures

(Unaudited)

 

Non-GAAP net income:

 

    Quarter Ended
March 31,
 
(amounts in thousands)   2017     2016  
             
Net (loss)   $ (399 )   $ (45 )
Non-cash interest and finance expense     9       78  
Stock-based compensation     1,083       1,212  
Discrete tax items     420       -  
Non-GAAP net income   $ 1,113     $ 1,245  

 

 

Non-GAAP diluted EPS:

 

    Quarter Ended
March 31,
 
    2017     2016  
             
Diluted (loss) per share   $ (0.02 )   $ (0.00 )
Non-cash interest and finance expense     0.00       0.01  
Stock-based compensation     0.06       0.06  
Discrete tax items     0.02       -  
Non-GAAP diluted EPS   $ 0.06     $ 0.07  

 

 

Weighted average shares - Non-GAAP diluted:

 

    Quarter Ended
March 31,
 
    2017     2016  
             
Basic weighted average shares     18,674,943       18,458,748  
Effect of exercising warrants     364,430       650,433  
Effect of exercising stock options     2,646       32,787  
Weighted average shares - Non-GAAP diluted     19,042,018       19,141,968  

 

 

Adjusted EBITDA:

 

    Quarter Ended
March 31,
 
(amounts in thousands)   2017     2016  
             
Net (loss)   $ (399 )   $ (45 )
Depreciation and amortization     394       426  
Interest and finance expense     378       435  
Income tax provision (benefit)     456       (51 )
State and local franchise taxes     29       25  
Stock-based compensation     1,083       1,212  
Adjusted EBITDA   $ 1,941     $ 2,002  

 

 

1333 Broadway, 10 th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 8

 

Non-GAAP net income and non-GAAP diluted EPS are non-GAAP unaudited terms. We define non-GAAP net income as net income, exclusive of stock-based compensation, non-cash interest expense from discounted debt related to acquired assets, gain on the reduction of contingent obligations, loss on extinguishment of debt, non-recurring facility exit charges, certain discrete tax items related to vesting or exercise of stock-based awards, and net income or loss from discontinued operations. Non-GAAP net income and non-GAAP diluted EPS measures do not include the tax effect of the aforementioned adjusting items, due to the nature of these items and the Company’s tax strategy.

 

Adjusted EBITDA is a non-GAAP unaudited measure, which we define as net income before stock-based compensation, interest and other financing costs, loss on extinguishment of debt, gain on the reduction of contingent obligations, income taxes, other state and local franchise taxes, depreciation and amortization, non-recurring facility exit charges, and net income or loss from discontinued operations.

 

Management uses non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA as measures of operating performance to assist in comparing performance from period to period on a consistent basis and to identify business trends relating to our results of operations. Management believes non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA are also useful because they provide supplemental information to assist investors in evaluating our financial results. Non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA should not be considered in isolation or as alternatives to net income, earnings per share, or any other measure of financial performance calculated and presented in accordance with GAAP. Given that non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA are financial measures not deemed to be in accordance with GAAP and are susceptible to varying calculations, our non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including companies in our industry, because other companies may calculate non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA in a different manner than we calculate these measures. In evaluating non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA, you should be aware that in the future we may or may not incur expenses similar to some of the adjustments in this document. Our presentation of non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA does not imply that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA alongside other financial performance measures, including our net income and other GAAP results, and not rely on any single financial measure.

 

1333 Broadway, 10 th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM