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):  August 9, 2016

 

 

 

XCEL BRANDS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   0-0031553   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 1.01 Entry into a Material Definitive Agreement
   
Item 2.02 Results of Operations and Financial Conditions.

 

On August 9, 2016, the Registrant issued a press release announcing its financial results for the fiscal quarter and six months ended June 30, 2016. 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 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers’ Arrangements of Certain Officers

 

On August 9, 2016, Todd Slater resigned as a director of the Registrant and advised the Board that his resignation was not based on any disagreement with the Registrant’s operations, policies or practices.

 

On August 11, 2016, Richard Kirschenbaum was appointed a director of XCel. Mr. Kirschenbaum has 35 years’ experience in the footwear business. He transformed a small family business into a multi-brand regional footwear and accessories chain, The Shoe Box. Mr. Kirschenbaum has been the CEO of The Shoe Box, Inc. since 1984.. Mr. Kirschenbaum has been appointed to serve as a member of the Compensation Committee.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

99.1 Press Release of XCel Brands, Inc. dated August 9, 2016.

 

 

 

 

 

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: August 15, 2016

 

 

Exhibit 99.1

 

FOR IMMEDIATE RELEASE

 

XCEL BRANDS ANNOUNCES SECOND QUARTER 2016 FINANCIAL RESULTS

 

Company Reports Double-Digit Quarterly Revenue Growth of 44% to $9.1 Million

 

Second Quarter 2016 GAAP Net Loss of less than ($0.1) million;

Non-GAAP Net Income of $2.1 million, or Nearly Double from Second Quarter 2015


Second Quarter Adjusted EBITDA Growth of 44% to of $2.7 million

 

Company Announces Successful Launch of IMNYC Isaac Mizrahi, H Halston, and Highline Collective Brands Apparel at Lord & Taylor and Hudson’s Bay Department Stores

 

NEW YORK, NY (August 9, 2016) – Xcel Brands, Inc. (NASDAQ: XELB) (“Xcel” or the “Company”), a brand management and media company, today announced its financial results for the second quarter and six months ended June 30, 2016.

 

“We are pleased to report another quarter of double-digit top-line growth, and are also excited to announce that during the quarter we successfully launched the IMNYC Isaac Mizrahi, H Halston, and Highline Collective brands at Lord & Taylor and Hudson’s Bay department stores,” said Robert W. D'Loren, Xcel's Chairman and Chief Executive Officer. He further stated, “I am pleased with the historical and continued growth in our interactive television business. We are also focused on gaining market share in the bricks and mortar channel, and plan to continue to invest in our quick-time-response short lead time production platform to drive growth in this channel.”

 

Second Quarter 2016

Total revenue for the second quarter of fiscal 2016 increased 44% to $9.1 million, compared with $6.3 million for the prior year quarter.

 

GAAP net loss was less than ($0.1) million for the quarter ended June 30, 2016, or ($0.00) per share, compared with net income of $2.1 million, or $0.13 per share on a diluted basis, in the prior year quarter. After adjusting for certain cash and non-cash items, non-GAAP net income for the quarter ended June 30, 2016 was $2.1 million, or $0.11 per diluted share, compared with $1.1 million, or $0.07 per diluted share in the prior year quarter.

 

Adjusted EBITDA for the quarter ended June 30, 2016 increased by $0.8 million or approximately 44% to $2.7 million, compared with $1.9 million for the quarter ended June 30, 2015.

 

First Six Months of Fiscal 2016

Total revenue for the six months ended June 30, 2016 increased 36% to $17.5 million, compared with $12.9 million in the same period in 2015.

 

GAAP net loss was ($0.1) million for the six months ended June 30, 2016, or ($0.01) per share, compared with net income of $1.8 million, or $0.11 per share on a diluted basis, for the six months ended June 30, 2015. After adjusting for certain cash and non-cash items, non-GAAP net income for the six months ended June 30, 2016 was $3.4 million, or $0.17 per diluted share, compared with $2.8 million, or $0.18 per diluted share, for the same period in the prior year.

 

 

 

  

Adjusted EBITDA for the six months ended June 30, 2016 increased to $4.7 million from $4.1 million for the same period in the prior year.

 

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 June 30, 2016 remains strong, with stockholders' equity of $102.3 million as of June 30, 2016, cash and cash equivalents of approximately $13.5 million, and adjusted working capital (which excludes obligations payable in stock) of approximately $16.5 million.

 

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, August 9, 2016. 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 877-681-3378. A replay of the conference call will be available on the Company website for 30 days following the event and can be accessed at 877-870-5176 using replay pin number 3010924.

 

About Xcel Brands

Xcel Brands, Inc. (NASDAQ:XELB) is a brand management and media 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 an omnichannel sales strategy which includes the promotion and sale of products under its brands through direct-response 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

 

 

 

 

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, 2015 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:

 

Hunter Wells / John Mills

ICR

646-277-1246

Hunter.wells@icrinc.com / John.mills@icrinc.com

 

 

 

 

Xcel Brands, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
         
   June 30, 2016   December 31, 2015 
   (Unaudited)     
Assets          
Current Assets:          
   Cash and cash equivalents  $13,471   $16,860 
   Accounts receivable, net   10,077    7,594 
   Prepaid expenses and other current assets   567    655 
      Total current assets   24,115    25,109 
   Property and equipment, net   2,369    871 
   Trademarks and other intangibles, net   111,759    112,323 
   Goodwill   12,371    12,371 
   Restricted cash   1,509    1,109 
   Other assets   282    343 
      Total non-current assets   128,290    127,017 
Total Assets  $152,405   $152,126 
           
Liabilities and Stockholders' Equity          
Current Liabilities:          
   Accounts payable, accrued expenses and other current liabilities  $3,822   $3,372 
   Deferred revenue   39    597 
   Current portion of long-term debt   8,058    8,918 
   Current portion of long-term debt, contingent obligations   -    250 
      Total current liabilities   11,919    13,137 
Long-Term Liabilities:          
   Long-term debt, less current portion   29,843    31,860 
   Deferred tax liabilities, net   6,490    6,749 
   Other long-term liabilities   1,821    297 
      Total long-term liabilities   38,154    38,906 
Total Liabilities   50,073    52,043 
           
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 June 30, 2016 and          
   December 31, 2015, and 18,670,686 and 18,434,634 issued and outstanding at          
   June 30, 2016 and December 31, 2015, respectively   19    18 
   Paid-in capital   96,382    93,999 
   Retained earnings   5,931    6,066 
      Total Stockholders' Equity   102,332    100,083 
           
Total Liabilities and Stockholders' Equity  $152,405   $152,126 

 

 

 

 

Xcel Brands, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
                 
                 
   For the Three Months Ended June 30,   For the Six Months Ended June 30, 
   2016   2015   2016   2015 
Revenues                    
   Net licensing revenue  $9,092   $6,269   $17,437   $12,793 
   Net e-commerce sales   24    52    71    119 
      Total revenues   9,116    6,321    17,508    12,912 
   Cost of goods sold   36    35    106    80 
      Gross profit   9,080    6,286    17,402    12,832 
                     
Operating expenses                    
   Salaries, benefits and employment taxes   4,217    3,073    8,427    6,176 
   Other design and marketing costs   831    808    1,660    1,092 
   Other selling, general and administrative expenses   1,988    535    3,294    1,521 
   Stock-based compensation   1,453    1,108    2,665    2,121 
   Depreciation and amortization   359    318    785    580 
      Total operating expenses   8,848    5,842    16,831    11,490 
                     
Other expenses (income)                    
   Gain on reduction of contingent obligation   -    (3,000)   -    (3,000)
   Loss on extinguishment of debt   -    760    -    1,371 
      Total other income, net   -    (2,240)   -    (1,629)
                     
Operating income   232    2,684    571    2,971 
                     
Interest and finance expense                    
   Interest expense - term debt   352    309    663    621 
   Other interest and finance charges   178    124    302    323 
      Total interest and finance expense   530    433    965    944 
                     
Income (loss) from continuing operations before income taxes   (298)   2,251    (394)   2,027 
                     
Income tax (benefit) provision   (208)   90    (259)   (16)
                     
Income (loss) from continuing operations   (90)   2,161    (135)   2,043 
                     
Loss from discontinued operations, net   -    (54)   -    (267)
                     
Net income (loss)  $(90)  $2,107   $(135)  $1,776 
                     
Basic and diluted net (loss) income per share:                    
Continuing operations  $(0.00)  $0.15   $(0.01)  $0.14 
Discontinued operations, net   -    (0.01)   -    (0.02)
Net (loss) income  $(0.00)  $0.14   $(0.01)  $0.12 
                     
Diluted net (loss) income per share:                    
Continuing operations  $(0.00)  $0.14   $(0.01)  $0.13 
Discontinued operations, net   -    (0.01)   -    (0.02)
Net (loss) income  $(0.00)  $0.13   $(0.01)  $0.11 
                     
Basic weighted average common shares outstanding   18,671,648    14,850,874    18,565,198    14,462,305 
Diluted weighted average common shares outstanding   18,671,648    15,963,975    18,565,198    15,575,406 

 

 

 

 

Xcel Brands, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
         
   For the Six Months Ended June 30, 
   2016   2015 
         
Cash flows from operating activities          
   Net (loss) income  $(135)  $1,776 
   Adjustments to reconcile net (loss) income to net cash          
   provided by (used in) operating activities:          
      Loss from discontinued operations, net   -    267 
      Depreciation and amortization expense   785    580 
      Amortization of deferred finance costs   94    77 
      Stock-based compensation   2,665    2,121 
      Recovery of allowance for doubtful accounts   -    (21)
      Amortization of note discount   158    246 
      Deferred income tax benefit   (259)   (85)
      Tax benefit from vested stock grants and exercised options   -    (69)
      Non-cash property exit charge   648    - 
      Gain on reduction of contingent obligation   -    (3,000)
      Loss on extinguishment of debt   -    1,371 
   Changes in operating assets and liabilities:          
      Accounts receivable   (2,484)   (2,903)
      Prepaid expenses and other assets   92    (204)
      Accounts payable, accrued expenses and other current liabilities   449    (1,010)
      Deferred revenue   (558)   (78)
      Other liabilities   875    (23)
Net cash provided by (used in) operating activities from continuing operations   2,330    (955)
Net cash provided by operating activities from discontinued operations, net   -    207 
Net cash provided by (used in) operating activities   2,330    (748)
           
Cash flows from investing activities          
     Cash consideration for asset acquisition of the H Halston Brand   -    (14)
     Advance deposit for asset acquisition of the C Wonder Brand   -    (300)
     Purchase of property and equipment   (1,718)   (47)
     Restricted cash for security deposits   (400)   (1,109)
Net cash used in investing activities   (2,118)   (1,470)
           
Cash flows from financing activities          
    Proceeds from exercise of stock options   20    - 
    Tax benefit from vested stock grants and exercised options   -    69 
    Shares repurchased including vested restricted stock in exchange for          
    withholding taxes   (302)   - 
    Payment of deferred finance costs   (69)   (10)
    Costs associated with equity offering   -    (316)
    Payment of long-term debt   (3,000)   (1,256)
    Payment of QVC earnout obligation   (250)   - 
    Payment of installment obligations related to the acquisition of the Ripka Brand   -    (2,183)
Net cash used in financing activities   (3,601)   (3,696)
           
Net decrease in cash and cash equivalents   (3,389)   (5,914)
           
Cash and cash equivalents, beginning of period   16,860    8,531 
           
Cash and cash equivalents, end of period  $13,471   $2,617 
           
Supplemental disclosure of non-cash activities:          
  Issuance of common stock as payment for a portion of the Ripka Seller Notes  $-   $5,401 
           
Supplemental disclosure of cash flow information:          
  Cash paid during the period for income taxes  $118   $437 
  Cash paid during the period for interest  $560   $610 

 

 

 

 

Xcel Brands, Inc. and Subsidiaries
Reconciliation of Non-GAAP measures
                 
                 
                 
                 
Non-GAAP net income:                
   Quarter Ended June 30,   Six Months Ended June 30, 
(amounts in thousands)  2016   2015   2016   2015 
                 
Net (loss) income  $(90)  $2,107   $(135)  $1,776 
Non-cash interest and finance expense   80    86    158    246 
Stock-based compensation   1,453    1,108    2,665    2,121 
Loss on extinguishment of debt   -    760    -    1,371 
Gain on reduction of contingent obligations   -    (3,000)   -    (3,000)
Non-recurring property exit charges   670    -    670    - 
Loss from discontinued operations, net   -    54    -    267 
Non-GAAP net income  $2,113   $1,115   $3,358   $2,781 
                     
                     
Non-GAAP diluted EPS:                    
    Quarter Ended June 30,     Six Months Ended June 30, 
    2016    2015    2016    2015 
                     
Diluted (loss) earnings per share  $-   $0.13   $(0.01)  $0.11 
Non-cash interest and finance expense  $-    (0.00)  $0.01    0.01 
Stock-based compensation  $0.08    0.07   $0.14    0.14 
Loss on extinguishment of debt  $-    0.05   $-    0.09 
Gain on reduction of contingent obligations  $-    (0.19)  $-    (0.19)
Non-recurring property exit charges  $0.03    -   $0.03    - 
Loss from discontinued operations, net  $-    0.01   $-    0.02 
Non-GAAP diluted EPS  $0.11   $0.07   $0.17   $0.18 
                     
                     
Weighted average shares - Non-GAAP diluted:                    
    Quarter Ended June 30,     Six Months Ended June 30, 
    2016    2015    2016    2015 
                     
Basic weighted average shares   18,671,648    14,850,874    18,565,198    14,462,305 
Effect of exercising warrants   673,995    971,873    663,270    971,873 
Effect of exercising stock options   42,914    141,228    39,777    141,228 
Weighted average shares - Non-GAAP diluted   19,388,557    15,963,975    19,268,245    15,575,406 
                     
                     
                     
Adjusted EBITDA:                    
    Quarter Ended June 30,     Six Months Ended June 30, 
(amounts in thousands)   2016    2015    2016    2015 
                     
Net (loss) income  $(90)  $2,107   $(135)  $1,776 
Depreciation and amortization   359    318    785    580 
Interest and finance expense   530    433    965    944 
Income tax (benefit) expense   (208)   90    (259)   (16)
State and local franchise taxes   24    27    49    56 
Stock-based compensation   1,453    1,108    2,665    2,121 
Loss on extinguishment of debt   -    760    -    1,371 
Gain on reduction of contingent obligations   -    (3,000)   -    (3,000)
Non-recurring property exit charges   670    -    670    - 
Loss from discontinued operations, net   -    54    -    267 
Adjusted EBITDA  $2,738   $1,897   $4,740   $4,099 

 

 

 

 

 

Non-GAAP net income and non-GAAP diluted EPS are non-GAAP unaudited terms. We define non-GAAP net income as net income (loss), 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, and net 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 (loss) before stock-based compensation, interest expense and other financing costs (including gain (loss) on extinguishment of debt), income taxes, other state and local franchise taxes, depreciation and amortization, gain on the reduction of contingent obligations, non-recurring facility exit charges, and net 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 (loss), 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 (loss) and other GAAP results, and not rely on any single financial measure.