Xcel(US:XELB)2019-11-14 16:17PART I - FINANCIAL INFORMATION This section provides Xcel Brands' unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements Presents Xcel Brands' unaudited condensed consolidated financial statements, covering balance sheets, operations, equity, cash flows, and detailed accounting notes Unaudited Condensed Consolidated Balance Sheets Summarizes Xcel Brands' financial position, detailing assets, liabilities, and stockholders' equity as of September 30, 2019, and December 31, 2018 Unaudited Condensed Consolidated Balance Sheets (in thousands) | Metric | September 30, 2019 (Unaudited) (in thousands) | December 31, 2018 (Note 1) (in thousands) | | :--------------------------------- | :------------------------------------------ | :--------------------------------------- | | Assets | | | | Cash and cash equivalents | $5,890 | $8,837 | | Total current assets | $19,230 | $23,875 | | Total non-current assets | $132,223 | $114,184 | | Total Assets | $151,453 | $138,059 | | Liabilities | | | | Total current liabilities | $12,241 | $16,116 | | Total long-term liabilities | $35,803 | $22,061 | | Total Liabilities | $48,044 | $38,177 | | Stockholders' Equity | | | | Total Stockholders' Equity | $103,409 | $99,882 | | Total Liabilities and Stockholders' Equity | $151,453 | $138,059 | Unaudited Condensed Consolidated Statements of Operations Presents Xcel Brands' revenues, expenses, and net income (loss) for the three and nine months ended September 30, 2019 and 2018 Unaudited Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net revenue | $10,932 | $8,267 | $30,371 | $25,520 | | Gross profit | $7,982 | $8,036 | $23,822 | $24,880 | | Operating income | $372 | $1,398 | $4,321 | $3,896 | | Net (loss) income | $(95) | $982 | $1,884 | $1,369 | | Basic net (loss) income per share | $(0.01) | $0.05 | $0.10 | $0.07 | | Diluted net (loss) income per share | $(0.01) | $0.05 | $0.10 | $0.07 | - Net revenue for the three months ended September 30, 2019, increased by approximately $2.6 million to $10.9 million, primarily due to growth in jewelry wholesale, e-commerce, and apparel wholesale sales142143 - Net loss for the current quarter was $(0.10) million, a decrease from net income of $0.98 million in the prior year quarter151 Unaudited Condensed Consolidated Statements of Stockholders' Equity Details changes in Xcel Brands' stockholders' equity, including common stock, paid-in capital, and retained earnings, for the period ended September 30, 2019 Unaudited Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | December 31, 2018 | September 30, 2019 | | :-------------------- | :---------------- | :----------------- | | Common Stock Amount | $18 | $19 | | Paid-In Capital | $100,097 | $101,739 | | Retained Earnings (Accumulated Deficit) | $(233) | $1,651 | | Total Stockholders' Equity | $99,882 | $103,409 | - Total Stockholders' Equity increased from $99.88 million at December 31, 2018, to $103.41 million at September 30, 2019, driven by common stock issuance for the Halston Heritage acquisition and net income, partially offset by share repurchases19 Unaudited Condensed Consolidated Statements of Cash Flows Outlines Xcel Brands' cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2019 and 2018 Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $3,009 | $4,713 | | Net cash used in investing activities | $(9,748) | $(1,099) | | Net cash provided by (used in) financing activities | $3,419 | $(5,161) | | Net decrease in cash, cash equivalents, and restricted cash | $(3,320) | $(1,547) | | Cash, cash equivalents, and restricted cash at end of period | $6,999 | $10,147 | - Net cash provided by operating activities decreased to $3.01 million in the current nine months from $4.71 million in the prior year, primarily due to changes in operating assets and liabilities and the gain on reduction of contingent obligations180181182183 - Net cash used in investing activities significantly increased to $(9.7) million in the current nine months, mainly due to the cash consideration paid for the Halston Heritage Brands acquisition184 - Net cash provided by financing activities was $3.4 million in the current nine months, a reversal from $(5.16) million used in the prior year, driven by proceeds from long-term debt partially offset by debt payments185186 Notes to Unaudited Condensed Consolidated Financial Statements Provides detailed explanations and disclosures regarding the accounting policies, significant transactions, and financial instrument specifics presented in the financial statements 1. Nature of Operations, Background, and Basis of Presentation Describes Xcel Brands' business model, brand portfolio, sales strategy, and the basis for presenting its unaudited condensed consolidated financial statements - Xcel Brands, Inc. is a media and consumer products company focused on design, production, marketing, wholesale, and direct-to-consumer sales of branded apparel, footwear, accessories, jewelry, home goods, and other consumer products, as well as acquiring dynamic consumer lifestyle brands28137 - The Company owns and manages brands including Isaac Mizrahi, Judith Ripka, Halston, and C Wonder, utilizing a ubiquitous sales strategy across interactive television, internet, brick-and-mortar retail, and e-commerce channels28137 - Effective January 1, 2019, the Company adopted ASU 2016-02 (Leases Topic 842), resulting in the recognition of approximately $10.4 million in operating lease right-of-use (ROU) assets and $13.2 million in lease liabilities, with a $2.8 million decrease in accrued rent30 2. Trademarks and Other Intangibles Details the carrying amounts and amortization of Xcel Brands' trademarks and other intangible assets, including changes due to acquisitions and reclassifications Intangible Asset Net Carrying Amount (in thousands) | Intangible Asset (in thousands) | September 30, 2019 Net Carrying Amount | December 31, 2018 Net Carrying Amount | | :------------------------------ | :------------------------------------- | :------------------------------------ | | Trademarks (indefinite-lived) | $69,100 | $96,707 | | Trademarks (finite