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Iconix Brand Group, Inc. (NASDAQ:ICON)

Q4 2012 Earnings Call

February 20, 2013 10:00 AM ET

Executives

Warren Clamen – EVP and CFO

Neil Cole – President and CEO

Analysts

Bob Drbul – Barclays

Jim Chartier – Monness, Crespi and Hardt

Steve Marotta – C.L. King & Associates

Susan Anderson – Citi

Robby Ohmes – Bank of America Merrill Lynch

Danielle McCoy – Brean Capital

Operator

Good day, ladies and gentlemen, and welcome to the Iconix Brand Group Fourth Quarter 2012 Earnings Conference Call. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session.

(Operator Instructions)

Our speakers on the call today are Neil Cole, Chief Executive Officer; and Warren Clamen, Chief Financial Officer.

Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. The statements that are not historically fact contained in this conference call are forward-looking statements that involve a number of risks, uncertainties and other factors, all of which are difficult or impossible to predict and many of which are beyond the control of the company. This may cause the actual results, performance or achievements of the company to be materially different from the results, performance or achievements expressed or implied by such forward-looking statements. The words believe, anticipate, expect, confident, and similar expressions identify forward-looking statements. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as the date the statement was made.

I would now like to turn the conference over to your host for today, Mr. Warren Clamen, Chief Financial Officer. Please proceed, sir.

Warren Clamen

Good morning, everyone, and welcome to the Iconix Brand Group Fourth Quarter and Full Year 2012 Earnings Conference Call. On today’s call, we will review our financial results, provide an update of our existing portfolio of brands and discuss our recent acquisitions of Buffalo, and Lee Cooper as well as our outlook for 2013.

Reviewing the results for the fourth quarter ended December 31, 2012, revenue was $85.1 million as compared to $95.5 million in the fourth quarter of 2011. As anticipated, healthy trends across the majority of our portfolio continued to be offset by the transition of the Royal Velvet license and the year-over-year declines of our Men’s businesses.

In the fourth quarter, we generated $37.9 million of free cash flow or $0.54 per diluted share as compared to $41.9 million in the prior year quarter. EBITDA in the fourth quarter was approximately $50 million as compared to $57.3 million in the prior year quarter, and our EBITDA margin for the fourth quarter was approximately 59%.

Non-GAAP net income, which excludes non-cash interest related to our convertible notes, was $28.9 million as compared to $31.3 million in the prior year quarter. Diluted non-GAAP earnings per share was $0.41 compared to $0.41 in the prior year quarter, noting that with lower revenues in 2012 we were able to deliver similar earnings per share to our shareholders as compared to 2011.

GAAP net income for the fourth quarter was approximately $26.1 million as compared to $27.2 million in the prior year quarter. And GAAP diluted EPS was $0.37 per diluted share compared to $0.36 in the prior year quarter.

Our weighted average diluted share count for the fourth quarter was approximately 70.3 million compared to approximately 75.4 million in the prior year quarter. This reflects our repurchases, which I will discuss later on the call.

Reviewing our results for the full year, December 31, 2012, our revenue was approximately $353.8 million, as compared to $369.8 million in the prior year. For 2012, we generated free cash flow of approximately $180.5 million, or $2.51 per diluted share, and $179.2 million, or $2.37 per diluted share, in 2011. Our EBITDA for the year was approximately $217 million as compared to approximately $229.6 million in the prior year.

Our non-GAAP net income, which excludes noncash interest related to our convertible notes and a one-time accounting gain in 2011, was approximately $122 million as compared to approximately $127.4 million in the prior year. And our diluted non-GAAP earnings per share was $1.70, as compared to $1.69 in the prior-year quarter, again, demonstrating that we were focused throughout 2012 in delivering similar earnings per share as compared to 2011 despite revenue decline.

EBITDA, free cash flow, non-GAAP net income and non-GAAP diluted EPS are all non-GAAP metrics, and reconciliation tables for each can be found in the press release sent earlier this morning and on our website, iconixbrand.com.

Moving on to our balance sheet. We ended the year with approximately $255 million of cash. In addition to generating $180 million of free cash flow in the fourth quarter, we launched a new $1.1 billion securitization facility, under which we have borrowed $600 million at an interest rate of 4.23% and have a yet-to-be-placed revolver of $100 million. We used a portion of the securitization proceeds to finance our purchase of the Umbro brand in the fourth quarter, to pay our 51% stake in the Buffalo brand earlier this month, to acquire the Lee Cooper brand that we announced this morning, and to repay amounts outstanding under our previous facilities.

We are excited about our ability to leverage the strength of our brands’ predictable and stable cash flows to secure financing at attractive prices. With this facility in place and a strong balance sheet and strong free cash flow, we believe we are well positioned to grow our business through additional acquisitions.

Since our last earnings call, we accelerated our share repurchase activity and bought back approximately $78 million of shares. Since initiating our current $200 million authorization in October 11, we have repurchased approximately 10 million shares at an average price of $18.32, representing $185 million, or 14% of our shares outstanding. To reflect our continued commitment to share repurchases, today we announced that our board has authorized a new $300 million share repurchase program.

With that, I will turn the call over to Neil Cole, our Chief Executive Officer.

Neil Cole

Good morning. Thank you, Warren. Good morning, everybody. As I take a look at our company today with a portfolio of over 30 brands that represent approximately $13 billion in annual retail sales, it is clear that we’ve come a long way. However, it is our future that I am most excited about. Over the past year, we have executed on several exciting initiatives, including the launch of a new $1.1 billion securitization facility, our acquisition of the Umbro brand, the Buffalo brand and the Lee Cooper brand, along with the signing of a new Peanuts movie deal, the formation of a joint venture in India, all which we believe position us for significant growth in the years to come.

In addition, the profile of our portfolios continues to evolve as we successfully diversify across geographies and consumer segments. To best manage our growing portfolio, we have created four separate verticals, each of which have their own business leaders including Women’s, Men’s, Home, and Entertainment.

Starting with our Entertainment segment. We are excited to announce that we recently hired Leigh Anne Brodsky, a licensing professional with over 20 years’ experience in the entertainment business to oversee Peanuts Worldwide and Iconix Entertainment. We believe her experience will be invaluable as we gear up for the launch in 2015 of the Peanuts movie with 20th Century Fox and Blue Sky Studios. In anticipation of the movie we have already begun to line up a list of new licensees which we expect will drive additional revenue over the next few years. We also believe we can successfully build a stable of entertainment-based properties through the acquisition of additional entertainment and character brands.

Our Women’s brands remain healthy with large businesses across key retailers. Our Mossimo brand remained a top performer in 2012 with retail sales exceeding $2 billion. Other top-performing Women’s brands for the year were Rampage and Bongo, which continue to expand into new categories.

Our Home brands continue to perform well with strength from Charisma, Sharper Image and Fieldcrest in 2012. As for Royal Velvet, now that it is one year into its transition, there should only be upside from here.

Moving onto our Men’s brands, as you know 2012 was a challenging year and we continue to work closely with our licensees to revitalize these businesses. We have also been working on a few smaller initiatives in the segment and 2012 we acquired interest in three small but emerging growth brands, these include Billionaire Boys Club and Ice Cream, of which we are joint ventured with Jay-Z and we acquired 50% from founder Pharrell Williams and his partners, and Modern Amusement, of which we own 51% through a partnership with Mossimo Giannulli.

Over the past few months, our acquisition pace has picked up, and we are excited to have added three iconic brands to the portfolio, including Umbro, Buffalo and Lee Cooper.

The Umbro brand, which we acquired in December, has been a great addition to our athletic platform, and we’re excited to announce that we’ve already found strong replacements for the territories Nike served directly. While today that brand is predominantly sold in the international markets, we are working on a strategy to build out the brand in the U.S. and also see big opportunities in markets such as Brazil and China. In addition, this year, we plan on launching a new marketing campaign leading up to the World Cup in Brazil in 2014.

Earlier this month, we acquired a 51% interest in the Buffalo brand for $76.5 million. Buffalo is a lifestyle brand founded in Canada in 1985, and we believe through our global licensing platform we can help grow the brand in the U.S. and internationally. Today, the brand generates approximately $25 million in annual royalty revenue and is primarily sold through better department stores including Macy’s, Dillard’s and Lord and Taylor. It also has 30 standalone retail stores, mainly in Canada, which will be operated by our core licensee, which is run by the Bitton brothers. We also believe there could be an opportunity to leverage our Canadian partner’s platform for other brands in the portfolio.

This morning, we also announced that we acquired the Lee Cooper brand for roughly $73 million. Lee Cooper is an iconic global denim brand with over 100-year-old British heritage and has a strong group of over 35 international licenses that are expected to generate approximately $14 million in annualized royalty revenue, which represents approximately $500 million in global retail sales. The brand is sold in over 80 countries, predominantly in Europe, Asia and the Middle East, along with India, and we believe with our platform and relationship in North and South America, we can further expand the brand into new geographical areas. In addition, we look forward to working with the brand’s strong licensee base to continue to grow and possibly form new partnerships for the rest of our portfolio.

Today, the brand has slightly higher overhead than a typical brand in our portfolio. However, with its international tax advantages, we expect it to be just as accretive as a typical Iconix acquisition. In addition, as an existing licensing business, we expect this to be a seamless transition with potential synergy opportunities.

With the successful completion of these three acquisitions, we still remain focused on additional acquisitions. With our strong balance sheet, projected free cash flow of over $200 million and our ability to borrow additional amounts under our $1.1 billion securitization facility, we believe we have strong financial flexibility and are well positioned to continue to execute on our acquisition and buyback strategies.

On the international front, we continued to make progress. In 2012, we formed a joint venture in India with Reliance Brands, marking our fourth international joint venture for our portfolio of brands. Through this joint venture we have already gained traction and recently signed our second direct-to-retail license in India with Arvind for the Ed Hardy brand, and are close to signing a third deal for our London Fog brand.

In addition, in the fourth quarter we monetized our remaining stake in OP Japan which drove incremental revenue of approximately $6.5 million. We also monetized our Zoo York and Artful Dodger brands in China resulting in $3.7 million of equity earnings.

International expansion has been a key focus for our company and a fast-growing component of our overall portfolio. With our three most recent acquisitions of Umbro, Buffalo and Lee Cooper, all of which are strong international businesses, we expect international to represent approximately 33% of our business in 2013 compared to 24% in 2012.

Moving on to guidance. To reflect our acquisition of the Lee Cooper brand, we are increasing our guidance for 2013 as follows. We are increasing our revenue guidance to a range of $425 million to $430 million (ph) from $415 million to $425 million. We are increasing our non-GAAP diluted EPS guidance to a range of $2.05 to $2.15 from $2 to $2.10. We are also increasing our free cash flow guidance to a range of $203 million to $210 million from $196 million to $203 million.

In closing, as we move to 2013 and beyond, we see our company returning to historical growth levels, fueled by a strong portfolio of brands, our organic initiatives including international opportunities as well as our most recent acquisitions, and our continued ability to be opportunistically acquisitive.

For 2013 we believe we are on track to deliver approximately 20% growth on both the top and bottom line, and we hope that we can continue to execute on both organic initiatives and acquisition strategy, we will achieve growth levels similar to which we’ve achieved over the past seven years, and we look forward to continuing to deliver strong growth and value to our shareholders.

I’d like to thank you all listening this morning and your continued support. With that I’d like to turn it over to the operator for questions and answers.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Bob Drbul with Barclays, please proceed

Bob Drbul – Barclays

Hiya, good morning.

Neil Cole

Morning, Bob.

Bob Drbul – Barclays

Hey Neil. Just got a couple of questions for you on – I guess on the acquisitions, with Buffalo and then Lee Cooper, can you just talk about the outlook for the denim market, where you seem to be making some investments in that area? And what you see around the category and the outlook for the category, how these brands are positioned there?

Neil Cole

Okay first of all, I was just handed a note that I misspoke on the call as far as guidance. The numbers – our guidance next year is $425 million to $435 million, not $430 million.

So the way we look at these brands is we look at them as lifestyle brands. And for instance, Lee Cooper has a huge shoe business, footwear business across the world, mostly in the Middle East and India. We sell as many tops as we do bottoms. Same thing with Buffalo; if you go into a Buffalo store, and there’s one in Manhattan that’s phenomenal, in Soho, more than half of the business is tops and accessories and all sorts of products. The way I look at denim, denim is a base fabric that’s always been around and is the most comfortable thing people wear and will only – it’s a big part of people’s wardrobe. We kind of don’t look at what the denim trends is this year or next year, we just look at great lifestyle brands and we believe both Buffalo and Lee Cooper qualify.

Bob Drbul – Barclays

Okay. And then, Neil, can you expand a little bit more in terms of the outlook for Umbro and sort of the game plan there? I think you mentioned the possibility of some new U.S. distribution. Can you just – what you’ve done since you’ve acquired it? What are the very initial steps in terms of putting your game plan into play here?

Neil Cole

Yeah, well Umbro is this incredible lifestyle brand, kind of based out of a very strong British heritage, almost 90 years old. Little different than a lot of other acquisitions; we kept a pretty big team over in the U.K. and Manchester, we have about 35 people there. And we have a pretty big network of licensees worldwide that we help orchestrate buying the kits and the uniforms and league sponsorships, et cetera.

So we’ve just been working on a transition with Nike over the next 12 months, where all of their territories’ licensees are taking over. So we’re in the process of signing a European license in the U.S., we have Dick’s as a core licensee, but we’ve also signed a few other licensees to supplement the market.

But we think our really big opportunities are South America and China. Two great countries. Obviously in South America, they have the World Cup coming next year and then right behind is the Olympics. We have a powerful group of licensees down there. A company called Das who’s one of the largest footwear makers who does all the cleats, or the boots. So we’re excited about Brazil, China and really the brand. It’s going to be an exciting growth brand for our company.

Bob Drbul – Barclays

Great. Thanks very much.

Neil Cole

Thanks, Bob.

Operator

Your next question comes from the line of Jim Chartier with Monness, Crespi and Hardt. Please proceed.

Jim Chartier – Monness, Crespi and Hardt

Good morning.

Neil Cole

Morning, Jim.

Jim Chartier – Monness, Crespi and Hardt

On the last call, you said you were going to have some one-time acquisition of financing costs in fourth quarter. Can you just go through what those were?

Neil Cole

It’s of the few million dollars in the Umbro acquisition.

Warren Clamen

Right, and you said the financing cost? That – we disclosed the financing costs related to the securitization on that.

Jim Chartier – Monness, Crespi and Hardt

Right. So can you be more specific on the acquisition-related costs?

Warren Clamen

We don’t usually give that detail, but it’s usually in the neighborhood of $1 million to $2 million in terms of specific direct related cost to the acquisitions.

Jim Chartier – Monness, Crespi and Hardt

Okay. And then how much Umbro revenue did you see in fourth quarter?

Warren Clamen

We don’t really disclose specific sort of programs –

Neil Cole

We basically said it’s around $40 million, and we had about a month’s worth. Although December’s not a key month, because we don’t get to ship after Christmas the Hotel brand

Jim Chartier – Monness, Crespi and Hardt

Right. And then you said that the margins from Lee Cooper were a little bit lower. Is there an opportunity to bring those in-line with the company average over time?

Neil Cole

Yeah, there is, and we’ll have to analyze the business as we get – and possibly even leveraging, along with what we have over there with Umbro and our European joint venture, so there could be a possibility of lowering that overhead and consolidating the three organizations.

Jim Chartier – Monness, Crespi and Hardt

Okay. On the Peanuts, have you – when do you start to expect to recognize revenue from new licenses for the Peanuts brand? Is that 2014, or you do start to see some of that in 2013?

Neil Cole

I think we’re starting to see – I think we’re going to see some in the back half. We’ve already started the movie trailer, last week was Toy Fair and we had incredible reactions with some of the biggest companies in the world. So, I think people are going to start gearing up a little bit in the back half of this year. 2014 will be strong and 2015 will be incredible, as far as the opportunities for Peanuts.

Jim Chartier – Monness, Crespi and Hardt

Great. And then just curious on your earnings guidance, this morning you raised it only $0.05, when I would have thought that the Lee Cooper acquisition would have been more than $0.05 accretive for this year?

Warren Clamen

Well, as we said, the margins are slightly off, that is offset by a favorable tax structure, but it’s about $14 million and we only have about 10 months of it in. So that’s about $0.05.

Jim Chartier – Monness, Crespi and Hardt

Okay.

Neil Cole

And there’s also a $0.10 spread we have there. So you could argue...

Jim Chartier – Monness, Crespi and Hardt

Right.

Warren Clamen

Right. And there’s one-time acquisition costs also, for that.

Neil Cole

Yeah, that’d be in the first quarter.

Jim Chartier – Monness, Crespi and Hardt

Right. And then, for you to access the additional $500 million of your securitized notes, how long does that process take and would you do it ahead of announcing a deal?

Warren Clamen

The process would take probably, I don’t know, a couple weeks, et cetera. We don’t have to go back to the rating agencies to get it re-rated, to take down the other $400 million. $100 million is a revolver that can be taken down any day, and we will take a look at that, in terms of when we need it.

Neil Cole

Yeah, we could do it either before or after. We also have the ability – the markets are wide open as far as the convertible side, the high yield side. So you know, capital, we’re pretty excited about the opportunity for capital, it’s just finding the great, iconic brands to purchase.

Jim Chartier – Monness, Crespi and Hardt

Great. Thank you.

Neil Cole

Thanks, Jim.

Operator

Your next question will come from the line of Steve Marotta with C.L. King & Associates. Please proceed.

Steve Marotta – C.L. King & Associates

Good morning, everybody. Congrats on a great quarter. Could you talk a little bit about what the portion of the new sales guidance, the $425 million to $435 million in 2013, will be acquisition related?

Neil Cole

None. The only thing would be the three acquisitions we’ve done, completed already, that’s in those numbers.

Steve Marotta – C.L. King & Associates

Yeah, that’s what I mean, that’s what I’m referring to.

Neil Cole

Yeah. I think what – the press releases we’ve done over the last two months is when we bought Nike, we said Umbro was about $40 million, when we bought Buffalo, on a full-year basis, Buffalo was $25 million and we’ve said this morning that Lee Cooper is about $14 million and each of them kicked in at different times.

Steve Marotta – C.L. King & Associates

Sure. No trouble. You may have said this and forget if you did, if you – if and when you bring Lee Cooper in a big way to the U.S., what kind of positioning will it look like here?

Neil Cole

I’m not so sure that Lee Cooper can come to the U.S. in a big opportunity. I think they’ve tried and – so we’re not sure, we have a lot of work to do. But the reason we brought Lee Cooper, it has such an incredible business in the Middle East with a company called Landmark, it’s in hundreds of stores with beautiful presentations. Also, we have an amazing business in India. So I would say U.S. is not the biggest opportunity for Lee Cooper, I think we have better opportunities in South America and Asia. But it could be – we have to analyze it more and discuss a U.S. strategy a little bit down the road. But we haven’t anticipated any revenue from the U.S.

Steve Marotta – C.L. King & Associates

Okay. Can you talk a little bit about the puts and takes in the equity interest and joint ventures income for the fourth quarter of $6.7 million?

Neil Cole

Yeah. We did a – we sold the remaining interest we had with OP in Japan to Itochu, a deal that we made about a year-and-a-half ago and they had the right to buy the rest. And we also did some equity interest on Artful Dodger and Zoo York in China. So that comprised those deals.

Steve Marotta – C.L. King & Associates

Okay. And what are the tax assumptions for 2013? Will they differ much based on the increased international exposure?

Warren Clamen

They will, actually. The international tax rates are definitely lower. We’re forecasting in the low 30%s for that; they ended this year at about 35%. It would be in the low 30%s for 2013, Steve.

Steve Marotta – C.L. King & Associates

Excellent, terrific. Thank you.

Warren Clamen

Thank you.

Neil Cole

Thanks, Steve.

Operator

Your next question comes from the line of Susan Anderson with Citi. Please proceed.

Susan Anderson – Citi

Good morning, guys. Congrats on another great acquisition.

Neil Cole

Thanks.

Warren Clamen

Thanks, Susan.

Susan Anderson – Citi

I was wondering if you could maybe talk a little bit about the growth of the organic brands and maybe touch a little bit more on the Men’s business, particularly Rocawear. I know that’s been stabilized for a while. I think we should start to cycle that in the first quarter, so should we start to see a little bit of a lift just on the overall top line as a result?

Neil Cole

Yeah, the Men’s business, as we’ve talked about over the last year, has been pretty challenging and we budgeted them pretty conservatively in 2013. Rocawear, we think we’ve stabilized. The Men’s core business is doing pretty – is okay. And we’ve done a lot of renewals on a lot of the categories in kids and others. So we think Rocawear is – we’re planning it pretty much flat to last year, but we are working on some new strategies to hopefully expand the business.

Marc Ecko is doing okay and we’re starting to grow the tailored part of that business. And Ed Hardy, the big story has been our international push into India, Europe and China. The stars in the Men portfolio have been Zoo York. Very excited about Starter, we’re now taking it into all the better stores, again with the NFL and the NBA. And obviously the Umbro business. So those have been the – the Men’s business is kind of planned to start creeping back and gaining rev share again.

Susan Anderson – Citi

Okay. And then what about the brands at, say, like the mid-tier department stores whichever have been struggling, such as Kohl’s? And then how is the Royal Velvet doing at JCPenney?

Warren Clamen

Actually Kohl’s, for the first time in – ever since we’ve been – they’ve been our – they were our first big DPR with Candie’s – last year was not an up year for the first time. But we have total confidence in Kohl’s and we know they’re going to figure it out, and we actually have started to see a little turn in the last six weeks. So we are confident both Candie’s and Mudd will be fine; they’re in great hands.

As far as Royal Velvet, it looks fabulous and we’re rolling out our shops in May and we’re pretty – it’s kind of even doing better than we thought it would, even though I think JCPenney obviously is having a little troubles. But we’re really excited about how they’re executing the product.

Susan Anderson – Citi

Great. That sounds good. And just one housekeeping question, is the new share repurchase program in guidance?

Warren Clamen

No. There’s no assumption for further share repurchase in the guidance.

Susan Anderson – Citi

Okay. Great. Thanks a lot you guys.

Neil Cole

Thanks, Susan.

Operator

Your next question comes from the line of Robby Ohmes with Bank of America Merrill Lynch. Please proceed.

Robby Ohmes – Bank of America Merrill Lynch

Oh, good morning guys. How are you?

Neil Cole

Good morning, Robby.

Robby Ohmes – Bank of America Merrill Lynch

Hey Neil, I was just hoping to get an update on MG Icon and what the outlook for 2013 looks for the growth of that JV and where you see the drivers and expansion there? Thanks.

Neil Cole

Yeah, MG Icon actually had a really good year. Macy’s is kind of turning the quarter and growing, so we’re pretty excited about that business. And best thing about MG Icon besides for Macy’s, we’ve taken it around the world. We have a great deal with Myer’s in Australia, a great deal with Hudson Bay, Ottawa in Europe and starting to enter new territories and negotiations with even more. So I think we had like a 15%, 20% growth in MG Icon last year, and we see it continuing to be strong going into this year.

Robby Ohmes – Bank of America Merrill Lynch

And so as we are looking at your 2013 guidance between MG Icon and some of your other JVs like India, et cetera, could that line start to really uptick in 2013? Or how should we think about the JV earnings line over the next year and maybe even a three-year look if you guys could give us that?

Warren Clamen

Yeah I mean we’re definitely forecasting those businesses, those are the growth businesses. So there’s – we could definitely see an uptick for 2013 and for sure in 2014 and 2015. Those are where we see a large growth opportunity, Robby

Neil Cole

And those we’re thinking are double digit where the regular organic we’re projecting low single-digit, but we see good opportunity down below the line.

Robby Ohmes – Bank of America Merrill Lynch

Great. Thanks a lot guys.

Neil Cole

Thanks Robby.

Operator

Your next question comes from the line of Danielle McCoy with Brean Capital. Please proceed.

Danielle McCoy – Brean Capital

Hi guys. Congrats on a good quarter.

Neil Cole

Thanks, Danielle.

Danielle McCoy – Brean Capital

A lot of my questions have actually been answered, but I wanted to see if you guys could put a little bit more color on what you’re seeing in the M&A world and how you look at it going forward?

Neil Cole

Well we bought three companies in the last three months, so we’re very active, and there’s more to go. There’s so many great opportunities out there, we just have to be selective and get great iconic brands.

We’re kind of focused a little bit around the world now; we see growth markets in some of the emerging markets, there’s a big opportunity for us and we have such great partners around the world to help expand our global footprint, so we’re looking at a lot of international deals as our last three were. And we also see a lot of opportunities in building out in the verticals we talked about. And Entertainment is one that we’re hoping to do a lot more deals in and working hard on.

So we’re hoping to get keep going, the first seven years we grew at a rate of well over 34% CAGR. This year we’re projecting about 20 some odd percent, but if we keep going at this rate, hopefully we can continue the rates that we’ve done over the last seven years.

Danielle McCoy – Brean Capital

Okay, great. And how should we think about the tax rate going through 2013?

Neil Cole

I think Warren just said, we’re thinking low 30%s because of a lot more of the international acquisitions, different than the mid-30%s last year.

Danielle McCoy – Brean Capital

Okay, great. Thank you, guys. Good luck.

Neil Cole

Thank you.

Operator

I would now like to turn the presentation back over to Mr. Neil Cole for closing remarks.

Neil Cole

Okay. Well, thank you all for joining us today and your interest in Iconix. As always, our team will be available for further questions throughout the day. Thank you, have a wonderful day.

Operator

Ladies and gentlemen that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.

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