Iconix Brand Group announced after the market close Thursday that it will restate several historical financial statements in connection with a “comment letter process” initiated by the U.S. Securities and Exchange Commission in 2015.
Iconix said it has responded to the SEC staff with a “confirming letter” on all of the questions the SEC has raised, concluding the “comment letter” process.
After discussions with SEC staff, Iconix said it will revise its accounting treatment to consolidate the financial statements of its Iconix Canada, Iconix Israel, Iconix Southeast Asia, Iconix MENA and LC Partners U.S. joint ventures with the company’s financial statements and will eliminate the previously reported sales gains.
“As we have stated in the past, the comment letter process was related to highly technical accounting standards and while we are disappointed to have to restate our financial statements, as we expected, there will be no impact on free cash flow,” Iconix Chairman and Interim CEO Peter Cuneo said in a release. “Moving forward, we are highly focused on positioning Iconix for long term success and are pleased to announce that our core operating business is on track to achieve our 2015 and 2016 projections. We also remain on track with our financing plans and expect to be in the position to refinance our convertible notes that mature in June 2016.”
Also among its conclusions, Iconix said its historical equity method of accounting will continue to be used for its Iconix China, Iconix Latin America, Iconix Europe, Iconix India, and Iconix Australia joint ventures but it will “recalculate the cost basis of the trademarks contributed to the respective joint ventures to determine the amount of the gain that should have been recorded at the time of the consummation of these transactions.”
Due to the restatements, Iconix anticipates filing its Form 10-K, for the year ended Dec. 31, 2015, and reporting fourth quarter and full year 2015 financial results by the extended filing date of March 15, 2016.
The company also reaffirmed its 2015 guidance, forecasting licensing revenue of $370 million to $380 million, non-GAAP diluted EPS of $1.35 to $1.40 and free cash flow of $170 million to $175 million.
Regarding the SEC’s ongoing investigation of the firm, Iconix said it intends to fully cooperate with the agency.