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Iconix to Restate Financial Statements, Stock Plunges 58%

Iconix Brand Group Inc. share price dropped 58 percent (as of press time) after the company disclosed disappointing preliminary third quarter fiscal year results for 2015 on Thursday. The company also revealed that it will restate previous financial statements dating back to 2013.

The company has been under investigation by the Securities and Exchange Commission for irregular accounting practices. A special committee, along with independent legal and accounting advisors, was put in place to conduct a review of the accounting treatment related to certain transactions.

Iconix, which owns, licenses and markets a brand portfolio that includes Badgley Mischka, Candie’s, Rampage more and holds interest in Peanuts, Billionaire Boys Club and Rocawear, said it will restate its historical financial statements for the fourth quarter and annual sales of 2013, the 2014 fiscal year and each quarterly period, and the first and second quarters of 2015 to correct errors in accounting. The company believes that the amount of such adjustments will have no impact on its 2013 income, however it expects to reduce the company’s 2014 operating income by approximately $6 million, and estimates it will increase its first half of 2015 operating income by approximately $1.6 million.

Based on preliminary third quarter results for 2015, Iconix is revising expectations for the Peanuts brand, weak performance in men’s fashion and reductions in revenue in the first nine months of 2015 and reductions in revenue assumptions for the fourth quarter of 2015 related to the accounting adjustments recorded as a result of the special committee and current management team’s reviews.

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Iconix is revising its 2015 licensing revenue guidance to $370-380 million from $410-$425 million; revising its 2015 “Other Revenue” guidance to zero from $5 million to $15 million; revising is 2015 non-GAAP diluted EPS guidance to a range of $1.35-$1.40 from $2.00;-$2.15; and revising its 2015 GAAP diluted EPS guidance to a range of $1.55-$1.60 from $2.24-$2.39.

Peter Cuneo, Iconix Chairman of the Board and Interim Chief Executive Officer, said in a statement, “While we are disappointed in the restatement of our results and revision to our guidance, we believe the actions being taken will create a more solid foundation for Iconix and represent a positive step toward the future of the company. As we look forward, Iconix continues to have significant business strengths from which to build, including its diversified portfolio of consumer brands, profitable business model and strong free cash flow generation. All of us at Iconix are focused on capitalizing on these strengths and better positioning the company so that we improve our results and enhance value for shareholders.”