Iconix Brand Group Inc. is cutting its 2016 diluted earnings per share guidance as a result of share increase due to the repurchase of convertible notes.
The GAAP earnings guidance was reduced by 4 cents to a range of 71 cents to 86 cents. The non-GAAP earnings forecast was cut by 9 cents to a range of $1.06 to $1.21. The Capital IQ estimate was for GAAP earnings of 87 cents and non-GAAP earnings of $1.20.
Iconix entered into a separate, privately negotiated agreement with certain holders of approximately $105 million of the company’s 1.5 percent convertible senior subordinated notes due March 2018. In exchange for the notes, the holders will receive cash payments of $35.2 million and roughly 6.8 million shares.
“We are very pleased to have negotiated the opportunistic repurchase of a portion of our outstanding convertible notes at what we believe to be an attractive discount,” said Dave Jones, chief financial officer at Iconix. “Given the repurchase price of the notes, we were able to retire a future debt obligation for significantly less than its face amount. This debt reduction, combined with the issuance of equity, allows us to enhance our financial flexibility and fulfills one of our principal goals of proactively reducing our leverage over time.”
Iconix Brands stock plunged 8 percent to $7.09 and has lost over 70 percent of its value during the past 12 months. The company has struggled with executive changes and an investigation by the Securities and Exchange Commission. This latest move is seen as an effort to get control over the large debt that has been hanging over the company.