August 11, 2016
Via EDGAR
Mr. Craig Arakawa
Accounting Branch Chief
Office of Beverages, Apparel, and Mining
United States Securities and Exchange Commission
Division of Corporate Finance
Washington, D.C. 20549-7010
Re: | Iconix Brand Group, Inc. (the “Company,” “Iconix,” “we,” “us” or “our”) |
Form 10-K for the Year Ended December 31, 2015
Amendment No. 1 to Form 10-K for the Year Ended December 31, 2015
File No. 001-10593
Dear Mr. Arakawa:
This letter is in response to the Staff’s oral request, made during a call on July 14, 2016, for additional information relating to the Company’s recent correspondence to the Staff dated June 29, 2016. The aforementioned additional information has been included as an Appendix to this letter.
*****
Sincerely, |
/s/ David K. Jones |
David K. Jones |
Chief Financial Officer |
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cc: | Myra Moosariparambil |
Brian Snyderman
BDO USA, LLP; attn: Natalie Kotlyar
BDO USA, LLP National Office
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APPENDIX
Put Option Summary for Joint Ventures
(dollar amounts in thousands)
Accretion ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Joint Ventures | Formation Date | Put Option Value at Inception (1) | Projected Royalty (2) | FMV Put Option (3) | Variance (Total Accretion)(4) | Duration (5) | Q4 | FY | Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | Q4 | FY | ||||||||||||||||||||||||||||||||||||||||||||||||||||
($) | ($) | ($) | ($) | (yrs) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SE Asia (original) (b) | Oct-2013 | 10,000 | 5,628 | 15,477 | 5,477 | 4.99 | 256 | 256 | 271 | 274 | 277 | 277 | 1,098 | 271 | 274 | 277 | 277 | 1,098 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
SE Asia II - Korea (b) | Jun-2014 | 2,441 | 6,712 | 6,712 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SE AsiaII - Europe (b) | Jun-2014 | 4,870 | 13,393 | 13,393 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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SE Asia II - Total (b) | Jun-2014 | 10,554 | 7,311 | 20,105 | 9,551 | 4.26 | — | — | — | 6 | 565 | 565 | 1,137 | 553 | 559 | 565 | 565 | 2,243 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
SEA III - China(b) | Sep-2014 | 21,500 | 7,474 | 20,553 | (947 | ) | 5.00 | — | — | — | — | (7 | ) | (48 | ) | (55 | ) | (47 | ) | (47 | ) | (48 | ) | (48 | ) | (189 | ) | |||||||||||||||||||||||||||||||||||||||||||
MENA | Dec-2014 | 15,208 | 7,296 | 20,064 | 4,856 | 4.99 | — | — | — | — | — | 21 | 21 | 240 | 243 | 245 | 245 | 973 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
LC Partners (a) | Mar-2014 | 4,000 | 20,000 | 10,000 | 6,000 | 5.77 | — | — | 11 | 259 | 262 | 262 | 795 | 257 | 259 | 262 | 262 | 1,040 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Iconix Europe | Jan-2014 | 13,508 | 6,214 | 17,088 | 3,580 | 5.00 | 179 | 179 | 179 | 179 | 716 | 179 | 179 | 179 | 179 | 716 |
(a) | Projections listed are projected wholesale sales, which are used to determine the put value. |
(b) | SE Asia was formed in October 2013. Subsequent to formation, in June 2014, SE Asia purchased certain Korean and European trademarks from the Company. In September 2014, SE Asia purchased certain Chinese trademarks from the Company. The put options enumerated above are all part of the SE Asia joint venture and therefore all accretion is considered aggregated. |
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(1) | The fair value of the put option at the time of additional investment and grant date of the put option. As the put option is for the entire minority interest, the fair value of the put option equals the value of the minority interest at the time of the joint venture formation or the grant date of the put option. |
(2) | Projected royalties for the joint venture (as of the most recent fiscal quarter); used as an input in the calculation of the fair value of the put option, in accordance with the joint venture shareholder/operating agreement. |
(3) | Fair market value (“FMV”) of the put option; calculated using the formula provided by the joint venture shareholder/operating agreement, as disclosed in our form 10-K for the year ended December 31, 2015. The inputs used, including the ‘Projected Royalties’ and multiple stipulated in the shareholder/operating agreement, are reassessed for reasonableness every quarterly period. As an example, Iconix Europe is calculated as follows: ‘Agreed Value-Five-Year Put/Call: (i) (x) percentage of Iconix Europe owned by GBG, multiplied by (y) 5.5, multiplied by (z) the greater of aggregate royalty generated by Iconix Europe for the year ended December 31, 2013 and the year ended December 31, 2018; plus (ii) percentage of Iconix Europe owned by GBG multiplied by the aggregate amount of cash in Iconix Europe which is available for distribution to the members.’ - |
Projected Royalty | 6,214 | |||
Multiple | 5.5 | |||
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34,176 | ||||
GBG Ownership Interest | 50 | % | ||
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FMV of Put Option | 17,088 | |||
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Note that we excluded the amount of cash in Iconix Europe as an input as it is assumed that distributions would have been made prior to exercising the put.
(4) | The difference between the projected ‘FMV Put Option’ and the ‘Put Option Value at Inception’. |
(5) | The number of years between the formation of the joint venture and when the put option becomes exercisable. |
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