18. Restatement

SEC Comment Letter Process.

As disclosed in our Form 10-K for the year ended December 31, 2015, the Company has been engaged in a comment letter process with the Staff of the U.S. Securities and Exchange Commission relating to an ongoing review of the Company’s Form 10-K for the year ended December 31, 2014. The Company has responded to the Staff with a Confirming Letter on the questions the Staff raised, and remains in a dialogue with the SEC Staff relating to those and certain other comments related to the Company’s future disclosures. As a result of the comment letter process, the Company’s management team, Audit Committee (the “Audit Committee”) and the Board of Directors (the “Board”) have reviewed the Company’s financial statements and assessed the accounting treatment applied by the Company to its joint ventures and other sales of intellectual property.

Based on this review and assessment, the Board, the Audit Committee and the Company’s management team, on February 11, 2016, concluded that the Company would restate its historical financial statements (the “Restatement”) to address the following accounting matters: (i) consolidate the financial statements of the Iconix Canada, Iconix Israel, Iconix Southeast Asia, Iconix MENA and LC Partners US joint ventures with the Company’s financial statements, and eliminate the previously reported gains on sale which were recorded at the time these transactions were consummated (including subsequent June 2014 and September 2014 transactions with respect to Iconix Southeast Asia), (ii) record the recalculated cost basis of the trademarks contributed to certain joint ventures which are recorded under the equity method of accounting at the time of consummation of the transactions (which also affected years prior to FY 2013), (iii) record the recalculated cost basis of the Umbro brand in the territory of Korea (which closed in December 2013) and the e-commerce and U.S. catalog rights in respect of the Sharper Image brand (which closed in June 2014) to determine the amount of the gain that should have been recorded at the time of the sale, (iv) reclassify the presentation of its statement of operations to reflect gains on sales of trademarks (to joint ventures or third parties) as a separate line item above the Operating Income line, and not as revenue as historically reflected, and (v) reclassify the Equity Earnings on Joint Ventures line to above the Operating Income line, from its previous location within the Other Expenses section.

In conjunction with the Company’s consolidation of the joint ventures noted above, the Company also adjusted its historical financial statements to properly reflect the consideration from joint venture partners (“the redemption value”) as redeemable non-controlling interest for the Iconix Southeast Asia, Iconix MENA and LC Partners US joint ventures as of the date of the formation of the joint venture. For each period subsequent to the formation of the joint venture, the Company will accrete the change in redemption value up to the date that the joint venture partner has the right to redeem its respective put option. Additionally, in accordance with the applicable accounting guidance, the notes receivable, net of discount, received from our joint venture partners as part of the consideration related to the formation of consolidated joint ventures will be netted against non-controlling interest or redeemable non-controlling interest, as applicable.

Other.

In addition, through the Company’s review of various historical transactions, management determined that it would record adjustments to reflect the following: (i) the reduction of revenue and remeasurment gains associated with certain transactions whereby the Company was not able to establish the fair value of the purchase transaction and subsequent guaranteed minimum royalties. Such adjustments reduced revenue by approximately $10 million, $14 million, $12 million and $6 million in 2015, 2014, 2013 and 2011, respectively, and reduced 2011 remeasurement gains by approximately $4 million, (ii) record a liability of $5.3 million for a royalty credit earned by a specific licensee in fiscal years 2006 through 2008 that will be utilized in fiscal years 2016 through 2020.

The impact of all of the changes described above on the Company’s previously reported consolidated financial statements for the years ended December 31, 2013 and December 31, 2014 were reflected in the financial statements included in the Company’s Form 10-K for the year ended December 31, 2015 filed on March 30, 2016, as amended. The impact of these changes on the Company’s previously reported financial statements for the quarter ended March 31, 2015 are identified in the table below:

	Three Months Ended March 31, 2015 (unaudited)
	As Previously Reported			Adjustments			As Restated
Licensing revenue	$	93,797		$	2,017		$	95,814
Total revenue		93,797			2,017			95,814
Selling, general and administrative expenses		39,871			(181	)		39,690
Depreciation and amortization		1,337			—			1,337
Equity earnings on joint ventures ⁽¹⁾		—			(1,187	)		(1,187	)
Operating income		52,589			3,385			55,974
Other expenses (income) - net ⁽¹⁾		(40,528	)		185			(40,343	)
Income before taxes		93,117			3,200			96,317
Provision for income taxes		26,365			907			27,272
Net income		66,752			2,293			69,045
Less: Net income attributable to non-controlling interest		3,067			620			3,687
Net income attributable to Iconix Brand Group, Inc.	$	63,685		$	1,673		$	65,358

Earnings per share:
Basic	$	1.32		$	0.04		$	1.36
Diluted	$	1.23		$	0.03		$	1.26

Comprehensive income	$	28,521		$	2,788		$	31,309
Comprehensive income attributable to Iconix Brand Group, Inc.	$	25,454		$	2,168		$	27,622

⁽¹⁾	Equity earnings from joint ventures was previously reported within other expenses – net and has been reclassified and is being presented as a component of operating income.

The Company intends to amend its Forms 10-Q for the quarterly periods ended March 31, June 30, and September 30, 2015 to reflect the restatement adjustments applicable to the periods presented therein.