18. Restatement

SEC Comment Letter Process

As previously disclosed, the Company has been engaged in a comment letter process with the Staff of the SEC 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 all of the questions the Staff has 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 and 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 and is effectuated in the consolidated balance sheets contained herein), (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 reporting 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 remeasurement 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 most recently filed Form 10-K. The impact of these changes on the Company’s previously reported financial statements for the three months and nine months ended September 30, 2015 are identified in the table below:

	As of September 30, 2015
	As Previously Reported			Adjustments				As Restated
Assets
Current Assets:
Cash and cash equivalents	$	136,367		$	353			$	136,720
Restricted cash		51,911			—				51,911
Accounts receivable, net		109,090			(4,262	)			104,828
Deferred income tax assets		20,383			—				20,383
Other assets – current⁽¹⁾		51,270			(11,713	)			39,557
Total Current Assets		369,021			(15,622	)			353,399
Property and equipment:
Furniture, fixtures and equipment		23,749			—				23,749
Less: Accumulated depreciation		(16,248	)		—				(16,248	)
		7,501			—				7,501
Other Assets:
Other assets		48,466			(15,793	)			32,673
Trademarks and other intangibles, net⁽¹⁾		2,184,532			(78,904	)			2,105,628
Deferred financing costs, net		16,188			—				16,188
Investments and joint ventures⁽¹⁾		179,773			(34,308	)			145,465
Goodwill⁽¹⁾		238,220			55,629				293,849
		2,667,179			(73,376	)			2,593,803
Total Assets	$	3,043,701		$	(88,998	)		$	2,954,703
Liabilities, Redeemable Non-Controlling Interest and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	43,926		$	68			$	43,994
Deferred revenue		26,945			590				27,535
Current portion of long-term debt		351,544			—				351,544
Other liabilities – current		13,884			(10,157	)			3,727
Total current liabilities		436,299			(9,499	)			426,800
Deferred income tax liability		362,100			(20,014	)			342,086
Long-term debt, less current maturities		1,120,098			—				1,120,098
Other liabilities		10,424			5,265				15,689
Total Liabilities	$	1,928,921		$	(24,248	)		$	1,904,673
Redeemable Non-Controlling Interests, net of installment payments due from non-controlling interest holders		14,761			37,762				52,523
Commitments and contingencies
Stockholders’ Equity:
Common stock		80			—				80
Additional paid-in capital		974,797			(7,256	)			967,541
Retained earnings		877,655			(93,888	)	.		783,767
Accumulated other comprehensive loss		(50,953	)		(443	)			(51,396	)
Less: Treasury stock		(837,424	)		—				(837,424	)
Total Iconix Brand Group, Inc. Stockholders’ Equity		964,155			(101,587	)			862,568
Non-controlling interests, net of installment payments due from non- controlling interest holders		135,864			(925	)			134,939
Total Stockholders’ Equity	$	1,100,019		$	(102,512	)		$	997,507
Total Liabilities, Redeemable Non-Controlling Interest and Stockholders’ Equity	$	3,043,701		$	(88,998	)		$	2,954,703

⁽¹⁾

Included in the adjustment amounts for goodwill, trademarks and other intangibles, net, investments and joint ventures, other assets – current, and accumulated other comprehensive loss are adjustments of approximately $54.5 million, $(50.8) million, $(4.7) million, $0.1 million and $0.9 milllion, respectively, which were not part of the restatement but are to reflect the final purchase price allocation (which was completed in the fourth quarter of 2015) for the buy-out of the remaining 50% interest in Iconix China as well as the acquisitions of Strawberry Shortcake and PONY and the temporary mark-to-market adjustment associated with the available-for-sale securities acquired as part of the buy-out of the remaining 50% interest in Iconix China. Refer to Note 2 and Note 3 for further details.

	Three Months Ended September 30, 2015									Nine Months Ended September 30, 2015
	As Previously Reported			Adjustments			As Restated			As Previously Reported			Adjustments			As Restated
Licensing revenue	$	88,935		$	2,397		$	91,332		$	278,955		$	5,589		$	284,544
Total revenue		88,935			2,397			91,332			278,955			5,589			284,544
Selling, general and administrative expenses		65,760			(1,860	)		63,900			153,626			(1,665	)		151,961
Equity earnings on joint ventures⁽²⁾		—			(350	)		(350	)		—			(3,000	)		(3,000	)
Operating income		23,175			4,607			27,782			125,329			10,254			135,583
Other expenses (income) - net⁽²⁾		20,475			1,986			22,461			(2,069	)		5,523			3,454
Income before taxes		2,700			2,621			5,321			127,398			4,731			132,129
Provision for income taxes		5,673			602			6,275			44,232			851			45,083
Net income (loss)		(2,973	)		2,019			(954	)		83,166			3,880			87,046
Less: Net income attributable to non- controlling interest		3,367			1,066			4,433			11,037			2,298			13,335
Net income (loss) attributable to Iconix Brand Group, Inc.	$	(6,340	)	$	953		$	(5,387	)	$	72,129		$	1,582		$	73,711

Earnings (loss) per share:
Basic	$	(0.13	)	$	0.02		$	(0.11	)	$	1.50		$	0.03		$	1.53
Diluted	$	(0.13	)	$	0.02		$	(0.11	)	$	1.43		$	0.03		$	1.46

Comprehensive income	$	1,077		$	1,072		$	2,149		$	56,399		$	3,437		$	59,836
Comprehensive income (loss) attributable to Iconix Brand Group, Inc.	$	(2,290	)	$	6		$	(2,284	)	$	45,362		$	1,139		$	46,501




	Three Months Ended September 30, 2014									Nine Months Ended September 30, 2014
	As Previously Reported			Adjustments			As Restated			As Previously Reported			Adjustments			As Restated
Licensing revenue	$	91,612		$	(1,647	)	$	89,965		$	299,334		$	(3,853	)	$	295,481
Other revenue⁽¹⁾		18,680			(18,680	)		—			38,690			(38,690	)		—
Total revenue		110,292			(20,327	)		89,965			338,024			(42,543	)		295,481
Selling, general and administrative expenses		46,878			(51	)		46,827			138,497			(84	)		138,413
Gains on sale of trademarks⁽¹⁾		—			—			—			—			(6,399	)		(6,399	)
Equity earnings on joint ventures⁽²⁾		—			(2,639	)		(2,639	)		—			(8,683	)		(8,683	)
Operating income		63,414			(17,637	)		45,777			199,527			(27,377	)		172,150
Other expenses - net⁽²⁾		16,441			4,087			20,528			11,071			21,637			32,708
Income before taxes		46,973			(21,724	)		25,249			188,456			(49,014	)		139,442
Provision for income taxes		9,856			(989	)		8,867			53,922			(10,844	)		43,078
Net income		37,117			(20,735	)		16,382			134,534			(38,170	)		96,364
Less: Net income attributable to non- controlling interest		3,433			94			3,527			9,970			195			10,165
Net income attributable to Iconix Brand Group, Inc.	$	33,684		$	(20,829	)	$	12,855		$	124,564		$	(38,365	)	$	86,199

Earnings per share:
Basic	$	0.70		$	(0.43	)	$	0.27		$	2.56		$	(0.79	)	$	1.77
Diluted	$	0.58		$	(0.36	)	$	0.22		$	2.14		$	(0.66	)	$	1.48

Comprehensive income (loss)	$	10,643		$	(19,166	)	$	(8,523	)	$	105,440		$	(37,424	)	$	68,016
Comprehensive income (loss) attributable to Iconix Brand Group, Inc.	$	7,210		$	(19,260	)	$	(12,050	)	$	95,470		$	(37,619	)	$	57,851

⁽¹⁾

Gains on sale of trademarks was previously reported as other revenue. Many of the gains recorded upon formation of certain joint ventures were reversed as a result of consolidation. The gains that were not impacted by consolidation, and therefore not reversed, have been reclassified and are being presented as a separate line item above operating income.

⁽²⁾	Equity earnings on joint ventures was previously reported within other expenses – net and has been reclassified and is being presented as a component of operating income.