21. Restatement of Previously Issued Financial Statements

SEC Comment Letter Process.

As previously disclosed, 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 all of the questions the Staff has raised. 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 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 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 following tables set forth a reconciliation of previously reported and restated selected financial data as of the dates and for the periods shown:

	Year Ended December 31, 2014
	As Previously Reported			Adjustments			As Restated
Assets
Current Assets:
Cash and cash equivalents	$	128,019		$	20		$	128,039
Restricted cash		59,560			—			59,560
Accounts receivable, net		115,066			(2,719	)		112,347
Deferred income tax assets		10,328			—			10,328
Other assets – current		66,781			(22,693	)		44,088
Total Current Assets		379,754			(25,392	)		354,362
Property and equipment:
Furniture, fixtures and equipment		22,704			—			22,704
Less: Accumulated depreciation		(14,946	)		—			(14,946	)
		7,758			—			7,758
Other Assets:
Other assets		63,334			(11,469	)		51,865
Trademarks and other intangibles, net		2,024,541			(28,207	)		1,996,334
Deferred financing costs, net		19,842			-			19,842
Investments and joint ventures		140,910			(30,805	)		110,105
Goodwill		231,738			1,038			232,776
		2,480,365			(69,443	)		2,410,922
Total Assets	$	2,867,877		$	(94,835	)	$	2,773,042
Liabilities, Redeemable Non-Controlling Interest and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	38,762		$	(107	)	$	38,655
Deferred revenue		24,978			890			25,868
Current portion of long-term debt		61,123			—			61,123
Other liabilities – current		12,741			(6,338	)		6,403
Total current liabilities		137,604			(5,555	)		132,049
Deferred income tax liability		320,792			(20,810	)		299,982
Other tax liabilities		—			—			—
Long-term debt, less current maturities		1,332,954			—			1,332,954
Other liabilities		11,660			5,264			16,924
Total Liabilities	$	1,803,010		$	(21,101	)	$	1,781,909
Redeemable Non-Controlling Interests, net of installment payments due from non-controlling interest holders		14,224			25,472			39,696
Commitments and contingencies
Stockholders’ Equity:
Common stock		79			—			79
Additional paid-in capital		948,714			(7,792	)		940,922
Retained earnings		805,526			(91,707	)		713,819
Accumulated other comprehensive loss		(24,186	)		—			(24,186	)
Less: Treasury stock		(812,429	)		—			(812,429	)
Total Iconix Brand Group, Inc. Stockholders’ Equity		917,704			(99,499	)		818,205
Non-controlling interests, net of installment payments due from non-controlling interest holders		132,939			293			133,232
Total Stockholders’ Equity	$	1,050,643		$	(99,206	)	$	951,437
Total Liabilities, Redeemable Non-Controlling Interest and Stockholders’ Equity	$	2,867,877		$	(94,835	)	$	2,773,042

	Year Ended December 31, 2014
	As Previously Reported		Adjustments			As Restated
Licensing revenue	$	394,157	$	(2,667	)	$	391,490
Other revenue⁽¹⁾		45,840		(45,840	)		—
Total revenue		439,997		(48,507	)		391,490
Selling, general and administrative expenses		190,153		(1,367	)		188,786
Gains on sale of trademarks⁽¹⁾		—		(6,399	)		(6,399	)
Equity earnings on joint ventures⁽²⁾		—		(11,325	)		(11,325	)
Operating income		249,844		(29,416	)		220,428
Other expenses - net⁽²⁾		26,667		26,651			53,318
Income before taxes		223,177		(56,067	)		167,110
Provision for income taxes		59,641		(11,353	)		48,288
Net income	$	163,536	$	(44,714	)	$	118,822
Less: Net income attributable to non-controlling interest		14,693		406			15,099
Net income attributable to Iconix Brand Group, Inc.	$	148,843	$	(45,120	)	$	103,723
Earnings per share:
Basic	$	3.07	$	(0.93	)	$	2.14
Diluted	$	2.59	$	(0.78	)	$	1.81
Comprehensive income	$	122,864	$	(44,714	)	$	78,150
Comprehensive income attributable to Iconix Brand Group, Inc.	$	108,171	$	(45,120	)	$	63,051

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

	Year Ended December 31, 2013
	As Previously Reported		Adjustments			As Restated
Licensing revenue	$	398,047	$	(7,473	)	$	390,574
Other revenue⁽¹⁾		32,579		(32,579	)		—
Total revenue		430,626		(40,052	)		390,574
Selling, general and administrative expenses		173,215		(54	)		173,161
Gains on sale of trademarks⁽¹⁾		—		(7,354	)		(7,354	)
Equity earnings on joint ventures⁽²⁾		—		(10,211	)		(10,211	)
Operating income		257,411		(22,433	)		234,978
Other expenses - net⁽²⁾		56,749		11,342			68,091
Income before taxes		200,662		(33,775	)		166,887
Provision for income taxes		58,075		(8,480	)		49,595
Net income	$	142,587	$	(25,295	)	$	117,292
Less: Net income attributable to non-controlling interest		14,539		(2,236	)		12,303
Net income attributable to Iconix Brand Group, Inc.	$	128,048	$	(23,059	)	$	104,989
Earnings per share:
Basic	$	2.28	$	(0.41	)	$	1.87
Diluted	$	2.11	$	(0.38	)	$	1.73
Comprehensive income	$	159,073	$	(25,295	)	$	133,778
Comprehensive income attributable to Iconix Brand Group, Inc.	$	144,534	$	(23,059	)	$	121,475

⁽¹⁾

⁽²⁾	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.

Additionally, the opening stockholders’ equity, as of January 1, 2013, was adjusted as follows:

	As of January 1, 2013
	As Previously Reported			Adjustments			As Restated
Stockholders’ Equity:
Common stock		77			—			77
Additional paid-in capital		815,935			—			815,935
Retained earnings		529,829			(20,224	)		509,605
Accumulated other comprehensive loss		—			—			—
Less: Treasury stock		(159,690	)		—			(159,690	)
Total Iconix Brand Group, Inc. Stockholders’ Equity		1,186,151			(20,224	)		1,165,927
Non-controlling interests, net of installment payments due from non-controlling interest holders		113,689			(2,250	)		111,439
Total Stockholders’ Equity	$	1,299,840		$	(22,474	)	$	1,277,366

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