Exhibit 10.78 


 


	Note: All items in the following reconciliation tables are attributable to Iconix Brand Group, Inc. and exclude results related to non-controlling interests and discontinued operations. Certain numbers may not add due to rounding.


 


Non-GAAP Net Income (Loss) & Diluted EPS Reconciliation:
(1)


($, 000’s, except per share data)


 


	 	 	NET INCOME	 	 	EPS	 
	 	 	Twelve Months Ended Dec. 31,	 	 	Twelve Months Ended Dec. 31,	 
	 	 	2017	 	 	2016	 	 	% Change	 	 	2017	 	 	2016	 	 	% Change	 
	GAAP net income (loss) & EPS from continuing operations attributable to Iconix (1)	 	 	(535,278	)	 	 	(254,498	)	 	 	-110	%	 	$	(9.47	)	 	$	(4.86	)	 	 	-95	%
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Add:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	non-cash interest related to ASC 470	 	 	16,943	 	 	 	22,398	 	 	 	 	 	 	$	0.29	 	 	$	0.43	 	 	 	 	 
	gain on sale of Complex Media	 	 	(2,728	)	 	 	(10,164	)	 	 	 	 	 	$	(0.05	)	 	$	(0.19	)	 	 	 	 
	gain on deconsolidation of JV	 	 	(3,772	)	 	 	—	 	 	 	 	 	 	$	(0.07	)	 	$	0.00	 	 	 	 	 
	loss on extinguishment of debt	 	 	20,939	 	 	 	5,903	 	 	 	 	 	 	$	0.37	 	 	$	0.11	 	 	 	 	 
	loss on termination of licenses	 	 	28,360	 	 	 	—	 	 	 	 	 	 	$	0.50	 	 	$	0.00	 	 	 	 	 
	trademark & goodwill impairment	 	 	654,019	 	 	 	438,093	 	 	 	 	 	 	$	11.45	 	 	$	8.37	 	 	 	 	 
	special charges	 	 	9,638	 	 	 	14,314	 	 	 	 	 	 	$	0.17	 	 	$	0.27	 	 	 	 	 
	settlement w/ former CEO of unearned compensation	 	 	—	 	 	 	(7,263	)	 	 	 	 	 	$	0.00	 	 	$	(0.14	)	 	 	 	 
	foreign currency translation gain/(loss)	 	 	3,072	 	 	 	(1,286	)	 	 	 	 	 	$	0.05	 	 	$	(0.02	)	 	 	 	 
	Deduct:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Income taxes related to above	 	 	(237,006	)	 	 	(121,537	)	 	 	 	 	 	$	(4.15	)	 	$	(2.32	)	 	 	 	 
	Valuation Allowance	 	 	89,210	 	 	 	—	 	 	 	 	 	 	$	1.56	 	 	$	0.00	 	 	 	 	 
	Tax Rate Reduction due to tax reform	 	 	34,205	 	 	 	—	 	 	 	 	 	 	$	0.60	 	 	$	0.00	 	 	 	 	 
	non-controlling interest	 	 	(32,616	)	 	 	(17,284	)	 	 	 	 	 	$	(0.57	)	 	$	(0.33	)	 	 	 	 
	Accretion of redeemable non-controlling interest	 	 	—	 	 	 	—	 	 	 	 	 	 	$	0.10	 	 	$	0.00	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net Adjustments	 	 	580,264	 	 	 	323,174	 	 	 	 	 	 	$	10.25	 	 	$	6.17	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Non-GAAP net income & EPS from continuing operations attributable to Iconix	 	 	44,986	 	 	 	68,676	 	 	 	-34	%	 	$	0.78	 	 	$	1.31	 	 	 	-38	%



 




     


     


    

  


2017 Free Cash Flow Reconciliation: (2)


($, 000’s)


 


	 	 	Three Months Ended Dec. 31,	 	 	Full Year	 
	 	 	2017	 	 	2016	 	 	% Change	 	 	2017	 	 	2016	 	 	% Change	 
	Net cash provided by operating activities	 	$	9,757	 	 	$	68,859	 	 	 	-86	%	 	$	12,854	 	 	$	134,840	 	 	 	-90	%
	Plus: Cash related to Disc Ops sale	 	 	—	 	 	 	—	 	 	 	 	 	 	 	36,272	 	 	 	—	 	 	 	 	 
	Plus: Cash from sale of trademarks and related notes receivable	 	 	1,937	 	 	 	8,458	 	 	 	 	 	 	 	8,864	 	 	 	14,595	 	 	 	 	 
	Plus: Cash from notes receivable from licensees	 	 	—	 	 	 	4,112	 	 	 	 	 	 	 	1,250	 	 	 	11,962	 	 	 	 	 
	Plus: Cash from sale of Nick Graham	 	 	—	 	 	 	—	 	 	 	 	 	 	 	2,561	 	 	 	—	 	 	 	 	 
	Plus: Cash from sale of equity interest in BBC Ice Cream	 	 	—	 	 	 	—	 	 	 	 	 	 	 	—	 	 	 	3,500	 	 	 	 	 
	Plus: Cash from sale of Badgley Mischka	 	 	—	 	 	 	—	 	 	 	 	 	 	 	375	 	 	 	14,000	 	 	 	 	 
	Plus: Cash from sale of Sharper Image	 	 	—	 	 	 	98,250	 	 	 	 	 	 	 	500	 	 	 	98,250	 	 	 	 	 
	Plus: Cash from sale of equity interest in China	 	 	—	 	 	 	—	 	 	 	 	 	 	 	—	 	 	 	15,415	 	 	 	 	 
	Less: Capital Expenditures	 	 	(41	)	 	 	(674	)	 	 	 	 	 	 	(870	)	 	 	(1,518	)	 	 	 	 
	Less: Distributions to non-controlling interests	 	 	(1,341	)	 	 	(4,695	)	 	 	 	 	 	 	(5,191	)	 	 	(14,016	)	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Free Cash Flow from operations	 	$	10,312	 	 	$	174,310	 	 	 	-94	%	 	$	56,615	 	 	$	277,028	 	 	 	-80	%



 


Forecasted Reconciliation of Net Income: (1)


($, 000’s)


 


	 	 	Year Ending	 
	 	 	Dec. 31, 2018	 
	 	 	Low	 	 	High	 
	Forecasted GAAP Net Income	 	$	6,700	 	 	$	16,700	 
	 	 	 	 	 	 	 	 	 
	Adjustment for non-cash interest related to ASC 470, net of tax	 	 	8,000	 	 	 	8,000	 
	Special charges, net of tax	 	 	6,000	 	 	 	6,000	 
	Gain on sale of Investment	 	 	(700	)	 	 	(700	)
	 	 	 	 	 	 	 	 	 
	Net Adjustments	 	 	13,300	 	 	 	13,300	 
	 	 	 	 	 	 	 	 	 
	Forecasted Non-GAAP Net Income	 	$	20,000	 	 	$	30,000	 



 


Forecasted Reconciliation of Free Cash Flow: (2)


($, 000’s)


 


	 	 	Year Ending
 Dec. 31, 2018
	 
	 	 	Low	 	 	High	 
	Net cash provided by operating activities	 	$	61,700	 	 	$	79,200	 
	Plus: Cash from sale of trademarks and notes receivable	 	 	2,800	 	 	 	5,300	 
	Plus: Cash from notes receivable from licensees	 	 	2,500	 	 	 	2,500	 
	Less: Capital Expenditures	 	 	(1,000	)	 	 	(1,000	)
	Less: Distributions to non-controlling interests	 	 	(16,000	)	 	 	(16,000	)
	 	 	 	 	 	 	 	 	 
	Free Cash Flow Guidance	 	$	50,000	 	 	$	70,000	 



 




     


     


    

  


Adjusted Operating Income Reconciliation for the Twelve Months
Ended Dec. 31: (3)


($, 000’s)


 


 





	 	 	GAAP	 	 	Impairment	 	 	Loss on
 Terminations
	 	 	Gain on Sale of
 Trademarks and
 JV Deconsolidation
	 	 	Income from
 Divested Brands
	 	 	Adjusted
 Operating Income
	 
	 	 	2017	 	 	2016	 	 	2017	 	 	2016	 	 	2017	 	 	2016	 	 	2017	 	 	2016	 	 	2017	 	 	2016	 	 	2017	 	 	2016	 
	Women’s	 	 	(215,570	)	 	 	62,565	 	 	 	301,502	 	 	 	31,478	 	 	 	2,000	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	381	 	 	 	87,932	 	 	 	94,424	 
	Men’s	 	 	(144,779	)	 	 	(132,574	)	 	 	137,462	 	 	 	162,896	 	 	 	26,360	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	19,043	 	 	 	30,322	 
	Home	 	 	(76,680	)	 	 	(18,105	)	 	 	101,951	 	 	 	49,993	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(7,986	)	 	 	25,271	 	 	 	23,902	 
	International	 	 	(64,826	)	 	 	(162,986	)	 	 	96,256	 	 	 	193,725	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	31,430	 	 	 	30,739	 
	Corporate	 	 	(62,796	)	 	 	(21,720	)	 	 	16,848	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(4,647	)	 	 	(38,104	)	 	 	—	 	 	 	—	 	 	 	(50,595	)	 	 	(59,824	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Op. Income	 	 	(564,651	)	 	 	(272,820	)	 	 	654,019	 	 	 	438,092	 	 	 	28,360	 	 	 	—	 	 	 	(4,647	)	 	 	(38,104	)	 	 	—	 	 	 	(7,605	)	 	 	113,081	 	 	 	119,563	 








 


 


	Adjusted Revenue by Segment	 	Year ended Dec. 31,	 
	($, 000’s)	 	2017	 	 	2016*	 	 	% Change	 
	Women’s	 	 	96,833	 	 	 	106,299	 	 	 	-9	%
	Men’s	 	 	39,780	 	 	 	48,635	 	 	 	-18	%
	Home	 	 	28,807	 	 	 	29,096	 	 	 	-1	%
	International	 	 	60,413	 	 	 	59,036	 	 	 	2	%
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Adjusted Revenue	 	 	225,833	 	 	 	243,066	 	 	 	-7	%



 


Adjusted Revenue Reconciliation for the Twelve Months Ended
Dec. 31, 2016:


($, 000’s)


 


	 	 	GAAP	 	 	Divested
 Brands
	 	 	Adjusted
 Revenue
	 
	Women’s	 	 	106,527	 	 	 	(228	)	 	 	106,299	 
	Men’s	 	 	48,635	 	 	 	—	 	 	 	48,635	 
	Home	 	 	38,370	 	 	 	(9,274	)	 	 	29,096	 
	International	 	 	61,611	 	 	 	(2,575	)	 	 	59,036	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Revenue	 	 	255,143	 	 	 	(12,077	)	 	 	243,066	 



 


* Revenue is adjusted for revenue from Sharper Image, Badgley
Mischka and the Southeast Asia joint venture.


 


		(1)	Non-GAAP net income and non-GAAP diluted EPS (along with non-GAAP weighted average diluted shares) are non-GAAP financial measures
which represent net income excluding any non-cash interest related to ASC Topic 470, non-cash, non-recurring gains and charges,
foreign currency translation gains and losses, and charges related to professional fees incurred as a result of the correspondence
with the Staff of the SEC, the SEC investigation, internal investigations, the previously disclosed class action and derivative
litigations, and costs related to the transition of Iconix management, all net of tax, and any incremental dilutive shares related
to our convertible notes that are covered by their respective hedges. The Company believes these are useful financial measures
in evaluating its financial condition because they are more reflective of the Company’s business purpose, operations and
cash expenses.



 




     


     


    

  


		(2)	Free Cash Flow, a non-GAAP financial measure, represents net cash provided by operating activities, plus cash received from
the sale of trademarks and formation of joint ventures, less distributions to non-controlling interests and capital expenditures. Free
Cash Flow excludes notes receivable from sale of trademarks and the formation of joint ventures, cash used to acquire the membership
interests of our joint venture partners, mandatory debt service requirements, and other non-discretionary expenditures. Free Cash
Flow should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative
to operating results presented in accordance with GAAP. The Company believes Free Cash Flow is useful because it provides information
regarding actual cash received in a specific period from the Company’s comprehensive business strategy of maximizing the
value of its brands through traditional licensing, international joint ventures and other arrangements. We have excluded the cash
used to buy back our joint venture membership interests from the above definition because we believe that, like other acquisitions,
such actions are capital transactions. It also provides supplemental information to assist investors in evaluating the Company’s
financial condition and ability to pursue opportunities that enhance shareholder value.



 


		(3)	Adjusted operating income, a non-GAAP financial measure represents operating income, less trademark, goodwill and investment
impairment charges, loss on termination of licensees, gains on sales of trademarks and joint venture deconsolidations and income
from divested brands. The Company believes this is a useful financial measure in evaluating its financial condition because it
is more reflective of the Company’s business purpose, operations and cash expenses.