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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to
_____________________
Commission File Number
0-23702
STEVEN MADDEN, LTD.
(Exact name of registrant as specified in its
charter)
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Delaware |
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13-3588231 |
(State or other jurisdiction of |
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(I.R.S. Employer Identification No.) |
incorporation or organization) |
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52-16 Barnett Avenue, Long Island City, New York 11104
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (718)
446-1800
Securities registered pursuant to Section 12(b) of the Exchange
Act:
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Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
Common Stock, par value $.0001 per share |
SHOO |
The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer”, “accelerated filer”,
“smaller reporting company” and "emerging growth company" in Rule
12b-2 of the Exchange Act.
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Large accelerated filer |
☒ |
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Accelerated filer |
☐ |
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Emerging growth company |
☐ |
Non-accelerated filer |
☐ |
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Smaller reporting company |
☐ |
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
o
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of April 30, 2021, there were 82,756,966 shares of the
registrant’s common stock, $0.0001 par value,
outstanding.
STEVEN MADDEN, LTD.
TABLE OF CONTENTS TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2021
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
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March 31,
2021 |
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December 31,
2020 |
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March 31,
2020 |
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(unaudited) |
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(unaudited) |
ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
233,202 |
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$ |
247,864 |
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$ |
211,138 |
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Short-term investments |
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39,788 |
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39,302 |
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34,271 |
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Accounts receivable, net of allowances of $9,730, $8,943 and
$9,055 |
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34,722 |
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25,044 |
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30,143 |
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Factor accounts receivable |
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285,162 |
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252,671 |
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231,408 |
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Inventories |
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106,561 |
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101,420 |
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102,265 |
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Prepaid expenses and other current assets |
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16,667 |
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17,415 |
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24,194 |
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Income tax receivable and prepaid taxes |
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18,429 |
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14,525 |
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7,373 |
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Total current assets |
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734,531 |
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698,241 |
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640,792 |
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Note receivable – related party |
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1,081 |
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1,180 |
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1,463 |
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Property and equipment, net |
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40,458 |
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43,268 |
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52,206 |
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Operating lease right-of-use asset |
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99,510 |
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101,379 |
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127,187 |
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Deposits and other |
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5,216 |
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4,822 |
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2,982 |
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Deferred taxes |
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5,414 |
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5,415 |
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6,422 |
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Goodwill – net |
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167,979 |
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168,265 |
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165,855 |
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Intangibles – net |
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114,754 |
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115,191 |
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148,997 |
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Total Assets |
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$ |
1,168,943 |
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$ |
1,137,761 |
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$ |
1,145,904 |
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LIABILITIES |
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Current liabilities: |
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Accounts payable |
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$ |
99,007 |
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$ |
73,904 |
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$ |
76,284 |
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Accrued expenses |
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120,253 |
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118,083 |
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87,698 |
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Advances from factor |
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— |
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— |
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29,100 |
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Operating leases - current portion |
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33,359 |
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34,257 |
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37,517 |
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Income taxes payable |
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— |
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5,799 |
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— |
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Contingent payment liability – current portion |
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113 |
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— |
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— |
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Accrued incentive compensation |
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3,761 |
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3,873 |
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2,113 |
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Total current liabilities |
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256,493 |
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235,916 |
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232,712 |
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Contingent payment liability |
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564 |
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207 |
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6,440 |
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Operating leases - long-term portion |
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96,246 |
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98,592 |
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121,187 |
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Deferred taxes |
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2,767 |
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2,562 |
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3,961 |
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Other liabilities |
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12,105 |
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10,115 |
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7,980 |
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Total Liabilities |
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368,175 |
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347,392 |
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372,280 |
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Commitments, contingencies and other (Note P) |
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STOCKHOLDERS’ EQUITY |
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Preferred stock – $.0001 par value, 5,000 shares authorized; none
issued; Series A Junior Participating preferred stock – $.0001 par
value, 60 shares authorized; none issued |
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— |
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— |
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— |
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Common stock – $.0001 par value, 245,000 shares authorized,
133,477, 133,247 and 133,159 shares issued, 82,692, 82,616 and
83,046 shares outstanding |
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8 |
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8 |
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6 |
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Additional paid-in capital |
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485,556 |
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478,463 |
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460,777 |
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Retained earnings |
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1,288,322 |
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1,279,550 |
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1,280,496 |
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Accumulated other comprehensive loss |
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(28,529) |
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(29,164) |
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(45,245) |
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Treasury stock – 50,785, 50,631 and 50,113 shares at
cost |
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(957,829) |
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(952,271) |
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(934,827) |
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Total Steven Madden, Ltd. stockholders’ equity |
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787,528 |
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776,586 |
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761,207 |
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Noncontrolling interest |
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13,240 |
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13,783 |
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12,417 |
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Total stockholders’ equity |
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800,768 |
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790,369 |
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773,624 |
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Total Liabilities and Stockholders’ Equity |
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$ |
1,168,943 |
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$ |
1,137,761 |
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$ |
1,145,904 |
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See accompanying notes to condensed consolidated financial
statements - unaudited.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Income/(Loss)
(unaudited)
(in thousands, except per share data)
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Three Months Ended March 31, |
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2021 |
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2020 |
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Net sales |
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$ |
358,901 |
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$ |
355,684 |
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Commission and licensing fee income |
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2,124 |
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3,484 |
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Total revenue |
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361,025 |
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359,168 |
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Cost of sales |
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221,921 |
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225,704 |
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Gross profit |
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139,104 |
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133,464 |
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Operating expenses |
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110,448 |
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121,373 |
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Impairment of store fixed assets and lease right-of-use
assets |
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612 |
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28,821 |
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Impairment of intangibles |
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— |
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9,518 |
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Income/(loss) from operations |
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28,044 |
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(26,248) |
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Interest and other (expense)/income – net |
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(37) |
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1,046 |
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Income/(loss) before provision for income taxes |
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28,007 |
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(25,202) |
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Provision/(benefit) for income taxes (Note L) |
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5,676 |
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(7,401) |
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Net income/(loss) |
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22,331 |
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(17,801) |
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Less: net income/(loss) attributable to noncontrolling
interest |
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1,134 |
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(350) |
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Net income/(loss) attributable to Steven Madden, Ltd. |
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$ |
21,197 |
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$ |
(17,451) |
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Basic net income/(loss) per share |
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$ |
0.27 |
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$ |
(0.22) |
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Diluted net income/(loss) per share |
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$ |
0.26 |
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$ |
(0.22) |
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Basic weighted average common shares outstanding |
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79,038 |
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78,875 |
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Effect of dilutive securities – options/restricted
stock |
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2,851 |
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— |
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Diluted weighted average common shares outstanding |
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81,889 |
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78,875 |
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Cash dividends declared per common share |
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$ |
0.15 |
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$ |
0.15 |
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See accompanying notes to condensed consolidated financial
statements - unaudited.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive
Income/(Loss)
(unaudited)
(in thousands)
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Three Months Ended March 31, 2021 |
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Pre-tax amounts |
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Tax expense |
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After-tax amounts |
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Net income |
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$ |
22,331 |
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Other comprehensive income: |
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Foreign currency translation
adjustment |
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$ |
(302) |
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$ |
— |
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(302) |
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Gain on cash flow hedging
derivatives |
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875 |
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(252) |
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623 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income |
|
$ |
573 |
|
|
$ |
(252) |
|
|
321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
22,652 |
|
|
|
|
|
|
|
Less: comprehensive income attributable to noncontrolling
interests |
|
|
|
|
|
820 |
|
|
|
|
|
|
|
Comprehensive income attributable to Steven Madden,
Ltd. |
|
|
|
|
|
$ |
21,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020 |
|
|
|
|
Pre-tax amounts |
|
Tax expense |
|
After-tax amounts |
|
|
|
|
|
|
Net loss |
|
|
|
|
|
$ |
(17,801) |
|
|
|
|
|
|
|
Other comprehensive (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment |
|
$ |
(15,650) |
|
|
$ |
— |
|
|
(15,650) |
|
|
|
|
|
|
|
Gain on cash flow hedging
derivatives |
|
1,676 |
|
|
(489) |
|
|
1,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive (loss) |
|
$ |
(13,974) |
|
|
$ |
(489) |
|
|
(14,463) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
(32,264) |
|
|
|
|
|
|
|
Less: comprehensive (loss) attributable to noncontrolling
interests |
|
|
|
|
|
(8) |
|
|
|
|
|
|
|
Comprehensive loss attributable to Steven Madden, Ltd. |
|
|
|
|
|
$ |
(32,256) |
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements - unaudited.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders'
Equity
(unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Additional Paid-in Capital |
|
Retained Earnings |
|
Accumulated Other Comprehensive (Loss) |
|
Treasury Stock |
|
Non-Controlling Interest |
|
Total Stockholders' Equity |
|
|
Shares |
|
Amount |
Shares |
|
Amount |
Balance - December 31, 2020 |
|
82,616 |
|
|
$ |
8 |
|
|
$ |
478,463 |
|
|
$ |
1,279,550 |
|
|
$ |
(29,164) |
|
|
50,631 |
|
|
$ |
(952,271) |
|
|
$ |
13,783 |
|
|
$ |
790,369 |
|
Share repurchases and net tax settlement of awards under stock
plan |
|
(154) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
154 |
|
|
(5,558) |
|
|
— |
|
|
(5,558) |
|
Exercise of stock options |
|
65 |
|
|
— |
|
|
1,554 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of restricted stock, net of forfeitures |
|
165 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock-based compensation |
|
— |
|
|
— |
|
|
5,539 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,539 |
|
Foreign currency translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
12 |
|
|
— |
|
|
— |
|
|
(314) |
|
|
(302) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedge (net of tax expense of $252) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
623 |
|
|
— |
|
|
— |
|
|
— |
|
|
623 |
|
Dividends on common stock ($0.15 per share) |
|
— |
|
|
— |
|
|
— |
|
|
(12,425) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(12,425) |
|
Distributions to noncontrolling interests, net |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,363) |
|
|
(1,363) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
21,197 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,134 |
|
|
22,331 |
|
Balance - March 31, 2021 |
|
82,692 |
|
|
$ |
8 |
|
|
$ |
485,556 |
|
|
$ |
1,288,322 |
|
|
$ |
(28,529) |
|
|
50,785 |
|
|
$ |
(957,829) |
|
|
$ |
13,240 |
|
|
$ |
800,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders'
Equity
(unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Additional Paid-in Capital |
|
Retained Earnings |
|
Accumulated Other Comprehensive (Loss) |
|
Treasury Stock |
|
Non-Controlling Interest |
|
Total Stockholders' Equity |
|
|
Shares |
|
Amount |
Shares |
|
Amount |
Balance - December 31, 2019 |
|
83,520 |
|
|
$ |
6 |
|
|
$ |
454,217 |
|
|
$ |
1,310,406 |
|
|
$ |
(30,440) |
|
|
49,234 |
|
|
$ |
(905,688) |
|
|
$ |
12,723 |
|
|
$ |
841,224 |
|
Share repurchases and net tax settlement of awards under stock
plan |
|
(879) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
879 |
|
|
(29,139) |
|
|
— |
|
|
(29,139) |
|
Exercise of stock options |
|
48 |
|
|
— |
|
|
874 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
874 |
|
Issuance of restricted stock, net of forfeitures |
|
357 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock-based compensation |
|
— |
|
|
— |
|
|
5,686 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,686 |
|
Foreign currency translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(15,992) |
|
|
— |
|
|
— |
|
|
342 |
|
|
(15,650) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedge (net of tax expense of $489) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,187 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,187 |
|
Dividends on common stock ($0.15 per share) |
|
— |
|
|
— |
|
|
— |
|
|
(12,459) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(12,459) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(298) |
|
|
(298) |
|
Net (loss) |
|
— |
|
|
— |
|
|
— |
|
|
(17,451) |
|
|
— |
|
|
— |
|
|
— |
|
|
(350) |
|
|
(17,801) |
|
Balance - March 31, 2020 |
|
83,046 |
|
|
$ |
6 |
|
|
$ |
460,777 |
|
|
$ |
1,280,496 |
|
|
$ |
(45,245) |
|
|
50,113 |
|
|
$ |
(934,827) |
|
|
$ |
12,417 |
|
|
$ |
773,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements - unaudited.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2021 |
|
2020 |
Cash flows from operating activities: |
|
|
|
|
Net income/(loss) |
|
$ |
22,331 |
|
|
$ |
(17,801) |
|
Adjustments to reconcile net (loss)/income to net cash provided by
operating activities: |
|
|
|
|
Stock-based compensation |
|
5,539 |
|
|
5,686 |
|
Depreciation and amortization |
|
4,028 |
|
|
4,996 |
|
Loss on disposal of fixed assets |
|
222 |
|
|
53 |
|
Impairment of intangibles |
|
— |
|
|
9,518 |
|
Impairment of lease right-of-use asset and store fixed
assets |
|
612 |
|
|
28,821 |
|
|
|
|
|
|
Deferred taxes |
|
206 |
|
|
(8,338) |
|
Accrued interest on note receivable - related party |
|
(6) |
|
|
(8) |
|
Notes receivable - related party |
|
102 |
|
|
102 |
|
Change in valuation of contingent considerations |
|
470 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Recovery of receivables, related to the Payless ShoeSource
bankruptcy |
|
(919) |
|
|
— |
|
Changes, net of acquisitions, in: |
|
|
|
|
Accounts receivable |
|
(8,759) |
|
|
8,023 |
|
Factor accounts receivable |
|
(32,491) |
|
|
(14,937) |
|
Inventories |
|
(5,141) |
|
|
34,631 |
|
Prepaid expenses, prepaid taxes, deposits and other |
|
(3,319) |
|
|
(8,000) |
|
Accounts payable and accrued expenses |
|
22,097 |
|
|
(71,108) |
|
Accrued incentive compensation |
|
(112) |
|
|
(8,821) |
|
Leases and other liabilities |
|
182 |
|
|
(2,426) |
|
Net cash provided by/(used in) operating activities |
|
5,042 |
|
|
(39,609) |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
(1,598) |
|
|
(3,301) |
|
Purchases of short-term investments |
|
(2,054) |
|
|
(5,542) |
|
|
|
|
|
|
Maturity/sale of short-term investments |
|
2,036 |
|
|
8,616 |
|
Net cash (used in) investing activities |
|
(1,616) |
|
|
(227) |
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
Proceeds from exercise of stock options |
|
1,554 |
|
|
874 |
|
|
|
|
|
|
Distribution of noncontrolling interest earnings |
|
(1,363) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Common stock purchased for treasury |
|
(5,558) |
|
|
(29,139) |
|
Cash dividends paid on common stock |
|
(12,425) |
|
|
(12,459) |
|
Advances from factor |
|
— |
|
|
42,539 |
|
Repayments of advances from factor |
|
— |
|
|
(13,439) |
|
Net cash (used in) financing activities |
|
(17,792) |
|
|
(11,624) |
|
Effect of exchange rate changes on cash and cash
equivalents |
|
(296) |
|
|
(1,503) |
|
Net (decrease) in cash and cash equivalents |
|
(14,662) |
|
|
(52,963) |
|
Cash and cash equivalents – beginning of period |
|
247,864 |
|
|
264,101 |
|
Cash and cash equivalents – end of period |
|
$ |
233,202 |
|
|
$ |
211,138 |
|
See accompanying notes to condensed consolidated financial
statements - unaudited.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
Note A – Basis of Reporting
The accompanying unaudited condensed consolidated financial
statements of Steven Madden, Ltd. and subsidiaries (the “Company”)
have been prepared in accordance with generally accepted accounting
principles in the United States of America (“GAAP”) for interim
financial information and pursuant to the rules and regulations of
the Securities and Exchange Commission (the “SEC”). Accordingly,
they do not include all of the information and footnotes required
by GAAP for complete financial statements. In the opinion of
management, such statements include all adjustments (consisting
only of normal recurring items) that are considered necessary for a
fair presentation of the financial position of the Company and the
results of its operations and cash flows for the periods presented.
Certain reclassifications were made to prior years' presentation to
conform to the 2021 presentation. The results of operations for the
three-month period ended March 31, 2021 are not necessarily
indicative of the operating results for the full year. These
financial statements should be read in conjunction with the
financial statements and related disclosures for the year ended
December 31, 2020 included in the Annual Report of Steven
Madden, Ltd. on Form 10-K filed with the SEC on March 16,
2021.
Note B - COVID-19
In December 2019, COVID-19 emerged and spread worldwide. The World
Health Organization declared COVID-19 a pandemic in March 2020,
resulting in federal, state and local governments and private
entities mandating various restrictions, including the closure of
non-essential businesses, travel restrictions, restrictions on
public gatherings, stay-at-home orders and advisories and
quarantining of people who may have been exposed to the virus.
After closely monitoring and taking into consideration the guidance
from federal, state and local governments, in March 2020, the
Company temporarily closed all of its brick-and-mortar stores and
its corporate offices in the U.S. and the vast majority of its
brick-and-mortar stores and offices globally.
On April 1, 2020, the Company temporarily furloughed a significant
number of its employees. Employees with medical benefits continued
to receive those benefits at no personal cost for a duration
determined by the Company. As of September 30, 2020, most of our
brick-and-mortar stores and corporate offices globally were
reopened with limited capacity, most employees returned from
furlough and a number of safety protocols and restrictions were
implemented to ensure the safety of the Company's employees and
customers. The
COVID-19 pandemic had and may continue to have a material impact on
the Company's business, results of operations, financial position
and cash flow. In response to the COVID-19 pandemic, the Company
has taken precautionary measures to maintain adequate liquidity and
financial flexibility by temporarily suspending share repurchases
and the quarterly cash dividend; temporarily
suspending salaries of the Company's founder and Creative and
Design Chief, Steve Madden, the Company's Chairman and Chief
Executive Officer, Edward Rosenfeld, and its Board of Directors
(all of which were reinstated on October 1, 2020); temporarily
reducing salaries by 30% for the Company's President, Chief
Financial Officer, Chief Operating Officer and Chief Merchandising
Officer (all of which were reinstated on August 1, 2020); reducing
salaries by graduated amounts for all other employees earning over
$100 per year (all of which were reinstated on August 1, 2020); and
significantly scaling back on non-essential operating expenses,
capital expenditures and planned inventory purchases. During the
first quarter of 2021, the
Board of Directors approved the reinstatement of a quarterly cash
dividend and the repurchase of stock under the Company's stock
repurchase plan.
In 2020, as a result of the COVID-19 pandemic, the
Company implemented a restructuring plan that resulted in the
reduction of a significant number of its corporate employees. In
2020, the
Company in aggregate recorded a pre-tax charge of $7,181 related to
restructuring and other related items, of which $490 was the
remaining unpaid portion of accrued expenses at December 31, 2020.
During the first quarter of 2021, the Company recorded a pre-tax
charge of $806 related to additional severance in connection with
its restructuring plan and other related items. As of March 31,
2021, $607 was the remaining unpaid portion of accrued
expenses.
Note C – Reclassification
Certain reclassifications were made to prior years' amounts to
conform to the 2021 presentation, primarily as it relates to
segment reporting of corporate expenses and corporate assets. See
Note Q - Operating Segment Information, for more
information.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
Note D – Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those
estimates.
Significant areas involving management estimates include variable
consideration included in revenue, allowances for bad debts,
inventory valuation, valuation of intangible assets, impairment of
long-lived assets, litigation reserves and contingent payment
liabilities. The Company estimates variable consideration for
future customer chargebacks and markdown allowances, discounts,
returns and other miscellaneous compliance-related deductions that
relate to the current-period sales. The Company evaluates
anticipated chargebacks by reviewing several performance indicators
of its major customers. These performance indicators, which include
retailers’ inventory levels, sell-through rates and gross margin
levels, are analyzed by management to estimate the amount of the
anticipated customer allowance. While the full impact of the
COVID-19 pandemic is unknown and cannot be reasonably estimated,
the Company has made accounting estimates based on the facts and
circumstances available as of the reporting date. Actual amounts
could differ from these estimates, and such differences could be
material.
Note E – Factoring Agreement
In conjunction with the Credit Agreement described in Note S below,
on July 22, 2020, the Company and certain of its subsidiaries
(collectively, the “Madden Entities”) entered into an Amended and
Restated Deferred Purchase Factoring Agreement (the “Factoring
Agreement”) with Rosenthal & Rosenthal, Inc. ("Rosenthal").
Pursuant to the Factoring Agreement, Rosenthal serves as the
collection agent with respect to certain receivables of the Madden
Entities and is entitled to receive a base commission of 0.20% of
the gross invoice amount of each receivable assigned for
collection, plus certain additional fees and expenses, subject to
certain minimum annual commissions. Rosenthal will generally assume
the credit risk resulting from a customer’s financial inability to
make payment of credit-approved receivables. The initial term of
the Factoring Agreement is twelve months, subject to automatic
renewal for additional twelve-month periods, and the Factoring
Agreement may be terminated at any time by Rosenthal or the Madden
Entities on 60 days notice and upon the occurrence of certain other
events. The Madden Entities pledged all of their rights under the
Factoring Agreement to the Agent (see Note S) under the Credit
Agreement to secure obligations arising under the Credit
Agreement.
Note F – Short-Term Investments
As of March 31, 2021 and December 31, 2020, short-term
investments consisted of certificates of deposit. These securities
are classified as current based upon their maturities. As of
March 31, 2021 and December 31, 2020 short-term
investments amounted to $39,788 and $39,302, respectively, and have
maturities of one year or less.
Note G – Fair Value Measurement
The accounting guidance under Accounting Standards Codification
820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”)
requires the Company to make disclosures about the fair value of
certain of its assets and liabilities. ASC 820-10 clarifies the
principle that fair value should be based on the assumptions market
participants would use when pricing an asset or liability and
establishes a fair value hierarchy that prioritizes the information
used to develop those assumptions. ASC 820-10 utilizes a fair value
hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value into three broad levels. A brief description
of those three levels is as follows:
•Level
1: Observable inputs such as quoted prices in active markets for
identical assets or liabilities.
•Level
2: Inputs other than quoted prices that are observable for the
asset or liability, either directly or indirectly.
•Level
3: Significant unobservable inputs.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
The Company’s financial assets and liabilities subject to fair
value measurements as of March 31, 2021 and December 31,
2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021 |
|
|
|
|
Fair Value Measurements |
|
|
Fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward contracts |
|
270 |
|
|
— |
|
|
270 |
|
|
— |
|
Total assets |
|
$ |
270 |
|
|
$ |
— |
|
|
$ |
270 |
|
|
$ |
— |
|
Liabilities: |
|
|
|
|
|
|
|
|
Contingent consideration |
|
$ |
677 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
677 |
|
Forward contracts |
|
439 |
|
|
— |
|
|
439 |
|
|
— |
|
Total liabilities |
|
$ |
1,116 |
|
|
$ |
— |
|
|
$ |
439 |
|
|
$ |
677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 |
|
|
|
|
Fair Value Measurements |
|
|
Fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Contingent consideration |
|
$ |
207 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
207 |
|
Forward contracts |
|
997 |
|
|
— |
|
|
997 |
|
|
— |
|
Total liabilities |
|
$ |
1,204 |
|
|
$ |
— |
|
|
$ |
997 |
|
|
$ |
207 |
|
Forward contracts are entered into to manage the risk associated
with the volatility of future cash flows (see Note O - Derivative
Instruments). Fair value of these instruments is based on
observable market transactions of spot and forward
rates.
The Company's level 3 balance consists of contingent consideration
related to acquisitions. The changes in the Company's level 3
liabilities for the periods ended March 31, 2021 and
December 31, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, |
|
Payments |
|
|
|
Acquisitions |
|
Adjustments (1) |
|
|
|
Balance at
March 31, |
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
* |
$ |
207 |
|
|
— |
|
|
|
|
— |
|
|
470 |
|
|
|
|
$ |
677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, |
|
Payments |
|
|
|
Acquisitions |
|
Adjustments (2) |
|
|
|
Balance at December 31, |
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration |
$ |
9,124 |
|
|
— |
|
|
|
|
— |
|
|
(8,917) |
|
|
|
|
$ |
207 |
|
(1) In 2021, amount of adjustments of $470 was included as an
expense in operating expenses, related to the change in valuation
of the contingent consideration in connection with acquisition of
B.B. Dakota, Inc.
(2) In 2020, the amount consists of adjustments of $4,570 and
$4,347 to the purchase accounting of B.B. Dakota, Inc. and GREATS
Brand, Inc, respectively. The adjustment of $4,570 was included as
a benefit to operating expenses and related to the change in
valuation of the contingent consideration in connection with the
acquisition of B.B. Dakota, Inc. The adjustment of $4,347 is
comprised of an adjustment of $2,684 to the preliminary fair value,
recorded during the first quarter 2020, and a benefit of $1,663
included in operating expenses related to the change in valuation
of the contingent consideration in connection with the acquisition
of GREATS Brand, Inc.
*Total contingent consideration liability of $677 is comprised of
$113 of which is classified as current and $564 of which is
classified as non-current on the consolidated balance
sheets.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
At March 31, 2021, the liability for potential contingent
consideration was $7 in connection with the August 9, 2019
acquisition of GREATS Brand, Inc. Pursuant to the terms of an
earn-out provision contained in the equity purchase agreement,
between the Company and the sellers of GREATS Brand, Inc., earn-out
payments are based on EBITA performance. The fair value of the
contingent payments was estimated using the present value of the
payments based on management’s projections of the financial results
of GREATS Brand, Inc. during the earn-out period, utilizing a
discount rate of
10.0%.
At March 31, 2021, the liability for potential contingent
consideration was
$670 in
connection with the August 12, 2019 acquisition of B.B. Dakota,
Inc. Pursuant to the terms of an earn-out provision contained in
the equity purchase agreement, between the Company and the sellers
of B.B. Dakota, Inc., earn-out payments are based on EBITDA
performance. The fair value of the contingent payments was
estimated using the present value of the payments based on
management’s projections of the financial results of B.B. Dakota,
Inc. during the earn-out period, utilizing a discount rate
of
10.5%.
The fair value of trademarks is measured on a non-recurring basis
using Level 3 inputs, including forecasted cash flows, discount
rates and implied royalty rates.(See Note N)
The fair values of right-of-use lease assets and fixed assets
related to Company-owned retail stores were determined using Level
3 inputs, including estimated discounted future cash flows
associated with the assets using sales trends and market
participant assumptions. (See Note I)
The carrying value of certain financial instruments such as cash
equivalents, certificates of deposit, accounts receivable, factor
accounts receivable and accounts payable approximates their fair
values due to the short-term nature of their underlying terms. Fair
value of the notes receivable held by the Company approximates
their carrying value based upon their imputed or actual interest
rate, which approximates applicable current market interest rates.
Some assets are not measured at fair value on an ongoing basis but
are subject to fair value adjustments only in certain
circumstances. These assets can include long-lived assets that have
been reduced to fair value when impaired. Assets that are written
down to fair value when impaired are not subsequently adjusted to
fair value unless further impairment occurs.
Note H – Leases
The Company leases office space, sample production space,
warehouses, showrooms, storage units and retail stores under
operating leases. The Company’s portfolio of leases is primarily
related to real estate. Since most of its leases do not provide a
readily determinable implicit rate, the Company estimated its
incremental borrowing rate to discount the lease payments based on
information available at lease commencement.
Some of the leases for the Company’s retail store leases provide
for variable lease payments based on future sales volumes at the
leased location, which are not measurable at the inception of the
lease and are therefore not included in the measurement of the
right-of-use assets and lease liabilities. Under ASC 842, these
variable lease costs are expensed as incurred.
As a result of the effects of the COVID-19 pandemic, the Company
executed amendments to certain leases in its existing operating
lease portfolio which included changes to rental payments either to
be fully or partially based on the future sales volumes at the
leased location or in the form of rent abatements or reductions of
the remaining lease costs obligations. The Company considered these
concessions in accordance with the FASB Staff Q&A—Topic 842 and
Topic 840: Accounting For Lease Concessions Related to the Effects
of the COVID-19 Pandemic (the “Lease Modification Q&A”), and
determined that the concessions resulted in the total payments
required by the modified contract being substantially the same as
or less than total payments required by the original contract
consistent with how they would be accounted for as though
enforceable rights and obligations for those concessions existed in
the original contract. Consequently, the Company elected to account
for these concessions as if they were contemplated in the
enforceable rights and obligations of the existing
contract.
The Company made payments amounting to $6,570 for COVID-19 lease
amendments during the three months ended March 31, 2021 which
are included in variable lease costs.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
Lease Position
The table below presents the lease-related assets and liabilities
recorded on the balance sheet as of March 31, 2021 and
December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification on the Balance Sheet |
|
March 31, 2021 |
|
December 31, 2020 |
Assets |
|
|
|
|
|
Noncurrent
(1) (2)
|
Operating lease right-of-use asset |
|
$ |
99,510 |
|
$ |
101,379 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Current |
Operating leases - current portion |
|
$ |
33,359 |
|
$ |
34,257 |
Noncurrent |
Operating leases - long-term portion |
|
96,246 |
|
98,592 |
Total operating lease liabilities |
|
|
$ |
129,605 |
|
$ |
132,849 |
|
|
|
|
|
|
Weighted-average remaining lease term |
|
|
5.0 years |
|
5.0 years |
Weighted-average discount rate |
|
|
4.2 |
% |
|
4.3 |
% |
(1) During the first quarter of 2021, the Company recorded a
pre-tax impairment charge related to its right-of-use assets of
$433
(2) During the year ended December 31, 2020, the Company recorded a
pre-tax impairment charge related to its right-of-use assets of
$22,183.
Lease Costs
The table below presents certain information related to lease costs
during the three months ended March 31, 2021 and
2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2021 |
|
2020 |
|
|
|
|
Operating lease cost |
$ |
10,192 |
|
|
$ |
11,383 |
|
|
|
|
|
Variable lease cost
(1)
|
7,343 |
|
|
43 |
|
|
|
|
|
Short-term lease cost |
— |
|
|
13 |
|
|
|
|
|
Less: sublease income |
80 |
|
|
201 |
|
|
|
|
|
Total lease cost |
$ |
17,455 |
|
|
$ |
11,238 |
|
|
|
|
|
(1) The Company has incurred lease modification expenses of $6,570
which
have been included in variable lease cost for the three months
ended March 31, 2021.
Other Information
The table below presents supplemental cash flow information related
to leases as of the three months ended March 31, 2021 and
2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
Cash paid for amounts included in the measurement of lease
liabilities |
|
|
|
Operating cash flows used for
operating leases |
$ |
10,901 |
|
|
$ |
11,545 |
|
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
Noncash transactions: |
|
|
|
Right-of-use asset obtained in exchange for new operating lease
liabilities |
$ |
7,283 |
|
|
$ |
— |
|
Right-of-use asset amortization expense |
$ |
8,770 |
|
|
$ |
10,333 |
|
Undiscounted Cash Flows
The table below reconciles the undiscounted cash flows for each of
the first five years and total of the remaining years to the lease
liabilities recorded on the balance sheet as of March 31,
2021:
|
|
|
|
|
|
2021 (remaining 9 months) |
$ |
30,199 |
|
2022 |
32,274 |
|
2023 |
23,792 |
|
2024 |
18,740 |
|
2025 |
15,345 |
|
Thereafter |
23,398 |
|
Total minimum lease payments |
143,748 |
|
Less: interest |
14,143 |
|
Present value of lease liabilities |
$ |
129,605 |
|
Note I – Impairment of Other Long-Lived Assets
Property and equipment and lease-related right-of-use assets, along
with other long-lived assets, are evaluated for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset or asset group may not be recoverable. In 2020,
due to the impacts of the COVID-19 pandemic on the Company’s
operations and declines in the retail real estate market, the
Company identified indicators of impairment for long-lived assets
at certain of its retail stores. For such stores, the Company
performed a recoverability test, comparing estimated undiscounted
cash flows to the carrying value of the related long-lived assets.
When the carrying value was more than the estimated undiscounted
cash flows, the Company wrote the assets down to their fair value.
Fair value of the long-lived assets was estimated using an income
approach based on management’s forecast of future cash flows
derived from continued retail operations and the fair value of
individual operating lease assets was determined using estimated
market rental rates. Significant estimates are used in determining
future cash flows of each store over its remaining lease term,
including the Company's expectations of future projected cash flows
which include revenues, operating expenses, and market conditions.
An impairment loss is recorded if the carrying amount of the
long-lived asset group exceeds its fair value. As a result, the
Company recorded impairment charges of $28,821 for the three months
ended March 31, 2020. For three months ended March 31, 2021, the
Company recorded impairment charges of $612. These
impairment charges were recorded in the Retail
segment.
Note J – Share Repurchase Program
The Company's Board of Directors authorized a share repurchase
program (the “Share Repurchase Program”), effective as of January
1, 2004. The Share Repurchase Program does not have a fixed
expiration or termination date and may be modified or terminated by
the Board of Directors at any time. On several occasions, the Board
of Directors has increased the amount authorized for repurchase of
the Company's common stock. On April 24, 2019, the Board of
Directors approved the expansion of the Company's Share Repurchase
Program for up to $200,000 in repurchases of the Company's common
stock, which included the amount remaining under the prior
authorization. The Share Repurchase Program permits the Company to
effect repurchases from time to time through a combination of open
market repurchases, net settlements of employee stock awards
or
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
in privately negotiated transactions at such prices and times as
are determined to be in the best interest of the Company. During
the three months ended March 31, 2021, an aggregate of 53,187
shares of the Company's common stock, excluding net settlements of
employee stock awards, were repurchased under the Share Repurchase
Program, at a weighted average price per share of $36.47, for an
aggregate purchase price of approximately $1,940. As of
March 31, 2021, approximately $109,650 remained available for
future repurchases under the Share Repurchase
Program.
The Steven Madden, Ltd. Amended and Restated 2006 Stock Incentive
Plan (as further amended, the "2006 Plan"), which expired on April
6, 2019, and the Steven Madden, Ltd. 2019 Incentive Compensation
Plan (the "2019 Plan") both provide the Company with the right to
deduct or withhold, or require employees to remit to the Company,
an amount sufficient to satisfy any applicable tax withholding
obligations applicable to stock-based compensation awards. To the
extent permitted, employees may elect to satisfy all or part of
such withholding obligations by tendering to the Company previously
owned shares or by having the Company withhold shares having a fair
market value equal to the employee's withholding tax obligation.
During the three months ended March 31, 2021, an aggregate of
100,853 shares were withheld in connection with the settlement of
vested restricted stock to satisfy tax-withholding requirements, at
an average price per share of $35.87, for an aggregate purchase
price of approximately $3,618.
Note K – Net Income/(Loss) Per Share of Common Stock
Basic net income/(loss) per share is based on the weighted average
number of shares of common stock outstanding during the period,
which does not include unvested restricted common stock subject to
forfeiture of 3,593,000 shares for the period ended March 31,
2021, compared to 4,565,000 shares for the period ended
March 31, 2020.
Diluted net income per share reflects:
(a) the potential dilution assuming shares of common stock were
issued upon the exercise of outstanding in-the-money options and
the assumed proceeds, which are deemed to be the proceeds from the
exercise plus compensation cost not yet recognized attributable to
future services using the treasury method, were used to purchase
shares of the Company’s common stock at the average market price
during the period, and b) the vesting of granted non-vested
restricted stock awards for which the assumed proceeds upon vesting
are deemed to be the amount of compensation cost not yet recognized
attributable to future services using the treasury stock method, to
the extent dilutive. For the three months ended March 31,
2021, options to purchase approximately 4,000 shares of common
stock, have been excluded from the calculation of diluted net
income per share compared to approximately 513,000 shares that were
excluded from the calculation of diluted net loss per share for the
three months ended March 31, 2020, as the result would have
been anti-dilutive. For the three months ended March 31, 2021,
approximately 14,000 restricted shares were excluded from the
calculation of diluted net income per share compared to
approximately 2,769,000 that were excluded from the calculation of
diluted net loss per share for the three months ended March 31,
2020, as the result would have been anti-dilutive. Shares
underlying contingently issuable awards that have not met the
necessary conditions as of the end of a reporting period are not
included in the calculation of diluted net income (loss) per common
share for that period. The Company had contingently issuable
performance awards outstanding that did not meet the performance
conditions as of March 31, 2021 and 2020 and, therefore, were
excluded from the calculation of diluted net income/ (loss) per
common share for the three months ended March 31, 2021 and 2020.
The maximum number of potentially dilutive shares that could be
issued upon vesting for these performance awards was approximately
17,000 and 300,000 as of both March 31, 2021 and 2020,
respectively. These amounts were also excluded from the computation
of weighted average potentially dilutive securities.
Note L – Income Taxes
The Company’s provision for income taxes for the three months ended
March 31, 2021 and 2020 is based on the estimated annual effective
tax rate, plus or minus discrete items. The following table
presents the provision for income taxes and the effective tax rates
for the three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2021 |
|
2020 |
|
|
|
|
Income/(loss) before provision for income taxes |
$ |
28,007 |
|
$ |
(25,202) |
|
|
|
|
Income tax expense/(benefit) |
$ |
5,676 |
|
$ |
(7,401) |
|
|
|
|
Effective tax rate |
20.3% |
|
29.4% |
|
|
|
|
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
The difference between the Company’s effective tax rates for the
three months ended March 31, 2021 and 2020 is primarily due to
the expected jurisdictional mix of profit and losses from each
period.
The Company recognizes interest and penalties, if any, related to
uncertain income tax positions in income tax expense. Accrued
interest and penalties on unrecognized tax benefits, and interest
and penalty expense are immaterial to the consolidated financial
statements.
The Company files income tax returns in the U.S. for federal,
state, and local purposes, and in certain foreign jurisdictions.
The Company's tax years 2017 through 2020 remain open to
examination by most taxing authorities.
In response to the COVID-19 pandemic, the Coronavirus Aid, Relief,
and Economic Security Act ("CARES Act") was signed into law on
March 27, 2020, which includes significant corporate income tax and
payroll tax provisions aimed at providing economic relief. The
Company received or expects to continue to receive a corporate
income tax benefit on the net operating loss carryback provision
set forth by the CARES act, as well as benefits related to the
employee retention credit, favorable cash flow benefits in
connection with employer payroll tax deferral, and accelerated
depreciation related to qualified improvement
property.
Note M – Equity-Based Compensation
The following table summarizes the number of shares of common stock
authorized for issuance under the 2019 Plan, the number of
stock-based awards granted (net of expired or cancelled awards)
under the 2019 Plan and the number of shares of common stock
available for the grant of stock-based awards under the 2019
Plan:
|
|
|
|
|
|
Common stock authorized |
11,000,000 |
|
Stock-based awards, including restricted stock and stock options
granted, net of expired or cancelled awards |
(2,668,950) |
|
Common stock available for grant of stock-based awards as of March
31, 2021 |
8,331,050 |
|
In addition, vested and unvested options to purchase 2,092,188
shares of common stock and 3,008,209 shares of unvested restricted
stock awarded under the 2006 Plan were outstanding as of March 31,
2021.
Total equity-based compensation for the three months ended
March 31, 2021 and 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2021 |
|
2020 |
|
|
|
|
Restricted stock |
$ |
4,509 |
|
|
$ |
4,864 |
|
|
|
|
|
Stock options |
1,030 |
|
|
822 |
|
|
|
|
|
Total |
$ |
5,539 |
|
|
$ |
5,686 |
|
|
|
|
|
Equity-based compensation is included in operating expenses on the
Company’s Condensed Consolidated Statements of Income.
On June 30, 2020, pursuant to his employment agreement with the
Company, Steve Madden, the Company's founder and Creative and
Design Chief, was granted an option to purchase 225,000 shares of
the Company's common stock at an exercise price of $24.83 per
share, which option vests in four equal installments commencing on
September 30, 2020 and ending on June 30, 2021. As of
March 31, 2021, Mr. Madden had unvested options to purchase
281,250 shares of the Company's common stock and 2,560,543
restricted shares of the Company's common stock.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
Stock Options
Cash proceeds and intrinsic values related to total stock options
exercised during the three months ended March 31, 2021 and
2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2021 |
|
2020 |
|
|
|
|
Proceeds from stock options exercised |
$ |
1,554 |
|
|
$ |
874 |
|
|
|
|
|
Intrinsic value of stock options exercised |
$ |
867 |
|
|
$ |
737 |
|
|
|
|
|
During the three months ended March 31, 2021, approximately
356,603 shares of options vested with a weighted average exercise
price of $25.55. During the three months ended March 31, 2020,
approximately 388,479 shares of options vested with a weighted
average exercise price of $26.04. As of March 31, 2021, there
were unvested options relating to 400,713 shares of common stock
outstanding with a total of $2,635
of unrecognized compensation cost and an average vesting period of
1.2 years.
The Company uses the Black-Scholes-Merton option-pricing model to
estimate the fair value of options granted, which requires several
assumptions. The expected term of the options represents the
estimated period of time until exercise and is based on the
historical experience of similar awards. Expected volatility is
based on the historical volatility of the Company’s common stock.
The risk-free interest rate is based on the U.S. Treasury yield
curve in effect at the time of the grant. The dividend yield is
based on the Company's annualized dividend per share amount divided
by the Company's stock price. The following weighted average
assumptions were used for stock options granted during the three
months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2021 |
|
2020 |
Volatility |
|
48.4% |
|
33.9% to 37.6% |
Risk free interest rate |
|
0.2% |
|
0.5% to 1.6% |
Expected life in years |
|
3.0 |
|
3.0 to 5.0 |
Dividend yield |
|
1.8% |
|
1.5% |
Weighted average fair value |
|
$10.33 |
|
$10.22 |
Activity relating to stock options granted under the Company’s
plans during the three months ended March 31, 2021 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
Weighted Average Exercise Price |
|
Weighted Average Remaining Contractual Term |
|
Aggregate Intrinsic Value |
Outstanding at January 1, 2021 |
|
2,674,000 |
|
|
$ |
26.80 |
|
|
|
|
|
Granted |
|
11,000 |
|
|
33.60 |
|
|
|
|
|
Exercised |
|
(65,000) |
|
|
23.92 |
|
|
|
|
|
Forfeited |
|
— |
|
|
— |
|
|
|
|
|
Outstanding at March 31, 2021 |
|
2,620,000 |
|
|
$ |
26.90 |
|
|
3.0 years |
|
$ |
— |
|
Exercisable at March 31, 2021 |
|
2,219,000 |
|
|
$ |
26.76 |
|
|
2.9 years |
|
$ |
— |
|
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
Restricted Stock
The following table summarizes restricted stock activity during the
three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2021 |
|
2020 |
|
|
Number of Shares |
|
Weighted Average Fair Value at Grant Date |
|
Number of Shares |
|
Weighted Average Fair Value at Grant Date |
Outstanding at January 1, |
|
3,651,000 |
|
|
$ |
20.81 |
|
|
4,427,000 |
|
|
$ |
19.84 |
|
Granted |
|
187,000 |
|
|
38.10 |
|
|
366,000 |
|
|
34.69 |
|
Vested |
|
(223,000) |
|
|
28.50 |
|
|
(219,000) |
|
|
27.15 |
|
Forfeited |
|
(22,000) |
|
|
35.82 |
|
|
(9,000) |
|
|
32.84 |
|
Outstanding at March 31, |
|
3,593,000 |
|
|
$ |
21.14 |
|
|
4,565,000 |
|
|
$ |
20.66 |
|
As of March 31, 2021, the Company had $52,106 of total
unrecognized compensation cost related to restricted stock awards
granted under the 2019 Plan and the 2006 Plan. This cost is
expected to be recognized over a weighted average period of 4.2
years. The Company determines the fair value of its restricted
stock awards based on the market price of its common stock on the
date of grant.
Note N – Goodwill and Intangible Assets
The following is a summary of the carrying amount of goodwill by
reporting unit as of March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
|
|
Net Carrying Amount |
|
|
Footwear |
|
Accessories/ Apparel |
|
Retail |
|
Balance at January 1, 2021 |
|
$ |
91,323 |
|
|
$ |
62,688 |
|
|
$ |
14,254 |
|
|
$ |
168,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation and other |
|
(146) |
|
|
— |
|
|
(140) |
|
|
(286) |
|
Balance at March 31, 2021 |
|
$ |
91,177 |
|
|
$ |
62,688 |
|
|
$ |
14,114 |
|
|
$ |
167,979 |
|
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
The following table details identifiable intangible assets as of
March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Lives |
|
Cost Basis |
|
Accumulated Amortization |
|
Currency Translation |
|
Net Carrying Amount |
Trade names |
|
1–10 years |
|
$ |
9,025 |
|
|
$ |
8,834 |
|
|
$ |
— |
|
|
$ |
191 |
|
Customer relationships |
|
10–20 years |
|
38,680 |
|
|
21,557 |
|
|
(1,490) |
|
|
15,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,705 |
|
|
30,391 |
|
|
(1,490) |
|
|
15,824 |
|
Re-acquired right |
|
indefinite |
|
35,200 |
|
|
— |
|
|
(7,474) |
|
|
27,726 |
|
Trademarks |
|
indefinite |
|
70,953 |
|
|
— |
|
|
251 |
|
|
71,204 |
|
|
|
|
|
$ |
153,858 |
|
|
$ |
30,391 |
|
|
$ |
(8,713) |
|
|
$ |
114,754 |
|
The Company evaluates its goodwill and intangible assets for
indicators of impairment at least annually in the third quarter of
each year or whenever events or changes in circumstances indicate
that their carrying amounts may not be recoverable. In the first
quarter of 2021, the
Company did not identify any indicators of impairment regarding its
goodwill and intangible assets.
The amortization of intangible assets amounted to $831 for the
three months ended March 31, 2021 compared to $891 for the
three months ended March 31, 2020 and is included in operating
expenses in the Company's Condensed Consolidated Statements of
Income/ (Loss). The estimated future amortization expense for
intangibles as of March 31, 2021 is as follows:
|
|
|
|
|
|
2021 (remaining 9 months) |
$ |
1,646 |
|
2022 |
1,735 |
|
2023 |
1,735 |
|
2024 |
1,735 |
|
2025 |
1,735 |
|
Thereafter |
7,238 |
|
Total |
$ |
15,824 |
|
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
Note O – Derivative Instruments
The Company uses derivative instruments, specifically forward
foreign exchange contracts, to manage the risk associated with the
volatility of future cash flows. The foreign exchange contracts are
used to mitigate the impact of exchange rate fluctuations on
certain forecasted purchases of inventory and are designated as
cash flow hedging instruments. As of March 31, 2021, the
Company's entire net forward contracts hedging portfolio consisted
of a notional amount of $36,955, with the fair value included on
the Consolidated Balance Sheets in other current assets of $270 and
other current liabilities of $439. For the three months ended March
31, 2021, the Company's hedging activities were considered
effective, and, thus, no ineffectiveness from hedging activities
was recognized in the Consolidated Statements of Income/(Loss)
during the first quarter of 2021. As of March 31, 2020, Company's
hedging activities were considered ineffective due to COVID-19,
and, thus, gains of $176 related to ineffectiveness from hedging
activities were recognized in the Consolidated Statements of
Income/(Loss). The following table presents the pre-tax amounts
from derivative instruments affecting income and other
comprehensive income ("OCI") for the periods ended March 31, 2021,
and 2020, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Hedges |
Forward Contracts: |
Location of Gain or Loss Recognized in Net Income on
Derivative |
|
Gain/(Loss) Recognized in Accumulated OCI |
|
Gain/(Loss) Reclassified into Income From Accumulated
OCI |
2021 |
Cost of Sales |
|
$ |
(169) |
|
|
$ |
— |
|
2020 |
Cost of Sales |
|
1,178 |
|
|
176 |
|
Note P – Commitments, Contingencies and Other
Future Minimum Royalty and Advertising Payments:
The Company has minimum commitments related to the Company’s
license agreements. The Company sources, distributes, advertises
and sells certain of its products pursuant to its license
agreements with unaffiliated licensors. Royalty amounts under the
license agreements are generally based on a stipulated percentage
of sales, although most of these agreements contain provisions for
the payment of minimum annual royalty amounts. The license
agreements have various terms and some have additional renewal
options, provided that minimum sales levels and certain other
conditions are achieved. As of March 31, 2021, the Company had
future minimum royalty and advertising payments of
$18,363.
Legal Proceedings:
The Company has been named as a defendant in certain lawsuits in
the normal course of business. In the opinion of management, after
consulting with legal counsel, the liabilities, if any, resulting
from these matters should not have a material effect on the
Company's financial position or results of operations. It is the
policy of management to disclose the amount or range of reasonably
possible losses in excess of recorded amounts or cash
flows.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
Note Q – Operating Segment Information
The Company operates the following operating segments, which are
presented as reportable segments: Wholesale Footwear, Wholesale
Accessories/Apparel, Retail, First Cost and Licensing. The
Wholesale Footwear segment, through sales to department stores,
mid-tier retailers, mass market merchants, online retailers and
specialty stores, derives revenue, both domestically and
internationally, from sales of branded and private label women’s,
men’s, girls’ and children’s footwear. The Wholesale
Accessories/Apparel segment, which includes branded and private
label handbags, apparel, belts and small leather goods as well as
cold weather and selected other fashion accessories, derives
revenue, both domestically and internationally, from sales to
department stores, mid-tier retailers, mass market merchants,
online retailers and specialty stores. The Company's Wholesale
Footwear and Wholesale Accessories/Apparel segments derive revenue
from certain countries in Asia, Europe, North America, and Africa
and, under special distribution arrangements, in Australia, the
Middle East, India, South and Central America, New Zealand, and
Southeast Asia and pursuant to a partnership agreement in
Singapore. The Retail segment, through the operation of
Company-owned retail stores in the United States, Canada and
Mexico, the Company's joint ventures in South Africa, China, Taiwan
and Israel and its websites, derives revenue from sales of branded
women’s, men’s and children’s footwear, accessories, apparel and
licensed products to consumers. The First Cost segment represents
activities of a subsidiary that earns commissions and design fees
for serving as a buying agent of footwear products to
mass-merchants, mid-tier department stores and other retailers with
respect to their purchase of footwear. In the Licensing segment,
the Company generates revenue by licensing its Steve Madden®,
Steven by Steve Madden®, FREEBIRD by Steven® and Madden Girl®
trademarks and other trademark rights for use in connection with
the manufacture, marketing and sale of eyewear, outerwear, hosiery,
jewelry, watches, hair accessories, umbrellas, bedding, luggage,
swimwear and men's accessories. In addition, this segment licenses
the Betsey Johnson® trademark for use in connection with the
manufacture, marketing and sale of women's and children's apparel,
hosiery, sleepwear, jewelry, watches, bedding, luggage, umbrellas,
eyewear, scrubs, fragrance, slippers, and household goods. The
Licensing segment also licenses the Dolce Vita® trademark for use
in connection with the manufacture, marketing and sale of
swimwear.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the three months ended, |
|
Wholesale Footwear |
|
Wholesale Accessories/Apparel |
|
Total Wholesale |
|
Retail |
|
First Cost |
|
Licensing |
|
Corporate (1) |
Consolidated |
March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
216,779 |
|
|
$ |
74,621 |
|
|
$ |
291,400 |
|
|
$ |
67,501 |
|
|
$ |
583 |
|
|
$ |
1,541 |
|
|
$ |
— |
|
$ |
361,025 |
|
Gross profit |
|
73,724 |
|
|
20,392 |
|
|
94,116 |
|
|
42,864 |
|
|
583 |
|
|
1,541 |
|
|
— |
|
139,104 |
|
Income/(loss) from operations |
|
$ |
44,376 |
|
|
$ |
7,515 |
|
|
$ |
51,891 |
|
|
$ |
(4,707) |
|
|
$ |
450 |
|
|
$ |
1,150 |
|
|
$ |
(20,740) |
|
$ |
28,044 |
|
Segment assets |
|
$ |
326,059 |
|
|
$ |
428,157 |
|
|
$ |
754,216 |
|
|
$ |
218,990 |
|
|
$ |
68,598 |
|
|
$ |
73,261 |
|
|
$ |
53,878 |
|
$ |
1,168,943 |
|
Capital expenditures |
|
$ |
281 |
|
|
$ |
710 |
|
|
$ |
991 |
|
|
$ |
183 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
424 |
|
$ |
1,598 |
|
March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
235,069 |
|
|
$ |
67,672 |
|
|
$ |
302,741 |
|
|
$ |
52,943 |
|
|
$ |
1,250 |
|
|
$ |
2,234 |
|
|
$ |
— |
|
$ |
359,168 |
|
Gross profit |
|
79,784 |
|
|
18,512 |
|
|
98,296 |
|
|
31,684 |
|
|
1,250 |
|
|
2,234 |
|
|
— |
|
133,464 |
|
Income/(loss) from operations |
|
$ |
41,053 |
|
|
$ |
(6,479) |
|
|
$ |
34,574 |
|
|
$ |
(43,002) |
|
|
$ |
464 |
|
|
$ |
948 |
|
|
$ |
(19,232) |
|
$ |
(26,248) |
|
Segment assets |
|
$ |
312,238 |
|
|
$ |
431,672 |
|
|
$ |
743,910 |
|
|
$ |
231,562 |
|
|
$ |
65,918 |
|
|
$ |
67,309 |
|
|
37,205 |
|
$ |
1,145,904 |
|
Capital expenditures |
|
$ |
305 |
|
|
$ |
67 |
|
|
$ |
372 |
|
|
$ |
714 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,215 |
|
$ |
3,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
(1) Revised to present unallocated corporate expenses separately
for all periods presented. Corporate does not constitute as a
reportable segment and includes costs not directly attributable to
the segments that are primarily related to costs associated with
corporate executives, corporate finance, corporate social
responsibility, legal, human resources, information technology,
cyber security and other shared costs. |
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
Revenues by geographic area are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
2021 |
|
2020 |
|
|
|
|
Domestic (a) |
|
$ |
315,601 |
|
|
$ |
317,937 |
|
|
|
|
|
International |
|
45,424 |
|
|
41,231 |
|
|
|
|
|
Total |
|
$ |
361,025 |
|
|
$ |
359,168 |
|
|
|
|
|
(a) Includes revenues of $75,291 for the three months end March 31,
2021, and $68,325 for the comparable period in 2020 related to
sales to U.S. customers where the title is transferred outside the
U.S. and the sale is recorded by the Company's international
entities. |
Note R – Recent Accounting Pronouncements
Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04 “Reference Rate Reform
(Topic 848): Facilitation of the Effects of Reference Rate Reform
on Financial Reporting,” (“ASU No. 2020-04”), which provides
practical expedients for contract modifications and certain hedging
relationships associated with the transition from reference rates
that are expected to be discontinued. This guidance is applicable
the Company's borrowing instruments that use LIBOR as a reference
rate, and is effective immediately, but is only available through
December 31, 2022. The Company is currently evaluating the impact
of ASU 2020-04; however, at the current time, the Company does not
expect that the adoption of this ASU will have a material impact on
its condensed consolidated financial statements.
Note S – Credit Agreement
Credit Agreement
On July 22, 2020, the Company entered into a $150,000 secured
revolving credit agreement (the “Credit Agreement”) with various
lenders and Citizens Bank, N.A., as administrative agent (the
“Agent”), which replaced the Company’s existing credit facility
provided by Rosenthal & Rosenthal, Inc. (“Rosenthal”). The
Credit Agreement provides for a revolving credit facility (the
“Credit Facility”) scheduled to mature on July 22,
2025.
The initial $150,000 maximum availability under the Credit Facility
is subject to a borrowing base calculation consisting of certain
eligible accounts receivable, credit card receivables, inventory,
and in-transit inventory. Availability under the Credit Facility is
reduced by outstanding letters of credit. The Company may from
time-to-time increase the maximum availability under the Credit
Agreement by up to $100,000 if certain conditions are
satisfied.
Borrowings under the Credit Agreement generally bear interest at a
variable rate equal to, at the Company’s election, (i) LIBOR for
the applicable interest period or (ii) the base rate (which is the
highest of (a) the prime rate announced by Citizens Bank, N.A. or
its parent company, (b) the sum of the federal funds effective rate
plus 0.50%, and (c) the sum of one-month LIBOR plus 1%), plus in
each case a specified margin, which is based upon average
availability under the Credit Facility from time to
time.
Under the Credit Agreement, the Company must also pay (i) a
commitment fee to the Agent, for the account of each lender, which
accrues at a rate equal to 0.40% per annum on the average daily
unused amount of the commitment of such lender, (ii) a letter of
credit participation fee to the Agent, for the account of each
lender, ranging from 2.00% to 2.50% per annum, based upon average
availability under the Credit Facility from time to time,
multiplied by the average daily amount available to be drawn under
the applicable letter of credit, and (iii) a letter of credit
fronting fee to each issuer of a letter of credit under the Credit
Agreement, which will accrue at a rate per annum separately agreed
upon between the Company and such issuer.
The Credit Agreement contains various restrictions and covenants
applicable to the Company and its subsidiaries. Among other
requirements, availability under the Credit Facility must, at all
times, (i) prior to the occurrence of the permanent borrowing base
trigger (as defined in the Credit Agreement), equal or exceed the
greater of $22,500 and 15% of the line cap (as defined
in
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
March 31, 2021
($ in thousands except share and per share data)
the Credit Agreement), and (ii) after the occurrence of the
permanent borrowing base trigger, equal or exceed the greater of
$15,000 and 10% of the line cap. Other than this minimum
availability requirement, the Credit Agreement does not include any
financial maintenance covenants.
The Credit Agreement requires the Company and various subsidiaries
of the Company to guarantee each other’s obligations arising from
time to time under the Credit Facility, as well as obligations
arising in respect of certain cash management and hedging
transactions. Subject to customary exceptions and limitations, all
borrowings under the Credit Agreement are secured by a lien on all
or substantially all of the assets of the Company and each
subsidiary guarantor.
The Credit Agreement also contains customary events of default. If
an event of default under the Credit Agreement occurs and is
continuing, then the Agent may, and at the request of the required
lenders shall, terminate the loan commitments under the Credit
Agreement, declare any outstanding obligations under the Credit
Agreement to be immediately due and payable or require the Company
to adequately cash collateralize outstanding letter of credit
obligations. If the Company or, with certain exceptions, a
subsidiary becomes the subject of a proceeding under any
bankruptcy, insolvency or similar law, then the loan commitments
under the Credit Agreement will automatically terminate, and any
outstanding obligations under the Credit Agreement and the cash
collateral required under the Credit Agreement for any outstanding
letter of credit obligations will become immediately due and
payable.
As of March 31, 2021, the Company had no cash borrowings or letters
of credit outstanding under the Credit Facility.
Note T – Subsequent Event
On April 14, 2021, the Company announced that it had completed the
acquisition of the remaining 49.9% interest in its European joint
venture in the amount of $16,483. The European joint venture was
formed in June 2016 and distributes Steve Madden-branded footwear
and accessories to most countries throughout Europe.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations for the three months period ended March 31, 2021
should be read in conjunction with the unaudited Condensed
Consolidated Financial Statements and notes thereto appearing
elsewhere in this Quarterly Report on Form 10-Q.
All references in this Quarterly Report to "we," "our," "us" and
the "Company" refer to Steven Madden, Ltd. and its subsidiaries
unless the context indicates otherwise.
This Quarterly Report contains “forward-looking statements” within
the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Examples of
forward-looking statements include, among others, statements
regarding revenue and earnings guidance, plans, strategies,
objectives, expectations and intentions. Forward-looking statements
can be identified by words such as: “may”, “will”, “expect”,
“believe”, “should”, “anticipate”, “project”, “predict”, “plan”,
“intend”, or “estimate”, and similar expressions or the negative of
these expressions. Forward-looking statements are neither
historical facts nor assurances of future performance. Instead,
they represent our current beliefs, expectations and assumptions
regarding anticipated events and trends affecting our business and
industry based on information available as of the time such
statements are made. Investors are cautioned that such
forward-looking statements are inherently subject to risks and
uncertainties, many of which cannot be predicted with accuracy and
some of which may be outside of our control. Our actual results and
financial condition may differ materially from those indicated in
these forward-looking statements. As such, investors should not
rely upon them. Important risk factors include:
•our
ability to maintain adequate liquidity when negatively impacted by
unforeseen events such as an epidemic or pandemic (COVID-19), which
may cause disruption to our business operations and temporary
closure of Company-operated and wholesale partner retail stores,
resulting in a significant reduction in revenue for an
indeterminable period of time;
•our
ability to accurately anticipate fashion trends and promptly
respond to consumer demand;
•our
ability to compete effectively in a highly competitive
market;
•our
ability to adapt our business model to rapid changes in the retail
industry;
•our
dependence on the retention and hiring of key
personnel;
•our
ability to successfully implement growth strategies and integrate
acquired businesses;
•our
reliance on independent manufacturers to produce and deliver
products in a timely manner, especially when faced with adversities
such as work stoppages, transportation delays, public health
emergencies, social unrest, changes in local economic conditions,
and political upheavals as well as their ability to meet our
quality standards;
•changes
in trade policies and tariffs imposed by the United States
government and the governments of other nations in which we
manufacture and sell products;
•disruptions
to product delivery systems and our ability to properly manage
inventory;
•our
ability to adequately protect our trademarks and other intellectual
property rights;
•legal,
regulatory, political and economic risks that may affect our sales
in international markets;
•changes
in U.S. and foreign tax laws that could have an adverse effect on
our financial results;
•additional
tax liabilities resulting from audits by various taxing
authorities;
•our
ability to achieve operating results that are consistent with prior
financial guidance; and
•other
risks and uncertainties indicated from time to time in our filings
with the Securities and Exchange Commission.
We do not undertake any obligation to publicly update any
forward-looking statement, including, without limitation, any
guidance regarding revenue or earnings, whether as a result of new
information, future developments or otherwise.
Overview:
($ in thousands, except earnings per share and per share
data)
Steven Madden, Ltd. and its subsidiaries design, source, market and
sell fashion-forward branded and private label footwear for women,
men and children. In addition, we design, source, market and sell
branded fashion handbags, apparel and accessories, as well as
private label fashion handbags and accessories. We market and sell
our products through better department stores, major department
stores, mid-tier department stores, specialty stores, luxury
retailers, value priced retailers, national chains, mass merchants,
and online retailers, throughout the United States, Canada, Mexico
and certain European nations. In addition, our products are
marketed through our retail stores and our e-commerce websites
within the United States, Canada and Mexico, our joint ventures in
Europe, South Africa, Israel, Taiwan and China, and under
distribution arrangements in Italy, the Middle East, South and
Central America, Oceania and various countries in Asia. Our product
lines include a broad range of contemporary styles designed to
establish or capitalize on market trends, complemented by core
product offerings. We have established a reputation for design
creativity and our ability to offer quality products in popular
styles at accessible price points, delivered in an efficient manner
and time frame.
Executive Summary
The impact of COVID-19 pandemic resulted in an unprecedented
decline in our revenue and earnings during 2020 and included but
not limited to, charges from adjustments to the carrying amount of
certain trademarks, long-lived asset impairment charges and
restructuring and other related charges. In 2021, despite the
continued impact of the pandemic and supply chain disruption, our
business saw improvements in our retail segment and improvements in
sell-through performance at our wholesale partners.
Total revenue for the quarter ended March 31, 2021
increased 0.5% to $361,025 compared to $359,168 in the same period
of last year. Net income attributable to Steven Madden, Ltd. was
$21,197 in the first quarter of 2021 compared to net loss of
$(17,451) in the same period of last year.
The effective tax rate for the first quarter of 2021 decreased to
20.3% compared to 29.4% in the first quarter of last year. Net
income was $0.26 per share on 81,889 diluted weighted average
shares outstanding
in the first quarter of 2021 compared to a loss of $(0.22) per
share on 78,875 diluted weighted average shares outstanding in the
first quarter of last year.
Our inventory turnover (calculated on a trailing twelve-month
average) for the quarters ended March 31, 2021 and 2020 was
7.0 times and 8.0 times, respectively. Our total Company accounts
receivable days outstanding
increased to
79
days in the first quarter of 2021 compared to 72 days in the first
quarter of 2020
primarily due to slower collections with the continued impact of
the COVID-19 pandemic and mix of accounts. As of March 31,
2021, we had $272,990 in cash, cash equivalents and short-term
investments, no debt and total stockholders’ equity of $800,768.
Working capital was $478,038 as of March 31, 2021, compared to
$408,080 on March 31, 2020.
The following tables set forth information on operations for the
periods indicated:
Selected Financial Information
Three Months Ended March 31,
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
2020 |
|
|
|
|
|
CONSOLIDATED: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
358,901 |
|
|
99.4 |
% |
|
$ |
355,684 |
|
|
99.0 |
% |
|
|
|
|
|
Commission and licensing fee income |
|
2,124 |
|
|
0.6 |
% |
|
3,484 |
|
|
1.0 |
% |
|
|
|
|
|
Total revenue |
|
361,025 |
|
|
100.0 |
% |
|
359,168 |
|
|
100.0 |
% |
|
|
|
|
|
Cost of sales |
|
221,921 |
|
|
61.5 |
% |
|
225,704 |
|
|
62.8 |
% |
|
|
|
|
|
Gross profit |
|
139,104 |
|
|
38.5 |
% |
|
133,464 |
|
|
37.2 |
% |
|
|
|
|
|
Operating expenses |
|
110,448 |
|
|
30.6 |
% |
|
121,373 |
|
|
33.8 |
% |
|
|
|
|
|
Impairment of store fixed assets and lease right-of-use
assets |
|
612 |
|
|
0.2 |
% |
|
28,821 |
|
|
8.0 |
% |
|
|
|
|
|
Impairment charges |
|
— |
|
|
— |
% |
|
9,518 |
|
|
2.7 |
% |
|
|
|
|
|
Income/(loss) from operations |
|
28,044 |
|
|
7.8 |
% |
|
(26,248) |
|
|
(7.3) |
% |
|
|
|
|
|
Interest and other income – net |
|
(37) |
|
|
— |
% |
|
1,046 |
|
|
0.3 |
% |
|
|
|
|
|
Income/(loss) before income taxes |
|
28,007 |
|
|
7.8 |
% |
|
(25,202) |
|
|
(7.0) |
% |
|
|
|
|
|
Net income/(loss) attributable to Steven Madden, Ltd. |
|
$ |
21,197 |
|
|
5.9 |
% |
|
$ |
(17,451) |
|
|
(4.9) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
WHOLESALE FOOTWEAR SEGMENT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
216,779 |
|
|
100.0 |
% |
|
$ |
235,069 |
|
|
100.0 |
% |
|
|
|
|
|
Cost of sales |
|
143,055 |
|
|
66.0 |
% |
|
155,285 |
|
|
66.1 |
% |
|
|
|
|
|
Gross profit |
|
73,724 |
|
|
34.0 |
% |
|
79,784 |
|
|
33.9 |
% |
|
|
|
|
|
Operating expenses |
|
29,348 |
|
|
13.5 |
% |
|
38,731 |
|
|
16.5 |
% |
|
|
|
|
|
Impairment charges |
|
— |
|
|
— |
% |
|
9,518 |
|
|
— |
% |
|
|
|
|
|
Income from operations |
|
$ |
44,376 |
|
|
20.5 |
% |
|
$ |
41,053 |
|
|
17.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WHOLESALE ACCESSORIES/APPAREL SEGMENT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
74,621 |
|
|
100.0 |
% |
|
$ |
67,672 |
|
|
100.0 |
% |
|
|
|
|
|
Cost of sales |
|
54,229 |
|
|
72.7 |
% |
|
49,160 |
|
|
72.6 |
% |
|
|
|
|
|
Gross profit |
|
20,392 |
|
|
27.3 |
% |
|
18,512 |
|
|
27.4 |
% |
|
|
|
|
|
Operating expenses |
|
12,877 |
|
|
17.3 |
% |
|
15,929 |
|
|
23.5 |
% |
|
|
|
|
|
Impairment charges |
|
— |
|
|
— |
% |
|
9,062 |
|
|
13.4 |
% |
|
|
|
|
|
Income/(loss) from operations |
|
$ |
7,515 |
|
|
10.1 |
% |
|
$ |
(6,479) |
|
|
(9.6) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RETAIL SEGMENT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
67,501 |
|
|
100.0 |
% |
|
$ |
52,943 |
|
|
100.0 |
% |
|
|
|
|
|
Cost of sales |
|
24,637 |
|
|
36.5 |
% |
|
21,259 |
|
|
40.2 |
% |
|
|
|
|
|
Gross profit |
|
42,864 |
|
|
63.5 |
% |
|
31,684 |
|
|
59.8 |
% |
|
|
|
|
|
Operating expenses |
|
46,959 |
|
|
69.6 |
% |
|
45,409 |
|
|
85.8 |
% |
|
|
|
|
|
Impairment of store fixed assets and lease right-of-use
assets |
|
612 |
|
|
0.9 |
% |
|
28,821 |
|
|
54.4 |
% |
|
|
|
|
|
Impairment charges |
|
— |
|
|
— |
% |
|
456 |
|
|
0.9 |
% |
|
|
|
|
|
(Loss) from operations |
|
$ |
(4,707) |
|
|
(7.0) |
% |
|
$ |
(43,002) |
|
|
(81.2) |
% |
|
|
|
|
|
Number of stores |
|
215 |
|
|
|
|
227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST COST SEGMENT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission fee income |
|
$ |
583 |
|
|
100.0 |
% |
|
$ |
1,250 |
|
|
100.0 |
% |
|
|
|
|
|
Gross profit |
|
583 |
|
|
100.0 |
% |
|
1,250 |
|
|
100.0 |
% |
|
|
|
|
|
Operating expenses |
|
133 |
|
|
22.8 |
% |
|
786 |
|
|
62.9 |
% |
|
|
|
|
|
Income from operations |
|
$ |
450 |
|
|
77.2 |
% |
|
$ |
464 |
|
|
37.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LICENSING SEGMENT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensing fee income |
|
$ |
1,541 |
|
|
100.0 |
% |
|
$ |
2,234 |
|
|
100.0 |
% |
|
|
|
|
|
Gross profit |
|
1,541 |
|
|
100.0 |
% |
|
2,234 |
|
|
100.0 |
% |
|
|
|
|
|
Operating expenses |
|
391 |
|
|
25.4 |
% |
|
1,286 |
|
|
57.6 |
% |
|
|
|
|
|
Income from operations |
|
$ |
1,150 |
|
|
74.6 |
% |
|
$ |
948 |
|
|
42.4 |
% |
|
|
|
|
|
Three Months Ended March 31,
($ in thousands)
|
|
|
|
|
|
|
|
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2021 |
|
2021 |
|
|
|
|
|
|
|
|
|
Corporate: |
|
|
|
|
|
|
|
|
Operating expenses |
|
$ |
20,740 |
|
|
— |
% |
|
$ |
19,232 |
|
|
— |
% |
Loss from operations |
|
$ |
(20,740) |
|
|
— |
% |
|
$ |
(19,232) |
|
|
— |
% |
RESULTS OF OPERATIONS
($ in thousands)
Three Months Ended March 31, 2021 Compared to Three Months Ended
March 31, 2020
Consolidated:
Total revenue for the three months ended March 31, 2021
increased 0.5% to $361,025 compared to $359,168 in the same period
of last year, with increases in the Wholesale Accessories/Apparel
and Retail segments, partially offset by a decrease in the
Wholesale Footwear segment. Gross profit was $139,104, or 38.5% of
total revenue, as compared
to $133,464, or 37.2% of total revenue, in the prior-year
period.
The increase in gross profit as a percentage of total revenue was
due to a shift in the mix of our business due to a higher
penetration of retail as a percentage to the total, which was
driven by our owned and operated e-commerce and the non-anniversary
of certain COVID-19 related inventory reserves in the prior year
period. These increases were partially offset by some headwinds in
connection with inbound freight costs and the non-renewal of the
Global System of Preferences ("GSP") which impacted imports in our
handbags business.
Operating expenses in the first quarter of 2021 were $110,448, or
30.6% of total revenue, as compared to $121,373, or 33.8% of total
revenue, in the first quarter of the prior year.
The decrease in operating expenses as a percentage of total revenue
was primarily attributable to the Company's expense control
initiatives, partially offset by early lease termination and
modification charges, restructuring and other related charges due
to the COVID-19 pandemic. For the three months ended March 31, 2021
and 2020 impairment charges were recorded of $612 and $28,821,
respectively, related to store fixed assets and lease right-of-use
assets. For the three months ended March 31, 2020, the Company
recorded an impairment charge of $9,518 associated with certain
intangibles. The effective tax rate for the first quarter of 2021
decreased to 20.3% compared to 29.4% in the first quarter of last
year. The
difference
in effective tax rate was primarily due to the expected
jurisdictional mix of profit and losses from each period. Net
income attributable to Steven Madden, Ltd. for the first quarter of
2021 was $21,197 compared to net loss attributable to Steven
Madden, Ltd. for the first quarter of 2020
of $(17,451).
Wholesale Footwear Segment:
Revenue from the Wholesale Footwear segment in the first quarter of
2021 accounted for $216,779, or 60.0% of total revenue, as compared
to $235,069, or 65.4% of total revenue, for the first quarter of
2020.
The 7.8% decrease in revenue in the current period is the result of
the continued impact of the COVID-19 pandemic and supply chain
disruption.
Gross profit was $73,724, or 34.0% of Wholesale Footwear revenue,
in the first quarter of 2021 as compared to $79,784, or 33.9% of
Wholesale Footwear revenue, in the first quarter of 2020. Operating
expenses in the first quarter of 2021 were $29,348, or 13.5% of
Wholesale Footwear revenue, as compared to $38,731, or 16.5% of
Wholesale Footwear revenue, in the first quarter of the prior
year.
The decrease in operating expenses as a percentage of Wholesale
Footwear revenue was primarily attributable to our expense control
initiatives. Income from operations increased to
$44,376, or 20.5% of Wholesale Footwear revenue in the first
quarter of 2021 as compared to $41,053, or 17.5% of Wholesale
Footwear revenue in the first quarter of the prior
year.
Wholesale Accessories/Apparel Segment:
Revenue from the Wholesale Accessories/Apparel segment in the first
quarter of 2021 accounted for $74,621, or 20.7% of total revenue,
as compared to $67,672, or 18.8% of total revenue, in the first
quarter of 2020.
The 10.3% increase in revenue in the current period is primarily
related to increases in both Steve Madden branded and private label
handbags.
Gross profit was $20,392, or 27.3% of Wholesale Accessories/Apparel
revenue, in the first quarter of 2021 as compared to $18,512, or
27.4% of Wholesale Accessories/Apparel revenue, in the first
quarter of the prior year.
The decrease
in gross profit as a percentage of Wholesale Accessories/Apparel
revenue was primarily due to headwinds in connection with inbound
freight costs and the non-renewal of the Global System of
Preferences ("GSP") which impacted our handbag imports from
Cambodia.
Operating expenses in the first quarter of 2021 were $12,877, or
17.3% of Wholesale Accessories/Apparel revenue, as compared to
$15,929, or 23.5% of Wholesale Accessories/Apparel revenue, in the
same period of last year.
The decrease
in operating expenses as a percentage of Wholesale
Accessories/Apparel revenue was primarily attributable to our
expense control initiatives. For the three months ended March 31,
2020 an impairment charge of $9,062 related to intangibles was
recorded. Income from operations for the Wholesale
Accessories/Apparel
segment for the first quarter of 2021 was $7,515, or 10.1% of
Wholesale Accessories/Apparel revenue as compared to a loss from
operations of $(6,479), or (9.6)% of Wholesale Accessories/Apparel
revenue for the first quarter of the prior year.
Retail Segment:
In the first quarter of 2021, revenue from the Retail segment
accounted for $67,501, or 18.7% of total revenue, as compared to
$52,943, or 14.7% of total revenue, in the first quarter of
2020.
The
27.5% increase in
revenue
was driven by the continued strength
in our e-commerce business. We
closed three stores during the three months ended March 31,
2021 and ended the quarter with 215 retail stores compared to 227
stores as of March 31, 2020. The store count includes 140
Steve Madden® full-price stores, 66 Steve Madden® outlet stores,
one Steven® store, one Superga® store and seven e-commerce
websites. In
addition,
we operated
17 concessions in
international markets.
As a result of the closures of certain brick-and-mortar stores for
part of the quarter in both 2021 and 2020, we did not report
comparable store sales for the quarter.
Gross profit in the first quarter of 2021 was $42,864, or 63.5% of
Retail revenue, compared to $31,684, or 59.8% of Retail revenue, in
the first quarter of 2020.
The
increase
in gross profit as a percentage of Retail revenue was primarily due
to lower promotional activity and a higher penetration of
e-commerce sales as a percentage of Retail revenue.
Operating expenses in the first quarter of 2021
were $46,959, or 69.6% of Retail revenue, as compared to $45,409,
or 85.8% of Retail revenue, in the first quarter of 2020. The
decrease
in operating expenses as a percentage of Retail revenue was
primarily from greater leverage on higher sales, the mix of the
business, as well as our expense control initiatives. For the three
months ended March 31, 2021 and 2020 an impairment charges were
recorded of $612 and $28,821, respectively, related to store fixed
assets and lease right-of-use assets. For the three months ended
March 31, 2020, the Company recorded an impairment charge of $456
associated with certain intangibles. In
the first quarter of 2021, loss
from
operations for the Retail segment was $(4,707), or (7.0)% of Retail
revenue as compared to $(43,002), or (81.2)% of Retail revenue in
the same period last year.
First Cost Segment:
Commission fee income generated by the First Cost segment accounted
for $583, or 0.2% of total revenue, in the first quarter of 2021
compared to $1,250, or 0.3% of total revenue, for the first quarter
of 2020. Operating expenses decreased
to
$133 in the current period compared to $786 in the same period last
year. Income from operations was $450 in the first quarter of 2021
as compared to income from operations of $464 in the same period of
last year.
Licensing Segment:
Licensing fee income generated by the Licensing segment accounted
for $1,541, or 0.4% of total revenue, in the first quarter of 2021
compared to $2,234, or 0.6% of total revenue, for the first quarter
of 2020. Operating expenses decreased
to $391 in the current period compared to $1,286 in the same period
of last year.
Income
from the Licensing segment was $1,150 as compared to $948 in the
same period last year.
Corporate:
Corporate does not constitute as a reportable segment and includes
costs in operating expenses not directly attributable to the
reportable segments. Corporate is primarily related to costs
associated with corporate executives, corporate finance, corporate
social responsibility, legal, human resources, information
technology, cyber security and other shared costs. Corporate
operating expenses increased 7.8 % to $20,740 in the first quarter
of 2021 as compared to $19,232 in the first quarter of
2020.
LIQUIDITY AND CAPITAL RESOURCES
($ in thousands)
Cash, cash equivalents and short-term investments totaled $272,990
and $287,166 at March 31, 2021 and December 31, 2020,
respectively. Of the total cash, cash equivalents and short-term
investments at March 31, 2021, $153,360, or approximately 56%,
was held in our foreign subsidiaries and of the total cash, cash
equivalents and short-term investments at December 31, 2020,
$158,610, or approximately 56%, was held in our foreign
subsidiaries.
On July 22, 2020, we entered into a new $150,000, five-year,
asset-based revolving credit facility with various lenders and
Citizens Bank, N.A.
As of March 31, 2021, we had working capital of $478,038, cash
and cash equivalents of $233,202, short-term investments of $39,788
and no debt.
We believe that based on our current financial position and
available cash, cash equivalents, and short-term
investments,
we will meet all of our financial commitments and operating needs
for at least the next twelve months. In addition, as a
precautionary measure, we have entered into the $150,000
asset-based revolving credit facility, which provides additional
liquidity and flexibility should we need it.
OPERATING ACTIVITIES
($ in thousands)
Cash provided by operations was $5,042 for the three months ended
March 31, 2021 compared to cash used in operations of $39,609
in the same period of last year. The improvement in cash provided
by operations was primarily driven by an increase in net income and
favorable changes in accounts payable and accrued expenses
partially offset by unfavorable changes in other working
capital.
INVESTING ACTIVITIES
($ in thousands)
During the three months ended March 31, 2021, we invested
$2,054 in short-term investments offset by cash received of $2,036
from the maturities and sales of short-term investments. We also
made capital expenditures of $1,598, principally for leasehold
improvements to office space, and new stores and systems
enhancements.
FINANCING ACTIVITIES
($ in thousands)
During the three months ended March 31, 2021, net cash used in
financing activities was $17,792, which consisted of share
repurchases of $5,558 and cash dividends paid of $12,425,
partially offset by proceeds from the exercise of stock options of
$1,554.
CONTRACTUAL OBLIGATIONS
($ in thousands)
Our contractual obligations as of March 31, 2021 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment due by period |
Contractual Obligations |
|
Total |
|
Remainder of 2021 |
|
2022-2023 |
|
2024-2025 |
|
2026 and after |
Operating lease obligations |
|
$ |
143,748 |
|
|
$ |
30,199 |
|
|
$ |
56,066 |
|
|
$ |
34,085 |
|
|
$ |
23,398 |
|
Purchase obligations |
|
67,492 |
|
|
67,492 |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
Future minimum royalty and advertising payments |
|
18,363 |
|
|
6,488 |
|
|
11,875 |
|
|
— |
|
|
— |
|
Transition tax |
|
14,847 |
|
|
1,563 |
|
|
4,493 |
|
|
8,791 |
|
|
— |
|
Total |
|
$ |
244,450 |
|
|
$ |
105,742 |
|
|
$ |
72,434 |
|
|
$ |
42,876 |
|
|
$ |
23,398 |
|
At March 31, 2021, we had no open letters of
credit.
Substantially all our products are produced by independent
manufacturers at overseas locations, the majority of which are
located in China, with a growing percentage located in Cambodia,
Mexico, Brazil, India, Vietnam and some European nations. We have
not entered into any long-term manufacturing or supply contracts
with any of these foreign manufacturers. We believe that a
sufficient number of alternative sources exist outside of the
United States for the manufacture of our products. Purchases are
made primarily in United States dollars.
We have employment agreements with our Creative and Design Chief,
Steven Madden, and certain executive officers, which provide for
the payment of compensation aggregating approximately $8,025 in the
remainder of 2021, $8,941 in 2022, and $7,774 in 2023. In addition,
some of these employment agreements provide for discretionary
bonuses and some provide for incentive compensation based on
various performance criteria as well as other benefits, including
stock-related compensation.
Transition tax of $14,847 was the result of the Tax Cuts
and Jobs Act of 2017 (the "Tax Act"). Excluded from the contractual
obligations table above are long-term taxes payable
of $2,295 as of March 31, 2021 primarily
related to uncertain tax positions, for which we are unable to make
a reasonably reliable estimate of the timing of payments in
individual years beyond one year due to uncertainties in the timing
of tax audit outcomes.
DIVIDENDS
The Company’s Board of Directors approved a quarterly cash dividend
of $0.15 per share. The dividend is payable on June 25, 2021 to
stockholders of record as of the close of business on June 15,
2021.
Future quarterly cash dividend payments are also subject to the
discretion of our Board of Directors and contingent upon future
earnings, our financial condition, capital requirements, general
business conditions, and other factors. Therefore, we can give no
assurance that cash dividends will be paid to holders of our common
stock in the future.
INFLATION
We do not believe that inflation and price changes have had a
significant effect on our sales or profitability in the three
months ended March 31, 2021. Historically, we have minimized
the impact of product cost increases by increasing prices,
renegotiating costs, changing suppliers and improving operating
efficiencies. However, no assurance can be given that we will be
able to offset any such inflationary cost increases in the
future.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES AND THE USE OF ESTIMATES
There have been no material changes to our critical accounting
policies and the use of estimates from these disclosures reported
in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2020 filed with the Securities and Exchange Commission
on March 16, 2021.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
($ in thousands)
We do not engage in the trading of market risk sensitive
instruments in the normal course of business. Our financing
arrangements are subject to variable interest rates, primarily
based on the prime rate and LIBOR. The terms of our new $150,000
asset-based revolving credit agreement and our collection agency
agreement with Rosenthal & Rosenthal, Inc. can be found in the
Liquidity and Capital Resources section of Item 2 and in Note S and
Note E, respectively, to the Condensed Consolidated Financial
Statements included in this Quarterly Report.
As of March 31, 2021, we held short-term investments valued at
$39,788, which consist of certificates of deposit. We have the
ability to hold these investments until maturity.
We face market risk to the extent that our U.S. or foreign
operations involve the transaction of business in foreign
currencies. In addition, our inventory purchases are primarily done
in foreign jurisdictions and inventory purchases may be impacted by
fluctuations in the exchange rates between the U.S. dollar and the
local currencies of our contract manufacturers, which could have
the effect of increasing the cost of goods sold in the future. We
manage these risks primarily by denominating these purchases in
U.S. dollars. To mitigate the risk of purchases that are
denominated in foreign currencies we may enter into forward foreign
exchange contracts for terms of no more than two years. A
description of our accounting policies for derivative financial
instruments is included in Note O
to the Condensed Consolidated Financial Statements.
In the first three months of 2021, we entered into forward foreign
exchange contracts with notional amounts totaling $36,955. We
performed a sensitivity analysis based on a model that measures the
impact of a hypothetical change in foreign currency exchange rates
to determine the effects that market risk exposures may have on the
fair values of our forward foreign exchange contracts that were
outstanding as of March 31, 2021. As of March 31, 2021, a
10% increase or decrease of the U.S. dollar against the exchange
rates for foreign currencies under forward foreign exchange
contracts would result in a net increase or decrease, respectively,
in the fair value of our derivatives portfolio of approximately
$3,742.
In addition, we are exposed to translation risk in connection with
our foreign operations in Canada, Mexico, Europe, South Africa,
China, Taiwan and Israel because our subsidiaries and joint
ventures in these countries utilize the local currency as their
functional currency, and those financial results are translated
into U.S. dollars. As currency exchange rates fluctuate,
foreign
currency exchange rate translation adjustments reflected in our
financial statements with respect to our foreign operations affects
the comparability of financial results between years.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Securities Exchange Act of
1934 (the “Exchange Act”), our management, including our Chief
Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of our disclosure controls and procedures as of the
end of the fiscal quarter covered by this Quarterly Report. Based
on that evaluation, the Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures
(as defined in Rule 13a-15(e) under the Exchange Act) were, as of
the end of the fiscal quarter covered by this Quarterly Report,
effective to ensure that information required to be disclosed by us
in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms and is accumulated
and communicated to our management, including the Chief Executive
Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.
Changes in Internal Control Over Financial Reporting
As required by Rule 13a-15(d) under the Exchange Act, our
management, including our Chief Executive Officer and Chief
Financial Officer, has evaluated our internal controls over
financial reporting to determine whether any changes occurred
during the quarter covered by this Quarterly Report that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting. There were no
changes in our internal controls over financial reporting that
occurred during our most recent fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our
internal controls over financial reporting. We have not experienced
any material impact to our internal controls over financial
reporting despite the fact that our employees are working remotely
due to the COVID-19 pandemic. We are continually monitoring and
assessing the effects that the COVID-19 pandemic may have on our
internal controls to minimize the impact on their design and
operating effectiveness.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We have been named as a defendant in certain lawsuits in the normal
course of business. In the opinion of management, after consulting
with legal counsel, the liabilities, if any, resulting from these
matters should not have a material impact on our financial
position, results of operations or cash flows. It is the policy of
management to disclose the amount or range of reasonably possible
losses in excess of recorded amounts.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
($ in thousands, except share and per share data)
The following table presents the total number of shares of our
common stock, $.0001 par value, purchased by us in the three months
ended March 31, 2021, the average price paid per share and the
approximate dollar value of the shares that still could have been
purchased at the end of the fiscal period pursuant to our Share
Repurchase Program. See also Note J to the Condensed Consolidated
Financial Statements. During the three months ended March 31,
2021, there were no sales by us of unregistered shares of common
stock.
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|
|
Period |
Total Number of Shares Purchased
(1)
|
|
Ave |