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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 September 30, 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 November 1, 2021, there were 81,392,991 shares of the
registrant’s common stock, $0.0001 par value,
outstanding.
STEVEN MADDEN, LTD.
TABLE OF CONTENTS TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2021
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands except for par value)
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September 30,
2021 |
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December 31,
2020 |
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September 30,
2020 |
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(unaudited) |
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(unaudited) |
ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
219,523 |
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$ |
247,864 |
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$ |
223,820 |
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Short-term investments |
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40,390 |
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39,302 |
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33,332 |
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Accounts receivable, net of allowances of $11,596, $8,943 and
$10,214
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36,524 |
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25,044 |
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33,526 |
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Factor accounts receivable |
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347,748 |
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252,671 |
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232,876 |
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Inventories |
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201,198 |
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101,420 |
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109,683 |
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Prepaid expenses and other current assets |
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19,182 |
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17,415 |
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13,477 |
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Income tax receivable and prepaid taxes |
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16,536 |
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14,525 |
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1,120 |
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Total current assets |
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881,101 |
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698,241 |
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647,834 |
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Note receivable – related party |
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891 |
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1,180 |
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1,274 |
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Property and equipment, net |
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36,843 |
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43,268 |
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43,130 |
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Operating lease right-of-use asset |
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90,832 |
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101,379 |
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111,732 |
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Deposits and other |
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4,332 |
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4,822 |
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2,660 |
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Deferred taxes |
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4,964 |
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5,415 |
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14,686 |
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Goodwill – net |
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167,957 |
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168,265 |
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166,794 |
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Intangibles – net |
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113,140 |
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115,191 |
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116,300 |
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Total Assets |
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$ |
1,300,060 |
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$ |
1,137,761 |
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$ |
1,104,410 |
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LIABILITIES |
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Current liabilities: |
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Accounts payable |
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$ |
121,838 |
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$ |
73,904 |
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$ |
65,666 |
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Accrued expenses |
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210,985 |
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118,083 |
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112,579 |
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Operating leases – current portion |
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32,063 |
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34,257 |
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36,212 |
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Income taxes payable |
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7,194 |
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5,799 |
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— |
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Contingent considerations – current portion |
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3,660 |
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— |
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— |
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Accrued incentive compensation |
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12,834 |
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3,873 |
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3,615 |
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Total current liabilities |
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388,574 |
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235,916 |
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218,072 |
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Contingent considerations – long term portion |
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4,381 |
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207 |
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1,420 |
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Operating leases – long-term portion |
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85,358 |
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98,592 |
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107,973 |
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Deferred taxes |
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2,563 |
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2,562 |
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3,054 |
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Other liabilities |
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12,004 |
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10,115 |
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6,151 |
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Total Liabilities |
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492,880 |
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347,392 |
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336,670 |
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Commitments, contingencies and other (Note Q)
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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 – 0.0001 par value, 245,000 shares authorized,133,827,
133,247 and 133,173 shares issued, 81,393, 82,616 and 83,030 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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487,732 |
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478,463 |
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472,116 |
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Retained earnings |
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1,367,252 |
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1,279,550 |
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1,256,959 |
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Accumulated other comprehensive loss |
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(29,206) |
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(29,164) |
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(37,477) |
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Treasury stock – 52,434, 50,631 and 50,143 shares at
cost
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(1,026,956) |
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(952,271) |
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(935,484) |
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Total Steven Madden, Ltd. stockholders’ equity |
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798,830 |
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776,586 |
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756,120 |
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Noncontrolling interest |
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8,350 |
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13,783 |
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11,620 |
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Total stockholders’ equity |
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807,180 |
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790,369 |
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767,740 |
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Total Liabilities and Stockholders’ Equity |
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$ |
1,300,060 |
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$ |
1,137,761 |
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$ |
1,104,410 |
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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 September 30, |
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Nine Months Ended September 30, |
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2021 |
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2020 |
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2021 |
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2020 |
Net sales |
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$ |
525,067 |
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$ |
342,830 |
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$ |
1,278,765 |
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$ |
839,877 |
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Commission and licensing fee income |
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3,675 |
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4,037 |
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8,896 |
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8,970 |
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Total revenue |
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528,742 |
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346,867 |
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1,287,661 |
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848,847 |
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Cost of sales (exclusive of depreciation and
amortization) |
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308,744 |
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206,990 |
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758,504 |
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519,618 |
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Gross profit |
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219,998 |
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139,877 |
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529,157 |
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329,229 |
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Operating expenses |
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131,580 |
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102,968 |
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363,888 |
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302,753 |
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Impairment of fixed assets and lease right-of-use
assets |
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— |
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6,897 |
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1,089 |
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36,896 |
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Impairment of intangibles |
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— |
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33,010 |
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— |
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42,528 |
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Income/(loss) from operations |
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88,418 |
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(2,998) |
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164,180 |
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(52,948) |
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Interest and other (expense)/income – net |
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(202) |
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88 |
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(1,016) |
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1,491 |
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Income/(loss) before provision (benefit) for income
taxes |
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88,216 |
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(2,910) |
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163,164 |
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(51,457) |
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Provision/(benefit) for income taxes (Note M)
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21,551 |
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4,236 |
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36,827 |
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(9,366) |
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Net income/(loss) |
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66,665 |
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(7,146) |
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126,337 |
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(42,091) |
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Less: net income/(loss) attributable to noncontrolling
interest |
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22 |
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(195) |
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1,645 |
|
|
(1,103) |
|
Net income/(loss) attributable to Steven Madden, Ltd. |
|
$ |
66,643 |
|
|
$ |
(6,951) |
|
|
$ |
124,692 |
|
|
$ |
(40,988) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income/(loss) per share |
|
$ |
0.85 |
|
|
$ |
(0.09) |
|
|
$ |
1.58 |
|
|
$ |
(0.52) |
|
|
|
|
|
|
|
|
|
|
Diluted net income/(loss) per share |
|
$ |
0.82 |
|
|
$ |
(0.09) |
|
|
$ |
1.53 |
|
|
$ |
(0.52) |
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
|
78,129 |
|
|
78,560 |
|
|
78,686 |
|
|
78,650 |
|
Effect of dilutive securities – options/restricted
stock |
|
3,178 |
|
|
— |
|
|
3,068 |
|
|
— |
|
Diluted weighted average common shares outstanding |
|
81,307 |
|
|
78,560 |
|
|
81,754 |
|
|
78,650 |
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share |
|
$ |
0.15 |
|
|
$ |
— |
|
|
$ |
0.45 |
|
|
$ |
0.15 |
|
See accompanying notes to condensed consolidated financial
statements - unaudited.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive
Income/(Loss)
(unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2021 |
|
Nine Months Ended September 30, 2021 |
|
|
Pre-tax amounts |
|
Tax (expense) |
|
After-tax amounts |
|
Pre-tax amounts |
|
Tax (expense) |
|
After-tax amounts |
Net income |
|
|
|
|
|
$ |
66,665 |
|
|
|
|
|
|
$ |
126,337 |
|
Other comprehensive (loss)/income: |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment |
|
$ |
(4,258) |
|
|
$ |
— |
|
|
(4,258) |
|
|
$ |
(673) |
|
|
$ |
— |
|
|
(673) |
|
Gain on cash flow hedging
derivatives |
|
365 |
|
|
(91) |
|
|
274 |
|
|
1,174 |
|
|
(294) |
|
|
880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive (loss)/income |
|
$ |
(3,893) |
|
|
$ |
(91) |
|
|
(3,984) |
|
|
$ |
501 |
|
|
$ |
(294) |
|
|
207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
62,681 |
|
|
|
|
|
|
126,544 |
|
Less: comprehensive income attributable to noncontrolling
interests |
|
|
|
|
|
163 |
|
|
|
|
|
|
1,894 |
|
Comprehensive income attributable to Steven Madden,
Ltd. |
|
|
|
|
|
$ |
62,518 |
|
|
|
|
|
|
$ |
124,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020 |
|
Nine Months Ended September 30, 2020 |
|
|
Pre-tax amounts |
|
Tax benefit |
|
After-tax amounts |
|
Pre-tax amounts |
|
Tax (expense) |
|
After-tax amounts |
Net loss |
|
|
|
|
|
$ |
(7,146) |
|
|
|
|
|
|
$ |
(42,091) |
|
Other comprehensive income/(loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment |
|
$ |
2,630 |
|
|
$ |
— |
|
|
2,630 |
|
|
$ |
(7,250) |
|
|
$ |
— |
|
|
(7,250) |
|
(Loss)/gain on cash flow
hedging derivatives |
|
(674) |
|
|
196 |
|
|
(478) |
|
|
205 |
|
|
(53) |
|
|
152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income/(loss) |
|
$ |
1,956 |
|
|
$ |
196 |
|
|
2,152 |
|
|
$ |
(7,045) |
|
|
$ |
(53) |
|
|
(7,098) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
(4,994) |
|
|
|
|
|
|
(49,189) |
|
Less: comprehensive loss attributable to noncontrolling
interests |
|
|
|
|
|
(416) |
|
|
|
|
|
|
(1,164) |
|
Comprehensive loss attributable to Steven Madden, Ltd. |
|
|
|
|
|
$ |
(4,578) |
|
|
|
|
|
|
$ |
(48,025) |
|
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 - June 30, 2021 |
|
82,156 |
|
|
$ |
8 |
|
|
$ |
481,646 |
|
|
$ |
1,312,827 |
|
|
$ |
(25,081) |
|
|
51,661 |
|
|
$ |
(995,065) |
|
|
$ |
8,187 |
|
|
$ |
782,522 |
|
Share repurchases and net settlement of awards under stock
plan |
|
(773) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
773 |
|
|
(31,891) |
|
|
— |
|
|
(31,891) |
|
Exercise of stock options |
|
16 |
|
|
— |
|
|
409 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
409 |
|
Issuance of restricted stock, net of forfeitures |
|
(5) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock-based compensation |
|
— |
|
|
— |
|
|
5,677 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,677 |
|
Foreign currency translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,399) |
|
|
— |
|
|
— |
|
|
141 |
|
|
(4,258) |
|
Cash flow hedge (net of tax expense of $91)
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
274 |
|
|
— |
|
|
— |
|
|
— |
|
|
274 |
|
Dividends on common stock ($0.15 per share)
|
|
— |
|
|
— |
|
|
— |
|
|
(12,218) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(12,218) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
66,643 |
|
|
— |
|
|
— |
|
|
— |
|
|
22 |
|
|
66,665 |
|
Balance - September 30, 2021 |
|
81,393 |
|
|
$ |
8 |
|
|
$ |
487,732 |
|
|
$ |
1,367,252 |
|
|
$ |
(29,206) |
|
|
52,434 |
|
|
$ |
(1,026,956) |
|
|
$ |
8,350 |
|
|
$ |
807,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 settlement of awards under stock
plan |
|
(1,803) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,803 |
|
|
(74,685) |
|
|
— |
|
|
(74,685) |
|
Exercise of stock options |
|
311 |
|
|
— |
|
|
7,232 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7,232 |
|
Issuance of restricted stock, net of forfeitures |
|
269 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock-based compensation |
|
— |
|
|
— |
|
|
16,696 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
16,696 |
|
Foreign currency translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(922) |
|
|
— |
|
|
— |
|
|
249 |
|
|
(673) |
|
Cash flow hedge (net of tax expense of $294)
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
880 |
|
|
— |
|
|
— |
|
|
— |
|
|
880 |
|
Dividends on common stock ($0.45 per share)
|
|
— |
|
|
— |
|
|
— |
|
|
(36,990) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(36,990) |
|
Distributions to noncontrolling interests, net |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,859) |
|
|
(2,859) |
|
Acquisition of incremental ownership of joint ventures |
|
— |
|
|
— |
|
|
(14,659) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,468) |
|
|
(19,127) |
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
124,692 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,645 |
|
|
126,337 |
|
Balance - September 30, 2021 |
|
81,393 |
|
|
$ |
8 |
|
|
$ |
487,732 |
|
|
$ |
1,367,252 |
|
|
$ |
(29,206) |
|
|
52,434 |
|
|
$ |
(1,026,956) |
|
|
$ |
8,350 |
|
|
$ |
807,180 |
|
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 - June 30, 2020 |
|
83,035 |
|
|
$ |
6 |
|
|
$ |
466,384 |
|
|
$ |
1,263,910 |
|
|
$ |
(39,850) |
|
|
50,138 |
|
|
$ |
(935,366) |
|
|
$ |
12,036 |
|
|
$ |
767,120 |
|
Share repurchases and net tax settlement of awards under stock
plan |
|
(5) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5 |
|
|
(118) |
|
|
— |
|
|
(118) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
— |
|
|
— |
|
|
5,732 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,732 |
|
Foreign currency translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,851 |
|
|
— |
|
|
— |
|
|
(221) |
|
|
2,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedge (net of tax benefit of $196)
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(478) |
|
|
— |
|
|
— |
|
|
— |
|
|
(478) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(6,951) |
|
|
— |
|
|
— |
|
|
— |
|
|
(195) |
|
|
(7,146) |
|
Balance - September 30, 2020 |
|
83,030 |
|
|
$ |
6 |
|
|
$ |
472,116 |
|
|
$ |
1,256,959 |
|
|
$ |
(37,477) |
|
|
50,143 |
|
|
$ |
(935,484) |
|
|
$ |
11,620 |
|
|
$ |
767,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
(909) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
909 |
|
|
(29,796) |
|
|
— |
|
|
(29,796) |
|
Exercise of stock options |
|
52 |
|
|
— |
|
|
960 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
960 |
|
Issuance of restricted stock, net of forfeitures |
|
367 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock-based compensation |
|
— |
|
|
— |
|
|
16,939 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
16,939 |
|
Foreign currency translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(7,189) |
|
|
— |
|
|
— |
|
|
(61) |
|
|
(7,250) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedge (net of tax expense of $53)
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
152 |
|
|
— |
|
|
— |
|
|
— |
|
|
152 |
|
Dividends on common stock ($0.15 per share)
|
|
— |
|
|
— |
|
|
— |
|
|
(12,459) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(12,459) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment of noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
359 |
|
|
359 |
|
Acquisition of noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(298) |
|
|
(298) |
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(40,988) |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,103) |
|
|
(42,091) |
|
Balance - September 30, 2020 |
|
83,030 |
|
|
$ |
6 |
|
|
$ |
472,116 |
|
|
$ |
1,256,959 |
|
|
$ |
(37,477) |
|
|
50,143 |
|
|
$ |
(935,484) |
|
|
$ |
11,620 |
|
|
$ |
767,740 |
|
See accompanying notes to condensed consolidated financial
statements - unaudited.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2021 |
|
2020 |
Cash flows from operating activities: |
|
|
|
|
Net income/(loss) |
|
$ |
126,337 |
|
|
$ |
(42,091) |
|
Adjustments to reconcile net income/(loss) to net cash provided by
operating activities: |
|
|
|
|
Stock-based compensation |
|
16,696 |
|
|
16,939 |
|
Depreciation and amortization |
|
11,611 |
|
|
13,235 |
|
Loss on disposal of fixed assets |
|
449 |
|
|
473 |
|
Impairment of intangibles |
|
— |
|
|
42,528 |
|
Impairment of lease right-of-use asset and fixed assets |
|
1,089 |
|
|
36,896 |
|
|
|
|
|
|
Deferred taxes |
|
452 |
|
|
(17,509) |
|
Accrued interest on note receivable - related party |
|
(18) |
|
|
(24) |
|
Notes receivable - related party |
|
307 |
|
|
308 |
|
Change in valuation of contingent considerations |
|
7,834 |
|
|
(5,020) |
|
Gain on sale of trademark |
|
(8,000) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Recovery of receivables, related to the Payless ShoeSource
bankruptcy |
|
(919) |
|
|
— |
|
Changes, net of acquisitions, in: |
|
|
|
|
Accounts receivable |
|
(10,561) |
|
|
4,640 |
|
Factor accounts receivable |
|
(95,077) |
|
|
(16,405) |
|
Inventories |
|
(99,778) |
|
|
27,213 |
|
Prepaid expenses, income tax receivables, prepaid taxes, and other
current assets |
|
(2,638) |
|
|
7,691 |
|
Accounts payable and accrued expenses |
|
143,111 |
|
|
(54,156) |
|
Accrued incentive compensation |
|
8,961 |
|
|
(7,319) |
|
Leases and other liabilities |
|
(3,672) |
|
|
(6,792) |
|
Net cash provided by operating activities |
|
96,184 |
|
|
607 |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
(4,599) |
|
|
(5,496) |
|
Proceeds from sale of a trademark |
|
8,000 |
|
|
— |
|
Purchases of short-term investments |
|
(43,376) |
|
|
(41,223) |
|
|
|
|
|
|
Maturity/sale of short-term investments |
|
42,383 |
|
|
47,243 |
|
Net cash provided by investing activities |
|
2,408 |
|
|
524 |
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
Proceeds from exercise of stock options |
|
7,232 |
|
|
960 |
|
Investment of noncontrolling interest |
|
— |
|
|
359 |
|
Distribution of noncontrolling interest earnings |
|
(2,859) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Acquisition of incremental ownership of joint ventures |
|
(19,127) |
|
|
— |
|
Common stock purchased for treasury |
|
(74,685) |
|
|
(29,796) |
|
Cash dividends paid on common stock |
|
(36,990) |
|
|
(12,459) |
|
Advances from factor |
|
— |
|
|
176,784 |
|
Repayments of advances from factor |
|
— |
|
|
(176,784) |
|
Net cash used in financing activities |
|
(126,429) |
|
|
(40,936) |
|
Effect of exchange rate changes on cash and cash
equivalents |
|
(504) |
|
|
(476) |
|
Net decrease in cash and cash equivalents |
|
(28,341) |
|
|
(40,281) |
|
Cash and cash equivalents – beginning of period |
|
247,864 |
|
|
264,101 |
|
Cash and cash equivalents – end of period |
|
$ |
219,523 |
|
|
$ |
223,820 |
|
See accompanying notes to condensed consolidated financial
statements - unaudited.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 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 and nine months ended September 30, 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 and Restructuring Charges
In December 2019, COVID-19 emerged and spread worldwide. The World
Health Organization declared COVID-19 a pandemic in March 2020,
which resulted 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
the Company’s
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 has 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 took precautionary measures to maintain adequate liquidity
and financial flexibility by temporarily suspending share
repurchases and the quarterly cash dividend (all of which were
reinstated in the first quarter 2021); 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 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. The impact of the COVID-19 pandemic resulted in an
unprecedented decline in the Company's revenue and earnings during
2020 and included charges from adjustments to the carrying amounts
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,
the Company’s
business saw improvements in its retail segment and improvements in
sell in and sell-through performance in its wholesale
businesses.
In 2020, as a result of the COVID-19 pandemic and after assessing
the cost of the Company's operations, 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 included in accrued expenses at December
31, 2020. During the three and nine months ended September 30,
2021, the Company recorded a pre-tax charge of $0 and $1,239,
respectively, related to additional severance in connection with
its restructuring plan and other related items. As of
September 30, 2021, the remaining unpaid portion included in
accrued expenses was $231.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 2021
($ in thousands except share and per share data)
Note C – Reclassification
Certain reclassifications were made to prior years' amounts to
conform to the 2021 presentation, primarily as it relates to the
breakout of the impairment of fixed assets and lease right-of-use
assets from operating expenses on the Condensed Consolidated
Statements of Income/Loss and as it relates to
segment reporting
of
corporate
expenses
and
corporate
assets. See Note R – Operating Segment Information, for more
information.
Note D – Acquisitions
On April 14, 2021, the Company announced that it had completed the
acquisition of the remaining 49.9% non-controlling interest in its
European joint venture in the amount of $16,626. The European joint
venture was formed in 2016 and distributes Steve Madden-branded
footwear and accessories/apparel to most countries throughout
Europe.
On June 28, 2021, the Company completed the acquisition of the
remaining 49.9% non-controlling interest in its South African joint
venture in the amount of $2,501. The South African joint venture
was formed in 2014 and distributes Steve Madden-branded footwear
and accessories/apparel throughout South Africa.
Note E – 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 profit
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 F– Factoring Agreement
In conjunction with the Credit Agreement described in Note T –
Credit Agreement, 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 T)
under the Credit Agreement to secure obligations arising under the
Credit Agreement.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 2021
($ in thousands except share and per share data)
Note G – Short-Term Investments
As of September 30, 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 September 30, 2021 and December 31, 2020 short-term
investments amounted to $40,390 and $39,302, respectively, and have
maturities of one year or less.
Note H – 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.
The Company’s financial assets and liabilities subject to fair
value measurements as of September 30, 2021 and
December 31, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021 |
|
|
|
|
Fair Value Measurements |
|
|
Fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward contracts |
|
268 |
|
|
— |
|
|
268 |
|
|
— |
|
Total assets |
|
$ |
268 |
|
|
$ |
— |
|
|
$ |
268 |
|
|
$ |
— |
|
Liabilities: |
|
|
|
|
|
|
|
|
Contingent consideration |
|
$ |
8,041 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
8,041 |
|
Forward contracts |
|
86 |
|
|
— |
|
|
86 |
|
|
— |
|
Total liabilities |
|
$ |
8,127 |
|
|
$ |
— |
|
|
$ |
86 |
|
|
$ |
8,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 P – Derivative
Instruments). Fair value of these instruments is based on
observable market transactions of spot and forward
rates.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 2021
($ in thousands except share and per share data)
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 September 30, 2021 and
December 31, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
January 1, 2021 |
|
Payments |
|
|
|
Acquisitions |
|
Adjustments
(1)
|
|
|
|
Balance at September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
(2)
|
$ |
207 |
|
|
— |
|
|
|
|
— |
|
|
7,834 |
|
|
|
|
$ |
8,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
January 1, 2020 |
|
Payments |
|
|
|
Acquisitions |
|
Adjustments
(3)
|
|
|
|
Balance at December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration |
$ |
9,124 |
|
|
— |
|
|
|
|
— |
|
|
(8,917) |
|
|
|
|
$ |
207 |
|
(1)
In 2021, amount consists of adjustments of $7,720 and $114 that
were included as an expense in operating expenses, related to the
change in valuation of the contingent consideration in connection
with the acquisitions of B.B. Dakota, Inc. and GREATS Brand, Inc.,
respectively.
(2)
Total contingent consideration liability of $8,041 is comprised of
$3,660, classified as current and $4,381, classified as non-current
on the Consolidated Balance Sheets.
(3)
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 comprises
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.
At September 30, 2021, the liability for potential contingent
consideration was
$7,920 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 Black-Scholes-Merton option pricing method with
a nonlinear payoff structure based on a set of financial metrics of
B.B. Dakota, Inc. during the earn-out period, utilizing a discount
rate of 11.0%.
At September 30, 2021, the liability for potential contingent
consideration was $121 in connection with the August 9, 2019
acquisition of GREATS Brand, Inc. Pursuant to the terms of an
earn-out provision contained in the equity purchase agreement,
between the Company and the sellers of GREATS Brand, Inc., earn-out
payments are based on EBITA performance. The fair value of the
contingent payments was estimated using a risk neutral simulation
method to model the probability of different financial results of
GREATS Brand, Inc. during the earn-out period, utilizing a discount
rate of 10.0%.
The fair value of trademarks is measured on a non-recurring basis
using Level 3 inputs, including forecasted cash flows, discount
rates and implied royalty rates (See
Note O).
The fair values of lease right-of-use assets and fixed assets
related to Company-owned retail stores were determined using Level
3 inputs, including estimated discounted future cash flows
associated with the assets using sales trends and market
participant assumptions (See
Note J).
The carrying value of certain financial instruments such as cash
equivalents, certificates of deposit, accounts receivable, factor
accounts receivable and accounts payable approximates their fair
values due to the short-term nature of their underlying terms. Fair
value of the notes receivable held by the Company approximates
their carrying value based upon their imputed or actual interest
rate, which approximates applicable current market interest rates.
Some assets are not measured at fair value on an ongoing basis but
are subject to fair value adjustments only in certain
circumstances. These assets can include long-lived assets that have
been reduced to fair value when impaired. Assets that are written
down to fair value when impaired are not subsequently adjusted to
fair value unless further impairment occurs.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 2021
($ in thousands except share and per share data)
Note I – 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 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 Accounting
Standards Codification 842, "Leases," 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 reductions of the remaining lease costs
obligations or in the form of rent abatements. 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 for COVID-19 lease amendments during the
nine months ended September 30, 2021, which are included in
variable lease costs.
Lease Position
The table below presents the lease-related assets and liabilities
recorded on the Consolidated Balance Sheets as of
September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification on the Balance Sheet |
|
September 30, 2021 |
|
December 31, 2020 |
Assets |
|
|
|
|
|
Noncurrent
(1)(2)
|
Operating lease right-of-use asset |
|
$ |
90,832 |
|
$ |
101,379 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Current |
Operating leases – current portion |
|
$ |
32,063 |
|
$ |
34,257 |
Noncurrent |
Operating leases – long-term portion |
|
85,358 |
|
98,592 |
Total operating lease liabilities |
|
|
$ |
117,421 |
|
$ |
132,849 |
|
|
|
|
|
|
Weighted-average remaining lease term |
|
|
4.7 years |
|
5.0 years |
Weighted-average discount rate |
|
|
4.2 |
% |
|
4.3 |
% |
(1)
During the three and nine months ended September 30, 2021, the
Company recorded a pre-tax impairment charge related to its
right-of-use assets of $0 and $680, respectively, recorded in the
Retail and the Wholesale Accessories/Apparel Segments.
(2)
During the year ended December 31, 2020, the Company recorded a
pre-tax impairment charge related to its lease right-of-use assets
of $22,183 in the Retail Segment..
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 2021
($ in thousands except share and per share data)
Lease Costs
The table below presents certain information related to lease costs
during the three and nine months ended September 30, 2021 and
2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Operating lease cost |
$ |
9,118 |
|
|
$ |
8,534 |
|
|
$ |
28,384 |
|
|
$ |
28,950 |
|
Variable lease cost
(1)(2)
|
1,937 |
|
|
8,448 |
|
|
14,818 |
|
|
8,448 |
|
Short-term lease cost |
— |
|
|
94 |
|
|
— |
|
|
213 |
|
Less: sublease income |
80 |
|
|
80 |
|
|
241 |
|
|
482 |
|
Total lease cost |
$ |
10,975 |
|
|
$ |
16,996 |
|
|
$ |
42,961 |
|
|
$ |
37,129 |
|
(1)
For the three and nine months ended September 30, 2021, the
Company incurred
expenses
related to the COVID-19 lease amendments
of $0 and $9,505, respectively,
which were included in variable lease cost.
(2)
For the three and nine months ended September 30, 2020, the Company
incurred expenses related to the COVID-19 lease amendments of
$8,248 which was included in variable lease costs.
Other Information
The table below presents supplemental cash flow information related
to leases as of the nine months ended September 30, 2021 and
2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2021 |
|
2020 |
Cash paid for amounts included in the measurement of lease
liabilities |
|
|
|
Operating cash flows used for
operating leases |
$ |
32,126 |
|
|
$ |
41,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Noncash transactions |
|
|
|
|
|
|
|
Right-of-use asset obtained in exchange for new operating lease
liabilities |
$ |
2,388 |
|
|
$ |
8,373 |
|
|
$ |
12,992 |
|
|
$ |
9,968 |
|
Right-of-use asset amortization expense |
$ |
8,493 |
|
|
$ |
15,108 |
|
|
$ |
24,256 |
|
|
$ |
34,204 |
|
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 Consolidated Balance Sheet as of
September 30, 2021:
|
|
|
|
|
|
2021 (remaining three months) |
$ |
9,997 |
|
2022 |
33,978 |
|
2023 |
26,006 |
|
2024 |
19,916 |
|
2025 |
16,123 |
|
Thereafter |
23,449 |
|
Total minimum lease payments |
129,469 |
|
Less: interest |
12,048 |
|
Present value of lease liabilities |
$ |
117,421 |
|
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 2021
($ in thousands except share and per share data)
Note J – 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.
For such assets, 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. 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. The Company recorded total impairment charges of $0 and
$1,089, respectively, for the three and nine months ended September
30, 2021 for impairment of its fixed assets and right-of-use assets
in its
Wholesale Accessories/Apparel and Retail
segments.
For the three and nine months ended September 30, 2020, the Company
recorded total impairment charges of $6,897 and $36,896,
respectively, for impairment of its fixed assets and right-of-use
assets in its Retail segment. These charges were recorded in
impairment of fixed assets and lease right of use assets in the
Company’s Condensed Consolidated Statements of
Income/(Loss).
Note K – 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. On November 2, 2021, the Board of Directors approved
an increase in the Company's share repurchase authorization of
approximately $200,000, bringing the total authorization to
$250,000 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
in privately negotiated transactions at such prices and times as
are determined to be in the best interest of the Company. During
the nine months ended September 30, 2021, an aggregate of
1,497,609 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
$41.45, for an aggregate purchase price of approximately $62,081.
As of September 30, 2021, approximately $49,509 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
and/or option cost 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 and/or option cost. During the nine
months ended September 30, 2021, an aggregate of 305,735
shares were withheld in connection with the settlement of vested
restricted stock to satisfy tax-withholding requirements and option
costs, at an average price per share of $41.23, for an aggregate
purchase price of approximately $12,604.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 2021
($ in thousands except share and per share data)
Note L – 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 3,608,000 shares for the period ended
September 30, 2021, compared to 4,468,000 shares for the
period ended September 30, 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 and
nine months ended September 30, 2021, options to purchase
approximately 17,000 and 2,000 shares of common stock,
respectively, have been excluded from the calculation of diluted
net income per share as compared to approximately 0 and 100,000
shares that were excluded from the calculation of diluted net loss
per share for the three and nine months ended September 30,
2020, as the result would have been anti-dilutive. For the three
and nine months ended September 30, 2021, approximately 2,000
and 7,000 restricted shares, respectively, were excluded from the
calculation of diluted net income per share as compared to
approximately 2,480,000 and 2,493,000 shares that were excluded
from the calculation of diluted net loss per share for the three
and nine months ended September 30, 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 September 30, 2021 and
2020 and, therefore, were excluded from the calculation of diluted
net income/(loss) per common share for the three and nine months
ended September 30, 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
September 30, 2021 and 2020, respectively. These amounts were
also excluded from the computation of weighted average potentially
dilutive securities.
Note M – Income Taxes
The Company’s provision for income taxes for the three and nine
months ended September 30, 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 and nine months ended September
30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Income/(loss) before provision (benefit) for income
taxes |
$ |
88,216 |
|
$ |
(2,910) |
|
$ |
163,164 |
|
|
$ |
(51,457) |
|
Income tax expense/(benefit) |
$ |
21,551 |
|
$ |
4,236 |
|
$ |
36,827 |
|
$ |
(9,366) |
|
Effective tax rate |
24.4% |
|
(145.6%) |
|
22.6% |
|
18.2% |
The difference between the Company’s effective tax rates for the
three and nine months ended September 30, 2021 and 2020 is
primarily due to the expected jurisdictional mix of profit and
losses from each period, and decrease in Global Intangible Low
Taxed Income in 2021.
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
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 2021
($ in thousands except share and per share data)
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, and favorable cash flow
benefits in connection with employer payroll tax deferral, and
accelerated depreciation related to qualified improvement
property.
Note N – 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 |
(3,269,478) |
Common stock available for grant of stock-based awards as of
September 30, 2021 |
7,730,522 |
In addition, vested and unvested options to purchase 1,846,567
shares of common stock and 2,951,891 shares of unvested restricted
stock awarded under the 2006 Plan were outstanding as of
September 30, 2021.
Total equity-based compensation for the three and nine months ended
September 30, 2021 and 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Restricted stock |
$ |
4,596 |
|
|
$ |
4,647 |
|
|
$ |
13,541 |
|
|
$ |
14,138 |
|
Stock options |
1,081 |
|
|
1,085 |
|
|
3,155 |
|
|
2,801 |
|
Total |
$ |
5,677 |
|
|
$ |
5,732 |
|
|
$ |
16,696 |
|
|
$ |
16,939 |
|
Equity-based compensation is included in operating expenses on the
Company’s Condensed Consolidated Statements of
Income/(Loss).
On August 2, 2021, 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 $43.83 per
share, which option vests in four equal installments commencing on
September 30, 2021 and ending on June 30, 2022. As of
September 30, 2021, Mr. Madden had 1,856,250 vested options
and 168,750 unvested options to purchase shares of the Company's
common stock and 2,560,543 unvested restricted shares of the
Company's common stock.
Stock Options
Cash proceeds and intrinsic values related to total stock options
exercised during the three and nine months ended September 30,
2021 and 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Proceeds from stock options exercised |
$ |
409 |
|
|
$ |
— |
|
|
$ |
7,232 |
|
|
$ |
960 |
|
Intrinsic value of stock options exercised |
$ |
265 |
|
|
$ |
— |
|
|
$ |
6,077 |
|
|
$ |
758 |
|
During the three and nine months ended September 30, 2021,
options to purchase 63,980 shares vested with a weighted average
exercise price of $41.50 and options to purchase 485,516 shares
vested with a weighted average exercise price of $27.73 vested,
respectively. During the three and nine months ended
September 30, 2020, options to purchase 65,390 shares of
common stock with a weighted average exercise price of $24.86 and
options to purchase approximately 575,552 shares with
a
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 2021
($ in thousands except share and per share data)
weighted average exercise price of $26.83 vested, respectively. As
of September 30, 2021, there were unvested options relating to
514,800 shares of common stock outstanding with a total of
$3,453
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 nine
months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2021 |
|
2020 |
Volatility |
|
40.3% to 49.6%
|
|
33.9% to 50.0%
|
Risk free interest rate |
|
0.1% to 0.6%
|
|
0.2% to 1.6%
|
Expected life in years |
|
2.0 to 4.0
|
|
3.0 to 5.0
|
Dividend yield |
|
1.6% |
|
1.3% |
Weighted average fair value |
|
$11.75 |
|
$10.16 |
Activity relating to stock options granted under the Company’s
plans during the nine months ended September 30, 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 |
|
254,000 |
|
43.16 |
|
|
|
|
|
Exercised |
|
(311,000) |
|
23.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2021 |
|
2,617,000 |
|
$ |
28.80 |
|
|
3.0 years |
|
$ |
— |
|
Exercisable at September 30, 2021 |
|
2,103,000 |
|
$ |
27.61 |
|
|
2.8 years |
|
$ |
— |
|
Restricted Stock
The following table summarizes restricted stock activity during the
nine months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
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 |
|
316,000 |
|
38.95 |
|
|
478,000 |
|
31.78 |
|
Vested |
|
(312,000) |
|
28.00 |
|
|
(326,000) |
|
27.90 |
|
Forfeited |
|
(47,000) |
|
34.93 |
|
|
(111,000) |
|
37.19 |
|
Outstanding at September 30, |
|
3,608,000 |
|
$ |
21.61 |
|
|
4,468,000 |
|
$ |
20.10 |
|
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 2021
($ in thousands except share and per share data)
As of September 30, 2021, the Company had $47,527 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 3.8
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 O – Goodwill and Intangible Assets
The following is a summary of the carrying amount of goodwill by
reporting unit as of September 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
|
|
Net Carrying Amount |
|
|
Footwear |
|
Accessories/ Apparel |
|
Retail |
|
Balance at January 1, 2021 |
|
$ |
91,097 |
|
|
$ |
62,688 |
|
|
$ |
14,480 |
|
|
$ |
168,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation |
|
(191) |
|
|
— |
|
|
(117) |
|
|
(308) |
|
Balance at September 30, 2021 |
|
$ |
90,906 |
|
|
$ |
62,688 |
|
|
$ |
14,363 |
|
|
$ |
167,957 |
|
The following table details identifiable intangible assets as of
September 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Lives |
|
Cost Basis |
|
Accumulated Amortization |
|
Currency Translation |
|
Net Carrying Amount |
Trade names |
|
1–10 years
|
|
$ |
9,025 |
|
|
$ |
(8,962) |
|
|
$ |
— |
|
|
$ |
63 |
|
Customer relationships |
|
10–20 years
|
|
38,680 |
|
|
(22,690) |
|
|
(1,526) |
|
|
14,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,705 |
|
|
(31,652) |
|
|
(1,526) |
|
|
14,527 |
|
Re-acquired right |
|
indefinite |
|
35,200 |
|
|
— |
|
|
(7,733) |
|
|
27,467 |
|
Trademarks |
|
indefinite |
|
70,953 |
|
|
— |
|
|
193 |
|
|
71,146 |
|
|
|
|
|
$ |
153,858 |
|
|
$ |
(31,652) |
|
|
$ |
(9,066) |
|
|
$ |
113,140 |
|
The Company evaluates its goodwill and indefinite-lived 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. A
qualitative assessment of goodwill and certain indefinite-lived
intangible assets was performed as of July 1, 2021. In conducting
the qualitative impairment assessment for goodwill and
indefinite-lived intangibles, the Company concluded that it is more
likely than not that the fair values of its goodwill exceeded the
carrying values of their respective reporting units and the fair
values of its indefinite-lived intangibles exceeded their
respective carrying values. Therefore, no impairment charges were
recorded for goodwill and intangibles.
As a result of the COVID-19 pandemic and decline in the
macroeconomic environment, the Company performed an interim
impairment analysis as of March 31, 2020 that resulted in $9,518 of
impairment charges, which is comprised of impairment charges of
$8,615, $456 and $447 related to the Company's Cejon, GREATS and
Jocelyn trademarks, respectively. An additional interim impairment
analysis was conducted in the third quarter of 2020 that resulted
in an impairment charge of $33,010, which is comprised of
impairment charges of $18,410 and $14,600 related to the Company's
Cejon and Report trademarks, respectively. These charges were
recorded in impairment of intangibles in the Company’s Condensed
Consolidated Statements of Income/(Loss).
During the nine months ended September 30, 2021 the Company
sold one of its internally developed trademarks for $8,000. The
gain from the sale of the trademark was recorded in operating
expenses in the Company's Condensed Statements of
Income/Loss.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 2021
($ in thousands except share and per share data)
The amortization of intangible assets amounted to $554 and $2,187
for the three and nine months ended September 30, 2021
compared to $908 and for $2,694 the three and nine months ended
September 30, 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
September 30, 2021 is as follows:
|
|
|
|
|
|
2021 (remaining three months) |
$ |
487 |
|
2022 |
1,718 |
|
2023 |
1,718 |
|
2024 |
1,718 |
|
2025 |
1,718 |
|
Thereafter |
7,168 |
|
Total |
$ |
14,527 |
|
Note P – 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 September 30, 2021,
the Company's entire net forward contracts hedging portfolio
consisted of a notional amount of $26,648, with the fair value
included on the Consolidated Balance Sheets in other current assets
of $268 and other current liabilities of $86. For the three and
nine months ended September 30, 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 nine months of 2021. The
following table presents the pre-tax amounts from derivative
instruments affecting income and other comprehensive income/loss
("OCI") for the periods ended September 30, 2021 and 2020,
respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
Forward Contracts: |
Location of Gain or Loss Recognized in Net Income on
Derivative |
|
Gain/(Loss) Recognized in Accumulated OCI |
|
Loss Reclassified into Income From Accumulated OCI |
|
Gain Recognized in Accumulated OCI |
|
Loss Reclassified into Income From Accumulated OCI |
2021 |
Cost of Sales (exclusive of depreciation and
amortization)
|
|
$ |
274 |
|
|
$ |
(53) |
|
|
$ |
880 |
|
|
$ |
(765) |
|
2020 |
Cost of Sales (exclusive of depreciation and
amortization)
|
|
(478) |
|
|
(147) |
|
|
152 |
|
|
(59) |
|
Note Q – 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 September 30, 2021, the Company
had future minimum royalty and advertising payments of
$16,000.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 2021
($ in thousands except share and per share data)
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.
Note R – 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, 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, Mexico, Europe and South
Africa, the Company's joint ventures in 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®, 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.
As of 2021, the Company displayed 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
September 30, 2021
($ in thousands except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the three months ended, |
|
Wholesale Footwear |
|
Wholesale Accessories/Apparel |
|
Total Wholesale |
|
Retail |
|
First Cost |
|
Licensing |
|
Corporate
(1)
|
Consolidated |
September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
304,203 |
|
|
$ |
97,811 |
|
|
$ |
402,014 |
|
|
$ |
123,054 |
|
|
$ |
991 |
|
|
$ |
2,683 |
|
|
$ |
— |
|
$ |
528,742 |
|
Gross profit |
|
108,019 |
|
|
27,184 |
|
|
135,203 |
|
|
81,121 |
|
|
991 |
|
|
2,683 |
|
|
— |
|
219,998 |
|
Income/(loss) from operations |
|
$ |
70,515 |
|
|
$ |
13,310 |
|
|
$ |
83,825 |
|
|
$ |
22,539 |
|
|
$ |
695 |
|
|
$ |
1,991 |
|
|
$ |
(20,632) |
|
$ |
88,418 |
|
Segment assets |
|
$ |
341,853 |
|
|
$ |
494,992 |
|
|
$ |
836,845 |
|
|
$ |
271,125 |
|
|
$ |
69,517 |
|
|
$ |
82,056 |
|
|
$ |
40,517 |
|
$ |
1,300,060 |
|
Capital expenditures |
|
$ |
171 |
|
|
$ |
58 |
|
|
$ |
229 |
|
|
$ |
458 |
|
|
$ |
3 |
|
|
$ |
— |
|
|
$ |
1,126 |
|
$ |
1,816 |
|
September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
213,327 |
|
|
$ |
70,516 |
|
|
$ |
283,843 |
|
|
$ |
58,987 |
|
|
$ |
1,479 |
|
|
$ |
2,558 |
|
|
$ |
— |
|
$ |
346,867 |
|
Gross profit |
|
73,140 |
|
|
25,065 |
|
|
98,205 |
|
|
37,635 |
|
|
1,479 |
|
|
2,558 |
|
|
— |
|
139,877 |
|
Income/(loss) from operations |
|
$ |
31,707 |
|
|
$ |
(4,658) |
|
|
$ |
27,049 |
|
|
$ |
(17,292) |
|
|
$ |
882 |
|
|
$ |
1,948 |
|
|
$ |
(15,585) |
|
$ |
(2,998) |
|
Segment assets |
|
$ |
284,327 |
|
|
$ |
423,146 |
|
|
$ |
707,473 |
|
|
$ |
223,428 |
|
|
$ |
65,452 |
|
|
$ |
69,725 |
|
|
$ |
38,332 |
|
$ |
1,104,410 |
|
Capital expenditures |
|
$ |
366 |
|
|
$ |
26 |
|
|
$ |
392 |
|
|
$ |
425 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
359 |
|
$ |
1,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the nine months ended, |
|
Wholesale Footwear |
|
Wholesale Accessories/Apparel |
|
Total Wholesale |
|
Retail |
|
First Cost |
|
Licensing |
|
Corporate
(1)
|
Consolidated |
September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
719,094 |
|
|
$ |
236,444 |
|
|
$ |
955,538 |
|
|
$ |
323,227 |
|
|
$ |
1,909 |
|
|
$ |
6,987 |
|
|
$ |
— |
|
$ |
1,287,661 |
|
Gross profit |
|
247,139 |
|
|
62,351 |
|
|
309,490 |
|
|
210,771 |
|
|
1,909 |
|
|
6,987 |
|
|
— |
|
$ |
529,157 |
|
Income/(loss) from operations |
|
$ |
159,049 |
|
|
$ |
15,468 |
|
|
$ |
174,517 |
|
|
$ |
43,632 |
|
|
$ |
1,577 |
|
|
$ |
5,826 |
|
|
$ |
(61,372) |
|
$ |
164,180 |
|
Segment assets |
|
$ |
341,853 |
|
|
$ |
494,992 |
|
|
$ |
836,845 |
|
|
$ |
271,125 |
|
|
$ |
69,517 |
|
|
$ |
82,056 |
|
|
$ |
40,517 |
|
$ |
1,300,060 |
|
Capital expenditures |
|
$ |
634 |
|
|
$ |
784 |
|
|
$ |
1,418 |
|
|
$ |
739 |
|
|
$ |
3 |
|
|
$ |
— |
|
|
$ |
2,439 |
|
$ |
4,599 |
|
September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
526,362 |
|
|
$ |
160,206 |
|
|
$ |
686,568 |
|
|
$ |
153,309 |
|
|
$ |
2,981 |
|
|
$ |
5,989 |
|
|
$ |
— |
|
$ |
848,847 |
|
Gross profit |
|
174,668 |
|
|
48,383 |
|
|
223,051 |
|
|
97,208 |
|
|
2,981 |
|
|
5,989 |
|
|
— |
|
$ |
329,229 |
|
Income/(loss) from operations |
|
$ |
71,534 |
|
|
$ |
(12,465) |
|
|
$ |
59,069 |
|
|
$ |
(66,944) |
|
|
$ |
1,251 |
|
|
$ |
3,416 |
|
|
$ |
(49,740) |
|
$ |
(52,948) |
|
Segment assets |
|
$ |
284,327 |
|
|
$ |
423,146 |
|
|
$ |
707,473 |
|
|
$ |
223,428 |
|
|
$ |
65,452 |
|
|
$ |
69,725 |
|
|
$ |
38,332 |
|
$ |
1,104,410 |
|
Capital expenditures |
|
$ |
819 |
|
|
$ |
105 |
|
|
$ |
924 |
|
|
$ |
1,391 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,181 |
|
$ |
5,496 |
|
(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.
Revenues by geographic area are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Domestic
(1)
|
|
$ |
460,246 |
|
|
$ |
297,641 |
|
|
$ |
1,128,992 |
|
|
$ |
741,708 |
|
International |
|
68,496 |
|
|
49,226 |
|
|
158,669 |
|
|
107,139 |
|
Total |
|
$ |
528,742 |
|
|
$ |
346,867 |
|
|
$ |
1,287,661 |
|
|
$ |
848,847 |
|
(1)
Includes revenues of $86,906 and $225,357, respectively, for the
three and nine months end September 30, 2021 and $63,604 and
$180,994, respectively, for the comparable period in 2020 related
to sales to U.S. customers where the title is transferred outside
the U.S. and the sale is recorded by the Company's international
entities.
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 2021
($ in thousands except share and per share data)
Note S – Recent Accounting Pronouncements
Not Yet Adopted
In March 2020, the Financial Accounting Standards Board ("FASB")
issued Accounting Standards Update ("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 T – 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 the
Credit Agreement), and (ii) after the occurrence of the permanent
borrowing base trigger, equal or exceed the greater of $15,000 and
10% of the line cap. Other than this minimum availability
requirement, the Credit Agreement does not include any financial
maintenance covenants.
The Credit Agreement requires the Company and various subsidiaries
of the Company to guarantee each other’s obligations arising from
time to time under the Credit Facility, as well as obligations
arising in respect of certain cash management and hedging
transactions. Subject to customary exceptions and limitations, all
borrowings under the Credit Agreement are secured by a lien on all
or substantially all of the assets of the Company and each
subsidiary guarantor.
The Credit Agreement also contains customary events of default. If
an event of default under the Credit Agreement occurs and is
continuing, then the Agent may, and at the request of the required
lenders shall, terminate the loan commitments under the Credit
Agreement, declare any outstanding obligations under the Credit
Agreement to be immediately due and payable or
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
–
Unaudited
September 30, 2021
($ in thousands except share and per share data)
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 September 30, 2021, the Company had no cash borrowings
and $1,400 letters of credit outstanding under the Credit
Facility.
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 and nine months ended September 30,
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, Mexico, Europe and South Africa,
our joint ventures in Israel, Taiwan and China, and under
distribution arrangements in Italy, the Middle East, South and
Central Americas, 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
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 in and
sell-through performance in our wholesale businesses.
Total revenue for the quarter ended September 30, 2021
increased 52.4% to $528,742 compared to $346,867 in the same period
of last year. Net income attributable to Steven Madden, Ltd. was
$66,643 in the third quarter of 2021 compared to net loss of
($6,951) in the same period of last year.
The effective tax rate for the third quarter of 2021 increased to
24.4% compared to (145.6)% in the third quarter of last year. Net
income was $0.82 per share on 81,307 diluted weighted average
shares outstanding
in the third quarter of 2021 compared to a loss of ($0.09) per
share on 78,560 diluted weighted average shares outstanding in the
third quarter of last year.
Our inventory turnover, calculated on a trailing twelve-month
average, for the quarters ended September 30, 2021 and 2020
was 7.3 times and 6.9 times, respectively. The improvement in
inventory turnover is due to the continued recovery from the COVID
pandemic partially offset by increased lead times as a result of
the supply chain disruptions and higher penetration from our Retail
segment. Our total Company accounts receivable days
outstanding
increased to
62 days in the third quarter of 2021 compared to 58 days in the
third quarter of 2020
primarily due to the mix of accounts. As of September 30,
2021, we had $259,913 in cash, cash equivalents and short-term
investments, no debt and total stockholders’ equity of $807,180.
Working capital was $492,527 as of September 30, 2021,
compared to $429,762 on September 30, 2020.
The following tables set forth information on operations for the
periods indicated:
Selected Financial Information
($ in thousands)
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Three Months Ended September 30, |
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2021 |
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