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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 June 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) 
Delaware 13-3588231
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)  

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:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $.0001 per shareSHOOThe 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. 
Large accelerated filerAccelerated filerEmerging growth company
Non-accelerated filerSmaller reporting company

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 July 30, 2021, there were 81,946,243 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
June 30, 2021


 
 
  
 
   
 
   
 
   
 
 
   
 
  
   
   
  
 
  
   
 






PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
June 30,
2021
December 31,
2020
June 30,
2020
 (unaudited) (unaudited)
ASSETS   
Current assets:   
Cash and cash equivalents$262,144 $247,864 $318,101 
Short-term investments40,513 39,302 38,837 
Accounts receivable, net of allowances of $10,586, $8,943 and $9,93724,598 25,044 20,183 
Factor accounts receivable254,545 252,671 123,496 
Inventories125,525 101,420 103,282 
Prepaid expenses and other current assets20,549 17,415 18,444 
Income tax receivable and prepaid taxes15,906 14,525 13,578 
Total current assets743,780 698,241 635,921 
Note receivable – related party987 1,180 1,369 
Property and equipment, net38,213 43,268 49,594 
Operating lease right-of-use asset97,222 101,379 120,489 
Deposits and other4,574 4,822 2,917 
Deferred taxes5,415 5,415 6,360 
Goodwill – net168,426 168,265 166,333 
Intangibles – net114,526 115,191 149,409 
Total Assets$1,173,143 $1,137,761 $1,132,392 
LIABILITIES   
Current liabilities:   
Accounts payable$91,822 $73,904 $42,474 
Accrued expenses139,717 118,083 113,744 
Advances from factor — 42,662 
Operating leases - current portion33,561 34,257 36,890 
Income taxes payable1,477 5,799  
Contingent considerations – current portion3,660   
Accrued incentive compensation8,921 3,873 2,122 
Total current liabilities279,158 235,916 237,892 
Contingent considerations - long term portion4,381 207 1,829 
Operating leases - long-term portion92,179 98,592 114,630 
Deferred taxes2,921 2,562 3,128 
Other liabilities11,982 10,115 7,793 
Total Liabilities390,621 347,392 365,272 
Commitments, contingencies and other (Note Q)
STOCKHOLDERS’ EQUITY   
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   
Common stock – $.0001 par value, 245,000 shares authorized,133,817, 133,247 and 133,173 shares issued, 82,156, 82,616 and 83,035 shares outstanding8 8 6 
Additional paid-in capital481,646 478,463 466,384 
Retained earnings1,312,827 1,279,550 1,263,910 
Accumulated other comprehensive loss(25,081)(29,164)(39,850)
Treasury stock – 51,661, 50,631 and 50,138 shares at cost(995,065)(952,271)(935,366)
Total Steven Madden, Ltd. stockholders’ equity774,335 776,586 755,084 
Noncontrolling interest8,187 13,783 12,036 
Total stockholders’ equity782,522 790,369 767,120 
Total Liabilities and Stockholders’ Equity$1,173,143 $1,137,761 $1,132,392 
See accompanying notes to condensed consolidated financial statements - unaudited.
1




STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Income/(Loss)
(unaudited)
(in thousands, except per share data)
 
Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Net sales$394,797 $141,363 $753,698 $497,047 
Commission and licensing fee income3,097 1,449 5,221 4,933 
Total revenue397,894 142,812 758,919 501,980 
Cost of sales (exclusive of depreciation and amortization)227,839 86,924 449,760 312,628 
Gross profit170,055 55,888 309,159 189,352 
Operating expenses121,860 78,412 232,308 199,785 
Impairment of fixed assets and lease right-of-use assets477 1,178 1,089 29,999 
Impairment of intangibles   9,518 
Income/(loss) from operations47,718 (23,702)75,762 (49,950)
Interest and other (expense)/ income – net(777)357 (814)1,403 
Income/(loss) before provision (benefit) for income taxes46,941 (23,345)74,948 (48,547)
Provision/(benefit) for income taxes (Note M)
9,600 (6,201)15,276 (13,602)
Net income/(loss)37,341 (17,144)59,672 (34,945)
Less: net income/(loss) attributable to noncontrolling interest489 (558)1,623 (908)
Net income/(loss) attributable to Steven Madden, Ltd.$36,852 $(16,586)$58,049 $(34,037)
Basic net income/(loss) per share$0.47 $(0.21)$0.74 $(0.43)
Diluted net income/(loss) per share$0.45 $(0.21)$0.71 $(0.43)
Basic weighted average common shares outstanding78,899 78,517 78,968 78,696 
Effect of dilutive securities – options/restricted stock3,162  3,013  
Diluted weighted average common shares outstanding82,061 78,517 81,981 78,696 
Cash dividends declared per common share$0.15 $ $0.30 $0.15 

See accompanying notes to condensed consolidated financial statements - unaudited.
2




STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income/(Loss)
(unaudited)
(in thousands)
 
Three Months Ended June 30, 2021Six Months Ended June 30, 2021
 Pre-tax amountsTax benefitAfter-tax amountsPre-tax amountsTax (expense)After-tax amounts
Net income$37,341 $59,672 
Other comprehensive income:  
      Foreign currency translation adjustment$3,887 $ 3,887 $3,585 $ 3,585 
      (Loss)/gain on cash flow hedging derivatives(23)6 (17)815 (209)606 
Total other comprehensive income$3,864 $6 3,870 $4,400 $(209)4,191 
Comprehensive income41,211 63,863 
Less: comprehensive income attributable to noncontrolling interests911 1,731 
Comprehensive income attributable to Steven Madden, Ltd.$40,300 $62,132 
Three Months Ended June 30, 2020Six Months Ended June 30, 2020
Pre-tax amountsTax benefitAfter-tax amountsPre-tax amountsTax (expense)After-tax amounts
Net loss$(17,144)$(34,945)
Other comprehensive income/(loss):
      Foreign currency translation adjustment$5,770 $ 5,770 $(9,880)$ (9,880)
      (Loss)/gain on cash flow hedging derivatives(797)240 (557)879 (249)630 
Total other comprehensive income/(loss)$4,973 $240 5,213 $(9,001)$(249)(9,250)
Comprehensive loss(11,931)(44,195)
Less: comprehensive (loss) attributable to noncontrolling interests(740)(748)
Comprehensive loss attributable to Steven Madden, Ltd.$(11,191)$(43,447)

See accompanying notes to condensed consolidated financial statements - unaudited.
3



STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders' Equity
(unaudited)
(in thousands)
Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive (Loss)Treasury StockNon-Controlling InterestTotal Stockholders' Equity
SharesAmountSharesAmount
Balance - March 31, 202182,692 $8 $485,556 $1,288,322 $(28,529)50,785 $(957,829)$13,240 $800,768 
Share repurchases and net settlement of awards under stock plan(876)— — — — 876 (37,236)— (37,236)
Exercise of stock options230 — 5,269 — — — — — 5,269 
Issuance of restricted stock, net of forfeitures110 — — — — — — — — 
Stock-based compensation— — 5,480 — — — — — 5,480 
Foreign currency translation adjustment— — — — 3,465 — — 422 3,887 
Cash flow hedge (net of tax benefit of $6)— — — — (17)— — — (17)
Dividends on common stock ($0.15 per share)— — — (12,347)— — — — (12,347)
Distributions to noncontrolling interests, net— — — — — — — (1,496)(1,496)
Acquisition of incremental ownership of joint ventures— — (14,659)— — — — (4,468)(19,127)
Net income— — — 36,852 — — — 489 37,341 
Balance - June 30, 202182,156 $8 $481,646 $1,312,827 $(25,081)51,661 $(995,065)$8,187 $782,522 
Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive (Loss)Treasury StockNon-Controlling InterestTotal Stockholders' Equity
SharesAmountSharesAmount
Balance - December 31, 202082,616 $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(1,030)— — — — 1,030 (42,794)— (42,794)
Exercise of stock options295 — 6,823 — — — — — 6,823 
Issuance of restricted stock, net of forfeitures275 — — — — — — — — 
Stock-based compensation— — 11,019 — — — — — 11,019 
Foreign currency translation adjustment— — — — 3,477 — — 108 3,585 
Cash flow hedge (net of tax expense of $209)— — — — 606 — — — 606 
Dividends on common stock ($0.30 per share)— — — (24,772)— — — — (24,772)
Distributions to noncontrolling interests, net— — — — — — — (2,859)(2,859)
Acquisition of incremental ownership of joint ventures— — (14,659)— — — — (4,468)(19,127)
Net income— — — 58,049 — — — 1,623 59,672 
Balance - June 30, 202182,156 $8 $481,646 $1,312,827 $(25,081)51,661 $(995,065)$8,187 $782,522 


4


STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders' Equity
(unaudited)
(in thousands)
Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive (Loss)Treasury StockNon-Controlling InterestTotal Stockholders' Equity
SharesAmountSharesAmount
Balance - March 31, 202083,046 $6 $460,777 $1,280,496 $(45,245)50,113 $(934,827)$12,417 $773,624 
Share repurchases and net tax settlement of awards under stock plan(25)— — — — 25 (539)— (539)
Exercise of stock options4 — 86 — — — — — 86 
Issuance of restricted stock, net of forfeitures10 — — — — — — — — 
Stock-based compensation— — 5,521 — — — — — 5,521 
Foreign currency translation adjustment— — — — 5,952 — — (182)5,770 
Cash flow hedge (net of tax benefit of $240)— — — — (557)— — — (557)
Investment of noncontrolling interest— — — — — — — 359 359 
Net (loss)— — — (16,586)— — — (558)(17,144)
Balance - June 30, 202083,035 $6 $466,384 $1,263,910 $(39,850)50,138 $(935,366)$12,036 $767,120 
Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive (Loss)Treasury StockNon-Controlling InterestTotal Stockholders' Equity
SharesAmountSharesAmount
Balance - December 31, 201983,520 $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(904)— — — — 904 (29,678)— (29,678)
Exercise of stock options52 — 960 — — — — — 960 
Issuance of restricted stock, net of forfeitures367 — — — — — — —  
Stock-based compensation— — 11,207 — — — — — 11,207 
Foreign currency translation adjustment— — — — (10,040)— — 160 (9,880)
Cash flow hedge (net of tax expense of $249)— — — — 630 — — — 630 
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)— — — (34,037)— — — (908)(34,945)
Balance - June 30, 202083,035 $6 $466,384 $1,263,910 $(39,850)50,138 $(935,366)$12,036 $767,120 

See accompanying notes to condensed consolidated financial statements - unaudited.
5



STEVEN MADDEN, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Six Months Ended June 30,
 20212020
Cash flows from operating activities:  
Net income/(loss)$59,672 $(34,945)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Stock-based compensation11,019 11,207 
Depreciation and amortization7,993 9,244 
Loss on disposal of fixed assets303 305 
Impairment of intangibles— 9,518 
Impairment of lease right-of-use asset and fixed assets1,089 29,999 
Deferred taxes359 (9,109)
Accrued interest on note receivable - related party(11)(16)
Notes receivable - related party204 204 
Change in valuation of contingent considerations7,834 (4,611)
Gain on sale of trademark(8,000) 
Recovery of receivables, related to the Payless ShoeSource bankruptcy(919) 
Changes, net of acquisitions, in:
Accounts receivable1,365 17,984 
Factor accounts receivable(1,874)92,975 
Inventories(24,105)33,614 
Prepaid expenses, prepaid taxes, deposits and other(2,125)(9,248)
Accounts payable and accrued expenses35,836 (76,183)
Accrued incentive compensation5,048 (8,812)
Leases and other liabilities(1,765)(4,259)
Net cash provided by operating activities91,923 57,867 
Cash flows from investing activities: 
Capital expenditures(2,782)(4,320)
Proceeds from sale of a trademark8,000 — 
Purchases of short-term investments(26,574)(25,818)
Maturity/sale of short-term investments26,460 25,656 
Net cash provided by/(used in) investing activities5,104 (4,482)
Cash flows from financing activities: 
Proceeds from exercise of stock options6,823 960 
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(42,794)(29,678)
Cash dividends paid on common stock(24,772)(12,459)
Advances from factor 176,784 
Repayments of advances from factor (134,122)
Net cash (used in)/provided by financing activities(82,729)1,844 
Effect of exchange rate changes on cash and cash equivalents(18)(1,229)
Net increase in cash and cash equivalents14,280 54,000 
Cash and cash equivalents – beginning of period247,864 264,101 
Cash and cash equivalents – end of period$262,144 $318,101 

See accompanying notes to condensed consolidated financial statements - unaudited.
6

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial StatementsUnaudited
June 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 six months ended June 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, resulting in federal, state and local governments and private entities mandating various restrictions, including the closure of non-essential businesses, travel restrictions, restrictions on public gatherings, stay-at-home orders and advisories and quarantining of people who may have been exposed to the virus. After closely monitoring and taking into consideration the guidance from federal, state and local governments, in March 2020, the Company temporarily closed all of its brick-and-mortar stores and its corporate offices in the U.S. and the vast majority of its brick-and-mortar stores and offices globally. On April 1, 2020, the Company temporarily furloughed a significant number of its employees. Employees with medical benefits continued to receive those benefits at no personal cost for a duration determined by the Company. As of September 30, 2020, most of 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 by graduated amounts for all other employees earning over $100 per year (all of which were reinstated on August 1, 2020); and significantly scaling back on non-essential operating expenses, capital expenditures and planned inventory purchases. The impact of 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-through performance at its wholesale partners. During the first quarter of 2021, the Board of Directors approved the reinstatement of a quarterly cash dividend and the repurchase of stock under the Company's stock repurchase plan.

In 2020, as a result of the COVID-19 pandemic 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 six months ended June 30, 2021, the Company recorded a pre-tax charge of $433 and $1,239 related to additional severance in connection with its restructuring plan and other related items. As of June 30, 2021, the remaining unpaid portion included in accrued expenses was $687.

Note C – Reclassification

Certain reclassifications were made to prior years' amounts to conform to the 2021 presentation, primarily as it relates to segment reporting of corporate expenses and corporate assets. See Note R – Operating Segment Information, for more information.
7

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial StatementsUnaudited
June 30, 2021
($ in thousands except share and per share data)
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 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 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 margin levels, are analyzed by management to estimate the amount of the anticipated customer allowance. While the full impact of the COVID-19 pandemic is unknown and cannot be reasonably estimated, the Company has made accounting estimates based on the facts and circumstances available as of the reporting date. Actual amounts could differ from these estimates, and such differences could be material.
Note 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.
Note G – Short-Term Investments
As of June 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 June 30, 2021 and December 31, 2020 short-term investments amounted to $40,513 and $39,302, respectively, and have maturities of one year or less.


8

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial StatementsUnaudited
June 30, 2021
($ in thousands except share and per share data)
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 June 30, 2021 and December 31, 2020 are as follows:
  June 30, 2021
  Fair Value Measurements
 Fair valueLevel 1Level 2Level 3
Assets:    
Forward contracts140 — 140 — 
Total assets$140 $ $140 $ 
Liabilities:    
Contingent consideration $8,041 $ $ $8,041 
Forward contracts325  </