View:
January 25, 2006
Mr. Michael Moran
Accountant Branch Chief
United States Securities and Exchange Commission
Division of Corporation Finance
Washington, D.C. 20549
Re: Steven Madden, Ltd.
Form 10-K for the fiscal year ended December 31, 2004
Form 10-Q for the fiscal quarter ended September 30, 2005
File No. 0-23702
Dear Mr. Moran:
This letter is in response to your letter dated January 11, 2006 to Arvind
Dharia, Chief Financial Officer of Steven Madden, Ltd. (the "Company"). We
appreciate and share in the Staff's objective to enhance the overall disclosure
of our filings.
Although we believe that our current disclosures are adequate, we welcome the
opportunity to improve our filings, and look forward to discussing any aspect of
this letter with you further. All of your comments will be addressed in future
filings.
Our responses to your comments are set forth below.
Form 10-K for the Year Ended December 31, 2004
- ----------------------------------------------
Note E - Restricted Stock Awards, page F-16
- -------------------------------------------
1. We note your discussion regarding both the exchange of restricted stock
awards for cash and the pay-out of an award in cash prior to the
expiration of its vesting period. Tell us whether you recognized
additional compensation expense in 2004 in order to fully recognize the
fair value of the restricted stock. If you did not, tell us why not
given your statement that the cash awards "are equal to the value of the
restricted stock when originally issued."
Company Response
----------------
As stated in paragraph two of Footnote E - Restricted Stock Awards in
our Form 10-K for December 31, 2004, the restricted stock awards were
replaced with cash rewards that were due "to be paid on the vesting
date". These cash rewards retained the same characteristics as the
original restricted stock awards. The vesting date (i.e. the payment
date) of the cash rewards was the same as the restricted stock, and the
payment was contingent on the recipient still being employed with the
Company on the vesting date. The Company continued to recognize
compensation through the vesting date in the same manner it would have
had the original restricted stock awards not been extinguished.
Another employee was issued a stock certificate when his shares vested.
These shares were unregistered, and the Company agreed to purchase the
shares back from the employee shortly after the certificate was issued.
Since this cash transaction took place after the vesting date, all of
the related compensation costs had already been recognized on the
Company's financial statements. Will update our disclosures in our 10-K.
Note K - Operating Segment Information, page F-26
- -------------------------------------------------
2. We note your disclosure that your business is comprised of three
distinct segments based on the methods used to distribute your products.
However, due to the information you provide on pages 14 through 19 of
MD&A, it appears that you have discrete financial information available
for your brands under the Wholesale segment and that these brands may
each be an operating segment. Please explain how you have determined
that your presentation of the Wholesale segment is appropriate using the
guidance of SFAS 131. If you believe you have aggregated several
operating segments (i.e. brands) into one reportable segment, tell us
how you determined that you met the criteria for aggregation in
paragraph 17 of SFAS 131, including the requirement that the segments
have similar economic characteristics.
Company Response
----------------
We have aggregated several operating segments into one segment based on
the guidelines of paragraph 17 of SFAS 131. We believe that our
wholesale brands have similar economic characteristics. For example, all
our brands have similar initial gross margins which range from about 42%
to 45%. For all of our brands, the net gross margins as reported in our
filings will vary from quarter to quarter and product to product based
on the amount of markdowns and allowances given to our customers and the
level of close-out sales at seasons end.
Our brands under the Wholesale segment are also similar in the following
areas:
(a) The nature of the products. All of our Wholesale divisions market
and distribute shoes to retailers across the United States.
(b) The nature of the production processes. The production process for
our various brands is identical. Their design and sample processes
are alike, they all use third party factories and their quality
control procedures are the same.
(c) The type or class of customer for their products. All of our brands
are distributed to department stores as well as specialty and
independent stores. Many of our customers carry several of our
product lines in their footwear departments.
(d) The methods used to distribute their products. All of our brands are
distributed from third party warehouses. The shipping terms for all
our brands is FOB warehouse and they are all shipped via the
customers nominated carriers and/or common carriers as per the
routing instructions of our customers.
(e) The nature of the regulatory environment. This category does not
apply to our business.
3. Please tell us how you have identified your chief operating decision
maker and provide us with an example of all the reports provided on a
regular basis to the chief operating decision maker.
Company Response
----------------
We believe that our Chief Operating Officer (the "COO") is the "chief
operating decision maker" of the Company. Among his many
responsibilities is the allocation of resources to and the assessment of
the performance of the segments of the Company. We have provided under
separate cover the following reports as examples of daily reports
received by the COO on a regular basis:
o Steve Madden Retail Divisional Flash Report. This report gives
comparative sales and gross margin data on a store-to-store
basis.
o Steve Madden Actual & Plan Sales Report. This report supplies the
COO with comparative sales, booking and gross margin data for the
wholesale divisions.
o Order Register By Div/Sol/Sty. This report lists all new sales
orders received that have a sell price that is different than the
Company's regular selling price.
o Available to Sell Report. This report lists inventory that is
available to sell for each individual style.
Quarter Ended September 30, 2005
- --------------------------------
4. We note that over the course of 2005 it appears that you issued
significantly more cash in lieu of restricted stock. Please provide us
with more details about the original restricted stock awards, including
the purpose of the original awards and the recipients of these awards,
i.e. employees, non-employees and / or directors. Tell us and disclose
why the Company is entering into these types of agreements and whether
you expect to continue to exchange restricted stock awards for cash in
the future.
Company Response
----------------
The Company issued restricted stock to key executives and management
employees of the Company. The restricted stock program is part of the
Company's incentive compensation programs which help to attract and
retain key employees. The Company's restricted stock grants typically
were "cliff vesting" and in certain cases, the issuance of stock
certificates on the vesting date required shareholder approval. In
October of 2002, two executives of the Company were granted restricted
stock pursuant to their employment agreements. Under the terms of the
agreements, the receipt of the shares of stock did require shareholder
approval. At the annual meeting of stockholders held on May 27 of 2005,
the shareholders did not approve the issuance of the shares. As stated
in the Company's proxy statement, the executives were given a cash award
equal to the fair value of the restricted stock when first granted.
As of October 1, 2005, there were 20,000 shares of restricted stock
outstanding which vested on January 1, 2006. The Company is currently
developing a new executive compensation plan which may include
restricted stock.
5. Please confirm that your next Form 10-K will include disclosures related
to the restricted stock awards in a level of detail similar to that
included in your Form 10-K for the year ended December 31, 2004 as there
was no disclosure of these awards in your most recent Form 10-Q.
Company Response
----------------
Our Form 10-K for the year ended December 31, 2005 will include detailed
disclosures related to the restricted stock awards similar to that
included in our Form 10-K of last year.
In connection with our responses to your comments outlined above, the Company
acknowledges the following:
o the Company is responsible for the adequacy and accuracy of the
disclosure in filings;
o staff comments or changes to disclosure in response to staff comments do
not foreclose the Commission from taking any action with respect to the
filings; and
o the Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
We welcome the opportunity to discuss any aspect of this letter with you
further.
Sincerely,
/s/ ARVIND DHARIA
- ----------------------------
Arvind Dharia
Chief Financial Officer