Steven Madden(SHOO) - 2021 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Q1 2021 show a return to profitability compared to a net loss in Q1 2020 Condensed Consolidated Balance Sheets The balance sheet as of March 31, 2021, shows total assets of $1.17 billion and stockholders' equity of $800.8 million Key Balance Sheet Items (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $233,202 | $247,864 | | Inventories | $106,561 | $101,420 | | Total current assets | $734,531 | $698,241 | | Total Assets | $1,168,943 | $1,137,761 | | Total current liabilities | $256,493 | $235,916 | | Total Liabilities | $368,175 | $347,392 | | Total stockholders' equity | $800,768 | $790,369 | Condensed Consolidated Statements of Income/(Loss) Q1 2021 saw a significant turnaround with $21.2 million net income, up from a $17.5 million net loss in Q1 2020 Q1 2021 vs Q1 2020 Income Statement (in thousands, except per share data) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Total revenue | $361,025 | $359,168 | | Gross profit | $139,104 | $133,464 | | Income/(loss) from operations | $28,044 | $(26,248) | | Net income/(loss) attributable to Steven Madden, Ltd. | $21,197 | $(17,451) | | Diluted net income/(loss) per share | $0.26 | $(0.22) | - The company recorded no impairment of intangibles in Q1 2021, compared to a $9.5 million charge in Q1 2020. Impairment of store fixed assets and lease right-of-use assets was also significantly lower at $612 thousand compared to $28.8 million in the prior year[10] Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities improved to $5.0 million in Q1 2021 from $39.6 million used in Q1 2020 Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by/(used in) operating activities | $5,042 | $(39,609) | | Net cash (used in) investing activities | $(1,616) | $(227) | | Net cash (used in) financing activities | $(17,792) | $(11,624) | | Net (decrease) in cash and cash equivalents | $(14,662) | $(52,963) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, COVID-19 impact, segment performance with strong retail growth, and a post-quarter European JV acquisition - In response to COVID-19, the company took measures including temporary furloughs, salary reductions, well as suspension of share repurchases and dividends. The quarterly cash dividend and stock repurchase plan were reinstated during the first quarter of 2021[16] Segment Revenue and Operating Income (in thousands) | Segment | Revenue Q1 2021 | Revenue Q1 2020 | Operating Income/(Loss) Q1 2021 | Operating Income/(Loss) Q1 2020 | | :--- | :--- | :--- | :--- | :--- | | Wholesale Footwear | $216,779 | $235,069 | $44,376 | $41,053 | | Wholesale Accessories/Apparel | $74,621 | $67,672 | $7,515 | $(6,479) | | Retail | $67,501 | $52,943 | $(4,707) | $(43,002) | - On April 14, 2021, the company acquired the remaining 49.9% interest in its European joint venture for $16.5 million[75] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A highlights Q1 2021 revenue growth to $361.0 million, $21.2 million net income, and strong liquidity with no debt - Despite the continued impact of the pandemic and supply chain disruption, the business saw improvements in the retail segment and in sell-through performance at wholesale partners in Q1 2021[81] Q1 2021 Financial Highlights (in thousands) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Total Revenue | $361,025 | $359,168 | | Gross Profit | $139,104 | $133,464 | | Gross Margin | 38.5% | 37.2% | | Operating Income/(Loss) | $28,044 | $(26,248) | | Net Income/(Loss) | $21,197 | $(17,451) | Results of Operations by Segment Segment performance varied, with Retail revenue up 27.5% and Wholesale Accessories/Apparel up 10.3%, offsetting Wholesale Footwear decline - Wholesale Footwear: Revenue decreased 7.8% to $216.8 million, but operating income increased to $44.4 million due to expense control initiatives[90] - Wholesale Accessories/Apparel: Revenue increased 10.3% to $74.6 million. The segment swung to an operating income of $7.5 million from a loss of $6.5 million in the prior year[91] - Retail: Revenue increased 27.5% to $67.5 million, driven by e-commerce. The operating loss narrowed significantly to $(4.7) million from $(43.0) million in Q1 2020, which included large impairment charges[92] Liquidity and Capital Resources The company maintained strong liquidity in Q1 2021 with $273.0 million in cash and no debt, supported by a new $150 million credit facility - As of March 31, 2021, the company had $273.0 million in cash, cash equivalents, and short-term investments, and no debt[96][97] - Cash provided by operations was $5.0 million for Q1 2021, a significant improvement from $39.6 million of cash used in Q1 2020[99] - The Board of Directors approved a quarterly cash dividend of $0.15 per share, payable in June 2021[106] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency fluctuations and interest rates, managing them with forward contracts and maintaining no outstanding debt - The company uses forward foreign exchange contracts to mitigate the impact of exchange rate fluctuations on forecasted inventory purchases. As of March 31, 2021, the notional amount of these contracts was $37.0 million[59][114] - A sensitivity analysis showed that a 10% increase or decrease of the U.S. dollar against foreign currencies would result in a net change of approximately $3.7 million in the fair value of the derivatives portfolio[114] - The company is also exposed to translation risk from its foreign operations in Canada, Mexico, Europe, South Africa, China, Taiwan, and Israel, as their financial results are translated into U.S. dollars[115] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the fiscal quarter[118] - No material changes to the company's internal control over financial reporting occurred during the quarter[119] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings, but management expects no material impact on financial position or results - Management does not expect ongoing legal proceedings to have a material effect on the company's financial position or results of operations[61][121] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 154,040 common shares in Q1 2021, with $109.7 million remaining for future repurchases Share Repurchases in Q1 2021 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2021 | 13,507 | $35.24 | | Feb 2021 | 8,173 | $33.60 | | Mar 2021 | 132,360 | $36.31 | | Total Q1 | 154,040 | $36.07 | - As of March 31, 2021, approximately $109.7 million remained available for future repurchases under the company's Share Repurchase Program[42][123] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and iXBRL formatted financial statements - Exhibits filed include certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[125]