Fair Value Measurement

6 Months Ended

Jun. 30, 2024

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; inputs to the valuation methodology based on unobservable prices or valuation techniques that are significant to the fair value measurement.

The Company’s financial assets and liabilities subject to fair value measurements as of June 30, 2024 and December 31, 2023 were as follows:


	June 30, 2024								December 31, 2023
	Fair value		Level 1		Level 2		Level 3		Fair value		Level 1		Level 2		Level 3
Assets:



Forward contracts	648		—		648		—		708		—		708		—
Total assets	$	648	$	—	$	648	$	—	$	708	$	—	$	708	$	—
Liabilities:
Contingent payment liability(1)(2)	$	21,500	$	—	$	—	$	21,500	$	13,300	$	—	$	—	$	13,300
Forward contracts	249		—		249		—		1,904		—		1,904		—
Total liabilities	$	21,749	$	—	$	249	$	21,500	$	15,204	$	—	$	1,904	$	13,300

(1) On June 30, 2024, $11,957 was recorded in Contingent payment liability - current portion and $9,543 was recorded in Contingent payment liability - long-term portion.

(2) On December 31, 2023, $3,325 was recorded in Contingent payment liability - current portion and $9,975 was recorded in Contingent payment liability - long-term portion.

Forward contracts are used to manage the risk associated with the volatility of future cash flows (see Note L – Derivative Instruments). Fair value of these instruments is based on observable market transactions of spot and forward rates.

The Company's recurring Level 3 balance consists of a contingent payment liability related to an acquisition. The changes in the Company's Level 3 liabilities for the periods ended June 30, 2024 and December 31, 2023 were as follows:


	Balance at January 1, 2024		Acquisitions		Adjustments(1)		Balance at June 30, 2024
2024
Liabilities:
Contingent payment liability	$	13,300	$	—	$	8,200	$	21,500

2023	Balance at January 1, 2023		Acquisitions		Adjustments		Balance at December 31, 2023

Liabilities:
Contingent payment liability	$	—	$	13,300	$	—	$	13,300

(1) In 2024, amount consists of an adjustment of $8,200 that was included as an expense related to the change in valuation of the contingent payment liability in connection with the acquisition of Almost Famous. The adjustment was recorded in the Wholesale Accessories/Apparel segment.

At June 30, 2024 and December 31, 2023, the fair value of the contingent payment liability was $21,500 and $13,300, respectively, in connection with the October 20, 2023 acquisition of Almost Famous. The fair value of the contingent payments was estimated using a risk neutral simulation method to model the probability of different financial results of Almost Famous during the earn-out period, utilizing a discount rate of 19.5% and 20.3% at June 30, 2024 and December 31, 2023, respectively.

The change in valuation for the contingent payment liability was a result of updates to the forecasted operating results for the earn-out period.

The fair values of goodwill and intangibles are measured on a non-recurring basis and are determined using Level 3 inputs, including forecasted cash flows, discount rates, and implied royalty rates (see Note C – Acquisitions and Joint Ventures and Note K – Goodwill and Intangible Assets).

The fair values of lease right-of-use assets and fixed assets related to company-owned retail stores are measured on a non-recurring basis and are determined using Level 3 inputs, including estimated discounted future cash flows associated with the assets using sales trends, market rents and market participant assumptions (see Note F – Leases).

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 (non-recurring). 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.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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