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Note F - Fair Value Measurement
 12 Months Ended
Dec. 31, 2011
Fair Value Disclosures [Text Block]

Note F – Fair Value Measurement


The accounting guidance under Accounting Standards Codification (“ASC”) “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 subject to fair value measurements as of December 31, 2011 are as follows:


         

Fair Value Measurements

Using Fair Value Hierarchy

 
   

Fair value

   

Level 1

   

Level 2

   

Level 3

 
Assets:                        
Cash equivalents   $ 57,652     $ 57,652     $ –     $ —  
Current marketable securities – available for sale     5,659       5,659       —       —  
Investment in Bakers     996       —       996       —  
Note receivable – Bakers     4,092       —       —       4,092  
Note receivable – Betsey Johnson     3,309       —       —       3,309  
Long-term marketable securities – available for sale     72,004       72,004       —       —  
                                 
Total assets   $ 143,712     $ 135,315     $ 996     $ 7,401  
Liabilities:                                
Contingent consideration – Big Buddha   $ 8,221       —       —     $ 8,221  
Contingent consideration – Cejon     23,500       —       —       23,500  
Contingent consideration – Topline     6,200       —       —       6,200  
                                 
Total liabilities   $ 37,921       —       —     $ 37,921  

Note F – Fair Value Measurement (continued)


The Company’s financial assets subject to fair value measurements as of December 31, 2010 are as follows:


         

Fair Value Measurements

Using Fair Value Hierarchy

 
Assets:  

Fair value

   

Level 1

   

Level 2

   

Level 3

 
Cash equivalents   $ 32,145     $ 32,145     $ —     $ —  
Current marketable securities – available for sale     13,289       13,289       —       —  
Investment in Bakers     996       —       996       —  
Note receivable – Bakers     4,024       —       —       4,024  
Note receivable – Betsey Johnson     3,000       —       —       3,000  
Long-term marketable securities – available for sale     114,317       114,317       —       —  
                                 
Total assets   $ 167,771     $ 159,751     $ 996     $ 7,024  
                                 
Liabilities:                                
Contingent consideration   $ 12,372       —       —     $ 12,372  
                                 
Total liabilities   $ 12,372       —       —     $ 12,372  

Pursuant to the Debenture and Stock Purchase Agreement with Bakers (see Note D), the Company acquired 1,844,860 unregistered shares of Bakers common stock, which trades on the OTC Bulletin Board. These shares, which are thinly traded, were valued using the quoted price of similar registered shares of Bakers common stock adjusted for the effect of the transfer restriction, considering factors such as the nature and duration of the transfer restriction, the volatility of the stock and the risk free interest rate. The shares are included in deposits and other assets on the Company’s Consolidated Balance Sheets. For the note receivable due from Bakers (see Note D), which was purchased at a substantial discount, the carrying value was determined to be the fair value. For the note receivable due from Betsey Johnson (see Note D), the carrying value was determined to be the fair value.


The Company has recorded a liability for potential contingent consideration in connection with the May 25, 2011 acquisition of Cejon (see Note B). Pursuant to the terms of an earn-out agreement between the Company and the sellers of Cejon, earn-out payments may be due annually to the sellers of Cejon based on the financial performance of Cejon for each of the twelve-month periods ending on June 30, 2012 through 2016, inclusive. The fair value of the contingent payments was estimated using the present value of management’s projections of the financial results of Cejon during the earn-out period. There have been no significant changes in estimates since the date of the acquisition.


The Company has recorded a liability for potential contingent consideration in connection with the May 20, 2011 acquisition of Topline (see Note B). Pursuant to the terms of the acquisition agreement, an earn-out payment may be due to the seller of Topline based on the financial performance of Topline for the twelve-month period ending on June 30, 2012. The fair value of the contingent payment was estimated using the present value of management’s projections of the financial results of Topline during the earn-out period. There have been no significant changes in estimates since the date of the acquisition.


The Company has recorded a liability for potential contingent consideration in connection with the February 10, 2010 acquisition of Big Buddha (see Note B). Pursuant to the terms of an earn-out agreement between the Company and the seller of Big Buddha,, earn-out payments may be due annually to the seller of Big Buddha based on the financial performance of Big Buddha for each of the twelve-month periods ending on March 31, 2012 and 2013. The fair value of the contingent payments was estimated using the present value of management’s projections of the financial results of Big Buddha during the earn-out period. The contingent payment for the twelve-month period ended March 31, 2011 was $3,603.