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Fair Value Measurement
 9 Months Ended
Sep. 30, 2013
Fair Value Disclosures [Abstract]  
Fair Value Measurement
Fair Value Measurement
The accounting guidance under Accounting Standards Codification “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.
Note G – Fair Value Measurement (continued)

The Company’s financial assets and liabilities subject to fair value measurements as of September 30, 2013 and December 31, 2012 are as follows: 
 
 
 
 
September 30, 2013
 
 
 
 
Fair Value Measurements
 
 
Fair value
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 

 
 

 
 

 
 

Cash equivalents
 
$
825

 
$
825

 
$
—

 
$
—

Current marketable securities – available for sale
 
19,848

 
19,848

 
—

 
—

Note receivable – related party
 
3,581

 
—

 
—

 
3,581

Forward contracts
 
166

 
—

 
166

 
—

Note receivable from seller of SM Canada
 
3,085

 
—

 
—

 
3,085

Long-term marketable securities – available for sale
 
92,431

 
92,431

 
—

 
—

Total assets
 
$
119,936

 
$
113,104

 
$
166

 
$
6,666

Liabilities:
 
 

 
 

 
 

 
 

Contingent consideration
 
$
39,699

 
—

 
—

 
$
39,699

Total liabilities
 
$
39,699

 
—

 
—

 
$
39,699

 
 
 
 
 
 
December 31, 2012
 
 
 
 
Fair Value Measurements
 
 
Fair value
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 

 
 

 
 

 
 

Cash equivalents
 
$
5,707

 
$
5,707

 
$
—

 
$
—

Current marketable securities – available for sale
 
16,285

 
16,285

 
—

 
—

Note receivable – related party
 
3,581

 
—

 
—

 
3,581

Forward contracts
 
161

 
—

 
161

 
—

Note receivable from seller of SM Canada
 
3,085

 
—

 
—

 
3,085

Long-term marketable securities – available for sale
 
81,202

 
81,202

 
—

 
—

Total assets
 
$
110,021

 
$
103,194

 
$
161

 
$
6,666

Liabilities:
 
 

 
 

 
 

 
 

Contingent consideration
 
$
41,960

 
—

 
—

 
$
41,960

Total liabilities
 
$
41,960

 
—

 
—

 
$
41,960



Forward contracts are entered into to manage the risk associated with the volatility of future cash flows denominated in Mexican pesos. Fair value of these instruments is based on observable market transactions of spot and forward rates.
For the notes receivable due from related party and from the seller of SM Canada (see Note P), the carrying value was determined to be the fair value, based upon their imputed or actual interest rates, which approximate current market interest rates.
 
The Company has recorded a liability for potential contingent consideration in connection with the February 21, 2012 acquisition of SM Canada (see Note P). Pursuant to the terms of an earn-out agreement between the Company and the seller of SM Canada, earn-out payments will be due annually to the seller of SM Canada based on the financial performance of SM Canada for each of the twelve-month periods ending on March 31, 2013 through 2017, inclusive. The fair value of the contingent payments was

Note G – Fair Value Measurement (continued)

estimated using the present value of management’s projections of the financial results of SM Canada during the earn-out period. The current portion of the earn-out due based on the twelve-month period ended March 31, 2013 approximates the recorded value and will be paid in the fourth quarter of 2013.

The Company has recorded a liability for potential contingent consideration in connection with the May 25, 2011 acquisition of Cejon Inc., Cejon Accessories, Inc. and New East Designs, LLC (collectively "Cejon"). Pursuant to the terms of an earn-out agreement between the Company and the sellers of Cejon, earn-out payments will be made 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 current year payment was made during the third quarter in the amount of $5,139. The fair value of the remaining contingent payments was estimated using the present value of management’s projections of the financial results of Cejon during the earn-out period.
 
The Company recorded a liability for contingent consideration as a result of the February 10, 2010 acquisition of Big Buddha, Inc. The final contingent consideration was paid during the third quarter of 2013 in the amount of $1,813 based on the financial performance of Big Buddha for the twelve-month period ended March 31, 2013.
 
Accounting guidance permits entities to choose to measure financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The accounting guidance also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that chose different measurement attributes for similar assets and liabilities. The Company has elected not to measure any eligible items at fair value.

The carrying value of certain financial instruments such as accounts receivable, due from factor and accounts payable approximates their fair values due to the short-term nature of their underlying terms. The fair values of investment in marketable securities available for sale are determined by reference to market data and other valuation techniques, as appropriate. Fair value of the notes receivable held by the Company approximates their carrying value based upon their imputed or actual interest rate, which approximates current market interest rates.