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Fair Value Measurement
 9 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurement Fair Value Measurement
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.
The Company’s financial assets and liabilities subject to fair value measurements as of September 30, 2019 and December 31, 2018 are as follows:

 
 
 
 
September 30, 2019
 
 
 
 
Fair Value Measurements
 
 
Fair value
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 

 
 

 
 

 
 

Cash equivalents
 
$
56,133

 
$
56,133

 
$
—

 
$
—

Current marketable securities – available for sale
 
27,452

 
27,452

 
—

 
—

Forward contracts
 
186

 
—

 
186

 
—

Total assets
 
$
83,771

 
$
83,585

 
$
186

 
$
—

Liabilities:
 
 

 
 

 
 

 
 

Contingent consideration
 
$
9,770

 
$
—

 
$
—

 
$
9,770

Total liabilities
 
$
9,770

 
$
—

 
$
—

 
$
9,770


 
 
 
 
December 31, 2018
 
 
 
 
Fair Value Measurements
 
 
Fair value
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 

 
 

 
 

 
 

Cash equivalents
 
$
77,050

 
$
77,050

 
$
—

 
$
—

Current marketable securities – available for sale
 
66,968

 
66,968

 
—

 
—

Forward contracts
 
707

 
—

 
707

 
—

Total assets
 
$
144,725

 
$
144,018

 
$
707

 
$
—

Liabilities:
 
 

 
 

 
 

 
 

Contingent consideration
 
$
3,000

 
$
—

 
$
—

 
$
3,000

Total liabilities
 
$
3,000

 
$
—

 
$
—

 
$
3,000



Our level 3 balance consists of contingent consideration related to acquisitions. The changes in our level 3 liabilities for the periods ended September 30, 2019 and December 31, 2018 are as follows:
 
Balance at January 1,
 
Payments
 
Acquisitions
 
Change in estimate
 
Balance at September 30,
2019
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
     Contingent consideration
$
3,000

 
—

 
9,770

 
(3,000
)
 
$
9,770

 
 
 
 
 
 
 
 
 
 
 
Balance at January 1,
 
Payments
 
Acquisitions
 
Change in estimate
 
Balance at December 31,
2018
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
     Contingent consideration
$
10,000

 
(7,000
)
 
—

 
—

 
3,000



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

The Company recorded a $5,000 liability for potential contingent consideration in connection with the August 9, 2019 acquisition of GREATS Brand, Inc. Pursuant to the terms of an earn-out provision contained in the equity purchase agreement, between the Company and the sellers of GREATS Brand, Inc., earn-out payments are based on EBIT performance. The fair value of the contingent payments was estimated based on management’s projections of the financial results of GREATS Brand, Inc. during the earn-out period.

The Company recorded a $4,770 liability for potential contingent consideration in connection with the August 12, 2019 acquisition of B.B. Dakota, Inc. Pursuant to the terms of an earn-out provision contained in the equity purchase agreement, between the Company and the sellers of B.B. Dakota, Inc., earn-out payments are based on EBITDA performance. The fair value of the contingent payments was estimated using the present value of the payments based on management’s projections of the financial results of B.B. Dakota, Inc. during the earn-out period.

The Company recorded a liability for potential contingent consideration in connection with the January 30, 2017 acquisition of Schwartz & Benjamin. Pursuant to the terms of an earn-out provision contained in the equity purchase agreement, as amended, between the Company and the sellers of Schwartz & Benjamin, earn-out payments are based on the performance of certain specified license agreements. The fair value of the contingent payments was estimated using the present value of the payments based on management’s projections of the financial results of Schwartz & Benjamin during the earn-out period. An earn-out payment in the aggregate amount of $7,000 was paid to the sellers of Schwartz & Benjamin in the first quarter of 2018, leaving a remaining balance of $3,000 at December 31, 2018, which, in the first quarter of 2019, the Company reversed because it will not need to pay based on the termination of the Kate Spade license agreement, which will occur by the end of the current fiscal year.

The carrying value of certain financial instruments such as accounts receivable, factor accounts receivable and accounts payable approximates their fair values due to the short-term nature of their underlying terms. The fair values of investments in marketable securities available for sale are determined by reference to publicly quoted prices in an active market. 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.