UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2018~~2019

o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to _____________________

Commission File Number 0-23702

STEVEN MADDEN, LTD.

(Exact name of registrant as specified in its charter)



Delaware		13-3588231
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)



~~52-16 Barnett Avenue, Long Island City, New York~~		~~11104~~
~~(Address of principal executive offices)~~		~~(Zip Code)~~

52-16 Barnett Avenue, Long Island City, New York 11104

(Address of principal executive offices) (Zip Code)

~~(718) 446-1800~~

~~(Registrant’s telephone number, including area code)~~

Registrant's telephone number, including area code: (718) 446-1800

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesx No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yesx No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filerx	x		Accelerated filero	☐	Emerging growth company	☐
Non-accelerated filero ~~(do not check if smaller reporting company)~~	☐		Smaller reporting companyo
☐		~~Emerging growth company~~ o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yeso☐ No x

Securities registered pursuant to Section 12(b) of the Exchange Act:



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $.0001 per share	SHOO	The NASDAQ Stock Market LLC

As of ~~November 8, 2018, the latest practicable date,~~August 1, 2019, there were ~~87,454,640~~84,860,214 shares of the registrant’s common stock, $0.0001 par value, outstanding.

STEVEN MADDEN, LTD.

TABLE OF CONTENTS TO QUARTERLY REPORT ON FORM 10-Q

~~September~~June 30, ~~2018~~2019



PART I – FINANCIAL INFORMATION

ITEM 1.	Condensed Consolidated Financial Statements (Unaudited):

	Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Statements of Income	2

	Condensed Consolidated Statements of Comprehensive Income	3

	Condensed Consolidated Statements of ~~Cash Flows~~Changes in Stockholder' Equity	4

	Condensed Consolidated Statements of Cash Flows	6

	Notes to Condensed Consolidated Financial Statements - Unaudited	57

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2120

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	30

ITEM 4.	Controls and Procedures	31

PART II – OTHER INFORMATION

ITEM 1.	Legal Proceedings	31

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

ITEM 4.6.	~~Controls and Procedures~~Exhibits	32

~~PART II – OTHER INFORMATION~~

~~ITEM 1.~~	~~Legal Proceedings~~	34

~~ITEM 1A.~~	~~Risk Factors~~	34

~~ITEM 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	35

~~ITEM 6.~~	~~Exhibits~~	3633

	Signatures	3734

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)


	September 30, 2018			December 31, 2017			September 30, 2017			June 30, 2019			December 31, 2018			June 30, 2018
	(unaudited)						(unaudited)			(unaudited)						(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	172,537		$	181,214		$	92,080		$	212,664		$	200,031		$	190,985
Accounts receivable, net of allowances of $1,380, $1,973, and $1,328	49,260			39,473			49,266
Accounts receivable, net of allowances of $12,570, $10,849 and $1,292										21,409			25,057			39,510
Factor accounts receivable	282,789			201,436			287,934			285,227			241,395			245,808
Inventories	147,491			110,324			124,117			146,120			137,247			133,627
Marketable securities – available for sale	57,896			64,027			50,976			36,096			66,968			64,327
Prepaid expenses and other current assets	24,056			19,538			26,061			31,275			23,425			24,483
Prepaid taxes	19,910			29,506			18,560			8,012			9,002			13,289
Total current assets	753,939			645,518			648,994			740,803			703,125			712,029
Note receivable – related party	2,018			2,289			2,378			1,743			1,927			2,108
Property and equipment, net	65,472			71,498			73,922			61,654			64,807			67,378
Operating lease right-of-use asset										179,320			—			—
Deposits and other	1,980			2,121			4,835			2,592			1,967			2,211
Marketable securities – available for sale	—			29,523			33,839			—			—			2,122
Deferred taxes	6,381			6,370			1,813			9,319			9,321			6,340
Goodwill – net	148,956			148,538			153,974			148,566			148,112			148,142
Intangibles – net	146,313			151,304			151,648			137,563			143,311			147,312
Total Assets	$	1,125,059		$	1,057,161		$	1,071,403		$	1,281,560		$	1,072,570		$	1,087,642
LIABILITIES
Current liabilities:
Accounts payable	$	94,636		$	66,955		$	102,906		$	107,436		$	79,802		$	100,463
Accrued expenses	113,325			120,624			97,088			129,810			130,592			126,774
Income taxes payable	—			1,566			—
Operating leases - current portion										38,652			—			—
Contingent payment liability – current portion	—			7,000			1,889			—			3,000			—
Accrued incentive compensation	8,569			10,467			9,397			6,321			11,295			4,189
Total current liabilities	216,530			206,612			211,280			282,219			224,689			231,426
Contingent payment liability	3,000			3,000			21,161			—			—			3,000
Deferred rent	15,707			16,033			15,998			—			15,786			15,727
Operating leases - long-term portion										154,643			—			—
Deferred taxes	3,602			3,602			18,740			4,041			4,041			3,602
Other liabilities	19,023			18,982			1,223			13,101			13,372			3,594
Total Liabilities	257,862			248,229			268,402			454,004			257,888			257,349
Commitments, contingencies and other (Note N)
STOCKHOLDERS’ EQUITY
Preferred stock – $.0001 par value, 5,000 shares authorized; none issued; Series A Junior Participating preferred stock – $.0001 par value, 60 shares authorized; none issued	—			—			—			—			—			—
Common stock – $.0001 par value, 135,000 shares authorized, 131,875, 130,959 and 130,551 shares issued, 87,407, 88,047 and 88,599 shares outstanding	6			6			6
Common stock – $.0001 par value, 245,000 shares authorized, 132,681, 131,991 and 131,778 shares issued, 84,821, 85,715 and 87,726 shares outstanding										6			6			6
Additional paid-in capital	418,864			390,723			380,435			438,242			424,835			412,073
Retained earnings	1,217,200			1,135,701			1,111,105			1,264,631			1,217,521			1,173,310
Accumulated other comprehensive loss	(27,424		)	(25,613		)	(22,675		)	(29,449		)	(32,628		)	(28,669		)
Treasury stock 44,468, 42,912 and 41,952 shares at cost	(748,876		)	(697,996		)	(671,810		)
Treasury stock 47,860, 46,276 and 44,052 shares at cost										(855,076		)	(803,920		)	(733,098		)
Total Steven Madden, Ltd. stockholders’ equity	859,770			802,821			797,061			818,354			805,814			823,622
Noncontrolling interest	7,427			6,111			5,940			9,202			8,868			6,671
Total stockholders’ equity	867,197			808,932			803,001			827,556			814,682			830,293
Total Liabilities and Stockholders’ Equity	$	1,125,059		$	1,057,161		$	1,071,403		$	1,281,560		$	1,072,570		$	1,087,642

See accompanying notes to condensed consolidated financial statements - unaudited.

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(unaudited)

(in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017		2018		2017		2019			2018		2019		2018
Net sales	$	458,482	$	441,193	$	1,243,249	$	1,181,728	$	444,974		$	395,753	$	855,914	$	784,767
Cost of sales	283,265		275,302		779,525		743,723		279,629			247,979		533,572		496,260
Gross profit	175,217		165,891		463,724		438,005		165,345			147,774		322,342		288,507
Commission and licensing fee income – net	4,994		4,746		10,897		10,838		3,147			2,244		4,374		5,903
Operating expenses	110,007		105,194		326,276		310,725		119,809			108,434		233,373		216,269
Impairment charges									4,050			—		4,050		—
Income from operations	70,204		65,443		148,345		138,118		44,633			41,584		89,293		78,141
Interest and other income – net	872		564		2,502		1,956		1,262			1,033		2,454		1,630
Income before provision for income taxes	71,076		66,007		150,847		140,074		45,895			42,617		91,747		79,771
Provision for income taxes (Note J)	14,757		21,181		32,885		45,703		9,784			10,172		20,371		18,128
Net income	56,319		44,826		117,962		94,371		36,111			32,445		71,376		61,643
Less: net income attributable to noncontrolling interest	756		596		1,316		1,019
Less: net (loss)/income attributable to noncontrolling interest									(461		)	35		279		560
Net income attributable to Steven Madden, Ltd.	$	55,563	$	44,230	$	116,646	$	93,352	$	36,572		$	32,410	$	71,097	$	61,083


Basic net income per share	$	0.68	$	0.54	$	1.43	$	1.13	$	0.46		$	0.40	$	0.89	$	0.75

Diluted net income per share	$	0.64	$	0.51	$	1.35	$	1.07	$	0.44		$	0.38	$	0.85	$	0.71

Basic weighted average common shares outstanding	81,727		82,356		81,832		82,935		79,951			81,681		80,241		81,885
Effect of dilutive securities – options/restricted stock	4,847		4,271		4,441		3,906		3,918			4,577		3,823		4,238
Diluted weighted average common shares outstanding	86,574		86,627		86,273		86,841		83,869			86,258		84,064		86,123

Cash dividends declared per common share	$	0.13	$	—	$	0.40	$	—	$	0.14		$	0.13	$	0.28	$	0.26

See accompanying notes to condensed consolidated financial statements - unaudited.

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(unaudited)

(in thousands)


	Three Months Ended September 30, 2018									Nine Months Ended September 30, 2018
	Pre-tax amounts			Tax benefit/(expense)			After-tax amounts			Pre-tax amounts			Tax (expense)			After-tax amounts
Net income							$	56,319								$	117,962
Other comprehensive income/(loss):
Foreign currency translation adjustment	$	1,585		$	—		1,585			$	(2,697	)	$	—		(2,697		)
(Loss)/gain on cash flow hedging derivatives	(476		)	114			(362		)	1,062			(255		)	807
Unrealized gain on marketable securities	29			(7		)	22			104			(25		)	79
Total other comprehensive income/(loss)	$	1,138		$	107		1,245			$	(1,531	)	$	(280	)	(1,811		)

Comprehensive income							57,564									116,151
Comprehensive income attributable to noncontrolling interests							756									1,316
Comprehensive income attributable to Steven Madden, Ltd.							$	56,808								$	114,835

	Three Months Ended September 30, 2017									Nine Months Ended September 30, 2017									Three Months Ended June 30, 2019									Six Months Ended June 30, 2019
	Pre-tax amounts			Tax benefit/(expense)			After-tax amounts			Pre-tax amounts			Tax benefit/(expense)			After-tax amounts			Pre-tax amounts			Tax benefit/(expense)			After-tax amounts			Pre-tax amounts			Tax benefit/(expense)			After-tax amounts
Net income							$	44,826								$	94,371								$	36,111								$	71,376
Other comprehensive income:
Foreign currency translation adjustment	$	3,708		$	—		3,708			$	9,545		$	—		9,545			$	1,362		$	—		1,362			$	3,617		$	—		3,617
(Loss) on cash flow hedging derivatives	(362		)	134			(228		)	(1,102		)	408			(694		)	(567		)	136			(431		)	(816		)	196			(620		)
Unrealized gain on marketable securities	46			(17		)	29			357			(132		)	225			18			(4		)	14			88			(21		)	67
Total other comprehensive income	$	3,392		$	117		3,509			$	8,800		$	276		9,076			$	813		$	132		945			$	2,889		$	175		3,064

Comprehensive income							48,335									103,447									37,056									74,440
Comprehensive income attributable to noncontrolling interests							596									1,019
Less: comprehensive (loss)/income attributable to noncontrolling interests																									(536		)							164
Comprehensive income attributable to Steven Madden, Ltd.							$	47,739								$	102,428								$	37,592								$	74,276

																			Three Months Ended June 30, 2018									Six Months Ended June 30, 2018
																			Pre-tax amounts			Tax (expense)			After-tax amounts			Pre-tax amounts			Tax (expense)			After-tax amounts
Net income																									$	32,445								$	61,643
Other comprehensive (loss):
Foreign currency translation adjustment																			$	(4,668	)	$	—		(4,668		)	$	(4,281	)	$	—		(4,281		)
Gain on cash flow hedging derivatives																			568			(136		)	432			1,538			(369		)	1,169
Unrealized gain on marketable securities																			86			(21		)	65			75			(18		)	57
Total other comprehensive (loss)																			$	(4,014	)	$	(157	)	(4,171		)	$	(2,668	)	$	(387	)	(3,055		)

Comprehensive income																									28,274									58,588
Less: comprehensive income attributable to noncontrolling interests																									35									560
Comprehensive income attributable to Steven Madden, Ltd.																									$	28,239								$	58,028

See accompanying notes to condensed consolidated financial statements - unaudited.

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders' Equity

(unaudited)

(in thousands)



	Common Stock				Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive (Loss)			Treasury Stock				Non-Controlling Interest			Total Stockholders' Equity
	Shares		Amount		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive (Loss)			Shares	Amount			Non-Controlling Interest			Total Stockholders' Equity
Balance - March 31, 2019	85,729		$	6	$	431,228	$	1,240,004		$	(30,469	)	46,801	$	(821,074	)	$	10,851		$	830,546
Share repurchases	(1,059	)	—		—		—			—			1,059	(34,002		)	—			(34,002		)
Exercise of stock options	48		—		1,077		—			—			—	—			—			1,077
Issuance of restricted stock, net of forfeitures	103		—		—		—			—			—	—			—			—
Stock-based compensation	—		—		5,937		—			—			—	—			—			5,937
Foreign currency translation adjustment	—		—		—		—			1,437			—	—			(75		)	1,362
Unrealized holding gain on securities (net of tax expense of $4)	—		—		—		—			14			—	—			—			14
Cash flow hedge (net of tax benefit of $136)	—		—		—		—			(431		)	—	—			—			(431		)
Dividends on common stock ($0.14 per share)	—		—		—		(11,945		)	—			—	—			—			(11,945		)
Distributions to non-controlling interests, net	—		—		—		—			—			—	—			(1,113		)	(1,113		)
Net income/(loss)	—		—		—		36,572			—			—	—			(461		)	36,111
Balance - June 30, 2019	84,821		$	6	$	438,242	$	1,264,631		$	(29,449	)	47,860	$	(855,076	)	$	9,202		$	827,556



	Common Stock				Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive (Loss)			Treasury Stock				Non-Controlling Interest			Total Stockholders' Equity
	Shares		Amount		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive (Loss)			Shares	Amount			Non-Controlling Interest			Total Stockholders' Equity
Balance - December 31, 2018	85,715		$	6	$	424,835	$	1,217,521		$	(32,628	)	46,276	$	(803,920	)	$	8,868		$	814,682
Share repurchases	(1,584	)	—		—		—			—			1,584	(51,156		)	—			(51,156		)
Exercise of stock options	80		—		1,799		—			—			—	—			—			1,799
Issuance of restricted stock, net of forfeitures	610		—		—		—			—			—	—			—			—
Stock-based compensation	—		—		11,608		—			—			—	—			—			11,608
Foreign currency translation adjustment	—		—		—		—			3,732			—	—			(115		)	3,617
Unrealized holding gain on securities (net of tax expense of $21)	—		—		—		—			67			—	—			—			67
Cash flow hedge (net of tax benefit of $196)	—		—		—		—			(620		)	—	—			—			(620		)
Dividends on common stock ($0.28 per share)	—		—		—		(23,987		)	—			—	—			—			(23,987		)
Distributions to non-controlling interests, net	—		—		—		—			—			—	—			(1,113		)	(1,113		)
Non-controlling investment in JV	—		—		—		—			—			—	—			1,283			1,283
Net income	—		—		—		71,097			—			—	—			279			71,376
Balance - June 30, 2019	84,821		$	6	$	438,242	$	1,264,631		$	(29,449	)	47,860	$	(855,076	)	$	9,202		$	827,556

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders' Equity

(unaudited)

(in thousands)



	Common Stock				Additional Paid‑in Capital		Retained Earnings			Accumulated Other Comprehensive (Loss)			Treasury Stock				Non-Controlling Interest		Total Stockholders' Equity
	Shares		Amount		Additional Paid‑in Capital		Retained Earnings			Accumulated Other Comprehensive (Loss)			Shares	Amount			Non-Controlling Interest		Total Stockholders' Equity
Balance - March 31, 2018	87,498		$	6	$	397,135	$	1,152,616		$	(24,498	)	43,763	$	(723,673	)	$	6,636	$	808,222
Share repurchases	(289	)	—		—		—			—			289	(9,425		)	—		(9,425		)
Exercise of stock options	432		—		9,596		—			—			—	—			—		9,596
Issuance of restricted stock, net of forfeitures	85		—		—		—			—			—	—			—		—
Stock-based compensation	—		—		5,342		—			—			—	—			—		5,342
Foreign currency translation adjustment	—		—		—		—			(4,668		)	—	—			—		(4,668		)
Unrealized holding gain on securities (net of tax expense of $21)	—		—		—		—			65			—	—			—		65
Cash flow hedge (net of tax expense of $136)	—		—		—		—			432			—	—			—		432
Dividends on common stock ($0.13 per share)	—		—		—		(11,716		)	—			—	—			—		(11,716		)
Net income	—		—		—		32,410			—			—	—			35		32,445
Balance - June 30, 2018	87,726		$	6	$	412,073	$	1,173,310		$	(28,669	)	44,052	$	(733,098	)	$	6,671	$	830,293



	Common Stock				Additional Paid‑in Capital		Retained Earnings			Accumulated Other Comprehensive (Loss)			Treasury Stock				Non-Controlling Interest		Total Stockholders' Equity
	Shares		Amount		Additional Paid‑in Capital		Retained Earnings			Accumulated Other Comprehensive (Loss)			Shares	Amount			Non-Controlling Interest		Total Stockholders' Equity
Balance - December 31, 2017	88,047		$	6	$	390,723	$	1,135,701		$	(25,614	)	42,912	$	(697,996	)	$	6,111	$	808,931
Share repurchases	(1,140	)	—		—		—			—			1,140	(35,102		)	—		(35,102		)
Exercise of stock options	503		—		11,115		—			—			—	—			—		11,115
Issuance of restricted stock, net of forfeitures	316		—		—		—			—			—	—			—		—
Stock-based compensation	—		—		10,235		—			—			—	—			—		10,235
Foreign currency translation adjustment	—		—		—		—			(4,281		)	—	—			—		(4,281		)
Unrealized holding gain on securities (net of tax expense of $18)	—		—		—		—			57			—	—			—		57
Cash flow hedge (net of tax expense of $369)	—		—		—		—			1,169			—	—			—		1,169
Dividends on common stock ($0.26 per share)	—		—		—		(23,474		)	—			—	—			—		(23,474		)
Net income	—		—		—		61,083			—			—	—			560		61,643
Balance - June 30, 2018	87,726		$	6	$	412,073	$	1,173,310		$	(28,669	)	44,052	$	(733,098	)	$	6,671	$	830,293

See accompanying notes to condensed consolidated financial statements - unaudited.

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2018			2017			2019			2018
Cash flows from operating activities:
Net income	$	117,962		$	94,371		$	71,376		$	61,643
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	15,340			15,680			11,608			10,235
Depreciation and amortization	17,169			15,688			10,763			11,109
Loss on disposal of fixed assets	24			924
Loss/(gain) on disposal of fixed assets							737			(14		)
Impairment of intangible							4,050			—
Deferred taxes	1,960			(190		)	2			2,001
Accrued interest on note receivable - related party	(35		)	(41		)	(21		)	(24		)
Deferred rent (benefit)/expense	(326		)	1,420
Realized loss/(gain) on sale of marketable securities	182			(52		)
Changes in fair value on contingent liability	—			(589		)
Bad debt expense from bankruptcy of a customer	—			7,970
Deferred rent benefit							—			(306		)
Realized loss on sale of marketable securities							5			182
Net benefit in connection with the reversal of a contingent liability partially offset by the acceleration of amortization related to the termination of the Kate Spade license agreement							(1,868		)	—
Recovery, net of provisions for bad debt expense, related to the Payless ShoeSource bankruptcy							(259		)	—
Changes, net of acquisitions, in:
Accounts receivable	(9,787		)	10,819			3,909			(37		)
Factor accounts receivable	(81,353		)	(143,766		)	(43,832		)	(44,372		)
Notes receivable - related party	307			307			204			205
Inventories	(37,167		)	8,405			(8,873		)	(23,303		)
Prepaid expenses, prepaid taxes, deposits and other	5,234			4,211			(7,849		)	11,182
Accounts payable and accrued expenses	18,816			19,825			26,232			38,092
Accrued incentive compensation	(1,898		)	1,437			(4,974		)	(6,278		)
Other liabilities	39			(1,409		)
Lease and other liabilities							(1,449		)	(15,388		)
Net cash provided by operating activities	46,467			35,010			59,761			44,927

Cash flows from investing activities:
Acquisitions, net of cash acquired	—			(17,396		)
Capital expenditures	(8,164		)	(11,710		)	(6,214		)	(5,251		)
Purchases of marketable securities	(42,531		)	(39,142		)	(37,426		)	(41,738		)
Repayment of notes receivable	—			221
Maturity/sale of marketable securities	76,373			67,432			69,488			66,634
Net cash provided by/(used in) investing activities	25,678			(595		)
Net cash provided by investing activities							25,848			19,645

Cash flows from financing activities:
Proceeds from exercise of stock options	12,801			11,312			1,799			11,115
Investment of noncontrolling interest							1,283			—
Distribution of noncontrolling interest earnings							(1,113		)	—
Payment of contingent liability	(7,000		)	(7,359		)	—			(7,000		)
Common stock purchased for treasury	(50,881		)	(73,226		)	(51,156		)	(35,102		)
Cash dividends paid on common stock	(35,147		)	—			(23,987		)	(23,474		)
Net cash (used in) financing activities	(80,227		)	(69,273		)	(73,174		)	(54,461		)
Effect of exchange rate changes on cash and cash equivalents	(595		)	823			198			(340		)
Net (decrease) in cash and cash equivalents	(8,677		)	(34,035		)
Net increase in cash and cash equivalents							12,633			9,771
Cash and cash equivalents – beginning of period	181,214			126,115			200,031			181,214
Cash and cash equivalents – end of period	$	172,537		$	92,080		$	212,664		$	190,985

See accompanying notes to condensed consolidated financial statements - unaudited.

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

~~September~~June 30, ~~2018~~2019

($ in thousands except share and per share data)

Note A – Basis of Reporting

The accompanying unaudited condensed consolidated financial statements of Steven Madden, Ltd. and subsidiaries (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the financial position of the Company and the results of its operations and cash flows for the periods presented. Certain adjustments were made to prior years' amounts to conform to the ~~2018~~2019 presentation and to reflect the three-for-two stock split (see Note B)B). The results of operations for the three and ~~nine~~six month periods ended ~~September~~June 30, ~~2018~~2019 are not necessarily indicative of the operating results for the full year. These financial statements should be read in conjunction with the financial statements and related disclosures for the year ended December 31, ~~2017~~2018 included in the Annual Report of Steven Madden, Ltd. on Form 10-K filed with the SEC on ~~March 1, 2018 and Amendment No. 1 on Form 10-K/A filed with the SEC on November 9, 2018.~~February 28, 2019.

Note B – Stock Split

On September 17, 2018, the Company announced that on September 11, 2018 its Board of Directors declared a three-for-two stock split of the Company's outstanding shares of common stock, effected in the form of a stock dividend on the Company's outstanding common stock. Stockholders of record at the close of business on October 1, 2018 received one additional share of Steven Madden, Ltd. common stock for every two shares of common stock owned on that date. The additional shares were distributed on October 11, 2018. Stockholders received cash in lieu of any fractional shares of common stock they otherwise would have received in connection with the dividend. All share and per share data provided herein gives effect to this stock split, applied retroactively.

Note C – Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Significant areas involving management estimates include variable consideration included in revenue, allowances for bad debts, inventory valuation, valuation of intangible assets, litigation reserves and contingent payment liabilities. The Company estimates variable consideration on trade accounts receivables and factor receivables for future customer chargebacks and markdown allowances, discounts, returns and other miscellaneous compliance-related deductions that relate to the current period sales. The Company evaluates anticipated chargebacks by reviewing several performance indicators of its major customers. These performance indicators, which include retailers’ inventory levels, sell-through rates and gross margin levels, are analyzed by management to estimate the amount of the anticipated customer allowance.

Note D – Factor Receivable

The Company has a collection agency agreement with Rosenthal & Rosenthal, Inc. (“Rosenthal”). The agreement can be terminated by the Company or Rosenthal at any time upon 60 days prior written notice. Under the agreement, the Company can request advances from Rosenthal of up to 85% of aggregate receivables submitted to Rosenthal. The agreement provides the Company with a $30,000 credit facility with a $15,000 sub-limit for letters of credit at an interest rate based, at the Company’s election, upon a calculation that utilizes either the prime rate minus 0.5% or LIBOR plus 2.5%. As of ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, no borrowings were outstanding onunder the credit facility. As of ~~September~~June 30, ~~2018~~2019 there were no open letters of credit and ~~2017,~~as of June 30, 2018 there were open letters of credit of ~~$812 and $447, respectively.~~$110. The Company also pays Rosenthal a fee based on a percentage of the gross invoice amount submitted to Rosenthal. With respect to receivables related to our private label business, the fee is 0.14% of the gross invoice amount. With respect to all other receivables, the fee is 0.20% of the gross invoice amount. Rosenthal assumes the credit risk on a substantial portion of the receivables that the Company submits to it and, to the extent of any loans made to the Company, Rosenthal maintains a lien on the Company’s receivables to secure the Company’s obligations.

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

~~September~~June 30, ~~2018~~2019

($ in thousands except share and per share data)

Note E – Marketable Securities

Marketable securities consist primarily of certificates of deposit and corporate bonds with maturities greater than three months and up to four years at the time of purchase. These securities, which are classified as available-for-sale, are carried at fair value, with unrealized gains and losses, net of any tax effect, reported in stockholders’ equity as accumulated other comprehensive ~~income~~ income/(loss). These securities are classified as current and non-current marketable securities based upon their maturities. Amortization of premiums and discounts is included in interest income. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, the amortization of bond premiums totaled ~~$175~~$88 and ~~$557~~$218 compared to ~~$219~~$183 and ~~$771,~~$382, respectively. The value of these securities may fluctuate as a result of changes in market interest rates and credit risk. The schedule of maturities at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 is as follows:



	Maturities as of June 30, 2019				Maturities as of December 31, 2018
	1 Year or Less		1 to 4 Years		1 Year or Less		1 to 4 Years
Corporate bonds	$	2,150	$	—	$	24,617	$	—
Certificates of deposit	33,946		—		42,351		—
Total	$	36,096	$	—	$	66,968	$	—

Maturities as of
September 30, 2018 Maturities as of
December 31, 2017
1 Year or Less 1 to 4 Years 1 Year or Less 1 to 4 Years
Corporate bonds $ 26,451
$ —
$ 11,979
$ 29,523
Certificates of deposit 31,445
—
52,048
—
Total $ 57,896
$ —
$ 64,027
$ 29,523

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, losses of $0$5 and ~~$182~~$5 were reclassified from accumulated other comprehensive income and recognized in the ~~income statement~~Condensed Consolidated Statements of Income in interest and other income compared to ~~gains~~losses of ~~$24~~$49 and ~~$52~~$182 for the comparable periods in ~~2017.~~2018. For the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, current marketable securities included immaterial unrealized losses ~~of $113~~ and no non-current marketable securities were held by the Company. For the comparable period in ~~2017,~~2018, current marketable securities included unrealized ~~gains of $4 and unrealized~~ losses of ~~$93~~$114 while non-current marketable securities included unrealized ~~gains of $37 and unrealized~~ losses of ~~$29.~~$21.

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

June 30, 2019

($ in thousands except share and per share data)

Note F – 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.

~~STEVEN MADDEN, LTD. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~ – ~~Unaudited~~

~~September 30, 2018~~

~~($ in thousands except share and per share data)~~

~~Note F – Fair Value Measurement (continued)~~

The Company’s financial assets and liabilities subject to fair value measurements as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 are as follows:


			September 30, 2018								June 30, 2019
			Fair Value Measurements								Fair Value Measurements
	Fair value		Level 1		Level 2		Level 3		Fair value		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	89,782	$	89,782	$	—	$	—	$	96,781	$	96,781	$	—	$	—
Current marketable securities – available for sale	57,896		57,896		—		—		36,096		36,096		—		—
Forward contracts	262		—		262		—
Total assets	$	147,940	$	147,678	$	262	$	—	$	132,877	$	132,877	$	—	$	—
Liabilities:
Contingent consideration	$	3,000	$	—	$	—	$	3,000
Forward contracts									$	139	$	—	$	139	$	—
Total liabilities	$	3,000	$	—	$	—	$	3,000	$	139	$	—	$	139	$	—



			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

December 31, 2017
Fair Value Measurements
Fair value Level 1 Level 2 Level 3
Assets:

Cash equivalents $ 58,436
$ 58,436
$ —
$ —
Current marketable securities – available for sale 64,027
64,027
—
—
Long-term marketable securities – available for sale 29,523
29,523
—
—
Total assets $ 151,986
$ 151,986
$ —
$ —
Liabilities:

Contingent consideration $ 10,000
$ —
$ —
$ 10,000
Forward contracts 783
—
783
—
Total liabilities $ 10,783
$ —
$ 783
$ 10,000

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

~~September~~June 30, ~~2018~~2019

($ in thousands except share and per share data)

~~Note F – Fair Value Measurement (continued)~~

Our level 3 balance consists of contingent consideration related to an acquisition. The changes in our level 3 liabilities for the periods ended ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 are as follows:



	Balance at January 1,		Payments		Acquisitions	Change in estimate		Balance at June 30,
2019
Liabilities:
Contingent consideration	$	3,000	—		—	(3,000	)	$	—

	Balance at January 1,		Payments		Acquisitions	Change in estimate		Balance at December 31,
2018
Liabilities:
Contingent consideration	$	10,000	(7,000	)	—	—		3,000

Balance at January 1, Payments Acquisitions Change in estimate Balance at September 30,
2018
Liabilities:
Contingent consideration $ 10,000
(7,000 ) —
—
$ 3,000

Balance at January 1, Payments Acquisitions Change in estimate Balance at December 31,
2017
Liabilities:
Contingent consideration $ 7,948
(7,359 ) 20,617
(11,206 ) $ 10,000

The change in estimate of the contingent consideration for the year ended December 31, 2017 of $11,206, which occurred in the fourth quarter, has been reflected as a reduction in operating expenses on the Consolidated Statement of Income for the year ended December 31, 2017.

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

The Company ~~has~~ recorded a liability for potential contingent consideration in connection with the January 30, 2017 acquisition of ~~all of the outstanding capital stock of~~ Schwartz & ~~Benjamin, Inc., B.D.S., Inc., Quinby Ridge Enterprises LLC and DanielBarbara Enterprises LLC (collectively, "Schwartz & Benjamin").~~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.~~

~~The Company recorded~~2018, leaving a ~~liability for potential contingent consideration in connection with the December 30, 2014 acquisition~~remaining balance of all of the outstanding capital stock of Trendy Imports S.A. de C.V., Comercial Diecisiette S.A. de C.V., and Maximus Designer Shoes S.A. de C.V. (together "SM Mexico"). Pursuant to the terms of an earn-out agreement between the Company and the seller of SM Mexico, earn-out payments were due annually to the seller of SM Mexico based on the financial performance of SM Mexico for each of the twelve-month periods ending on$3,000 at December 31, 2015 and 2016, inclusive. The fair value of the contingent payments was estimated using the present value of management's projections of the financial results of SM Mexico during the earn-out period. The first earn-out payment of $3,482 for the period ended December 31, 2015 was paid to the seller of SM Mexico2018, which, in the first quarter of ~~2016. The final earn-out payment of $4,618 for the period ended December 31, 2016 was paid to the seller of SM Mexico in 2017.~~

The Company recorded a liability for potential contingent consideration in connection with the February 21, 2012 acquisition of all of the assets of Steve Madden Canada Inc., Steve Madden Retail Canada Inc., Pasa Agency Inc. and Gelati Imports Inc. (collectively, “SM Canada”). Pursuant to the terms of an earn-out agreement between2019, the Company ~~and the seller of SM Canada, earn-out payments were due annually~~reversed because it will not need to ~~the seller of SM Canada~~pay based on the ~~financial performance of SM Canada for each~~termination of the ~~12-month periods ending on March 31, 2013 through 2017, inclusive. The fair value~~Kate Spade license agreement, which will occur by the end of the contingent payments was estimated using the present value of management’s projections of the financial results of SM Canada during the earn-out period. The final earn-out payment of $2,741 for the period ended March 31, 2017 was paid to the seller of SM Canada in 2017.current fiscal year.

~~STEVEN MADDEN, LTD. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~ – ~~Unaudited~~

~~September 30, 2018~~

~~($ in thousands except share and per share data)~~

~~Note F – Fair Value Measurement (continued)~~

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, factor accounts receivable and accounts payable approximates their fair values due to the short-term nature of their underlying terms. The fair values of ~~investment~~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.

Note G – ~~Revenue Recognition~~Leases

~~Adoption of Accounting Standards Update, Topic 606, "Revenue from Contracts with Customers"~~

~~In May 2014,~~During the Financial Accounting Standards Board (the "FASB") issued new accounting guidance ("Topic 606"), Accounting Standards Update No. 2014-09 ("ASU 2014-09"), "Revenue from Contracts with Customers," on revenue recognition. The new standard has replaced Revenue Recognition Topic 605 and provides for a single five-step model to be applied to all revenue contracts with customers as well as requiring additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Effective January 1, 2018,first quarter 2019, the Company adopted ASU No. 2016-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the ~~requirements of Topic 606~~balance sheet. The Company adopted the standard using the ~~cumulative effect adjustment approach.~~modified retrospective approach with an effective date as of January 1, 2019. The ~~impacts~~Company did not apply the new standard to ~~the financial statements of this adoption~~comparative periods and therefore, those amounts are primarily related to balance sheet classification, including amounts associated with the change in balance sheet classification of the sales returns reserves, with no significant impact to the income statement as the Company's existing revenue recognition policies are in line with Topic 606.

not presented below.

The Company ~~recognizes revenue when performance obligations identified under~~elected the ~~terms~~package of three practical expedients. As such, the Company did not reassess whether expired or existing contracts are or contain a lease and did not need to reassess the lease classifications or reassess the initial direct costs associated with ~~its customers~~expired or existing leases. The Company did not elect the hindsight practical expedient and the land easement practical expedient, neither of which are satisfied, which generally occurs upon the transfer of control in accordance with the contractual terms and conditions of the sale. The majority of the Company’s revenue is recognized at a point in time when product is shippedapplicable to the ~~customer. Revenue is measured as the amount of consideration~~Company. Also, the Company ~~expects~~has elected to ~~receive in exchange~~take the practical expedient to not separate lease and non-lease components for transferring goods, which includes estimates for variable consideration. Variable consideration mainly includes markdown allowances, co-op advertising programs and product returns. The revenue recognition for the Company's segments are described below (see Note O for disaggregated revenue amounts by segment).all asset classes.

~~A. Disaggregation of Revenue~~

~~Wholesale Sales Segment.~~ The Company generates revenue through the design, sourcing and sale of branded footwear and accessories to both domestic and international customers who in-turn sell the products to the consumer. The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied, which occurs upon the transfer of control of the merchandise in accordance with the contractual terms and conditions of the sale. The Company's revenue associated with its branded footwear and accessories products is recognized at a point in time when product is shipped to the customer. The Company also generates revenue through the design, sourcing and sale of private label footwear and accessories to both domestic and international customers who brand the products and sell them to the consumer. The Company's revenue associated with private label footwear and accessories products is recognized at a point in time when product is physically delivered to the customer's freight forwarder.

~~Retail Segment.~~ The Company owns and operates 210 retail stores throughout the United States, Canada, Mexico, South Africa, and China, including seven e-commerce sites. The Company generates revenue through the sale of branded footwear and accessories directly to the consumer. The Company's revenue associated with Retail sales is recognized at the time of the point of sale when the customer takes control of the goods and payment is received.

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

~~September~~June 30, ~~2018~~2019

($ in thousands except share and per share data)

~~Note G – Revenue Recognition (continued)~~

~~First Cost Segment.~~ The Company earns commissions for serving as a buying agent for footwear products under private labels and certain owned brands for many of the large mass-market merchandisers, shoe chains and other mid-tier retailers. As a buying agent, the Company utilizes its expertise and relationships with shoe manufacturers to facilitate the production of private label shoes to customer specifications. The Company’s commission revenue also includes fees charged for its design and product development services provided to certain suppliers. The Company satisfies its performance obligation to its customers by performing the services in buyer agency agreements and thereby earning its commission fee at the point in time when the customer’s freight forwarder takes control of the goods. The Company satisfies its performance obligation with the suppliers and earns its design fee from the factory at the point in time when the customer’s freight forwarder takes control of the goods.

~~Licensing Segment.~~ The Company licenses various trademarks it owns under licensing agreements for use in connection with the manufacture, marketing and sale of eyewear, outerwear, hosiery, activewear, sleepwear, jewelry, watches, hair accessories, umbrellas, bedding, luggage, men’s leather accessories, women's and children's apparel, swimwear, stationary and household goods. The license agreements require the licensee to pay the Company a royalty and, in substantially all of the agreements, an advertising fee, both of which are based on the higher of a minimum or actual net sales percentage as defined in the various agreements. Licensing revenue is recognized on the basis of net sales reported by the licensees, or the minimum guaranteed royalties, if higher. In substantially all of the Company’s license agreements, the minimum guaranteed royalty is earned and receivable on a quarterly basis. The Company recognizes licensing revenue over the period of time in which the license is provided to the benefit of the licensee.

~~B. Variable Consideration~~

~~Markdown Allowances~~

The Company ~~provides markdown allowances~~leases office space, sample production space, warehouses, showrooms, storage, and retail stores under operating leases. The Company’s portfolio of leases is primarily related to ~~its retailer customers, which are recorded as~~real estate and since most our leases do not provide a reduction of revenue in the period in which the branded footwear and accessories revenues are recognized. The Company estimates its markdown allowances by reviewing several performance indicators, including retailers' inventory levels, sell-through rates and gross margin levels.

~~Co-op Advertising Programs~~

~~Under co-op advertising programs,~~readily determinable implicit rate, the Company ~~agrees~~estimated its incremental borrowing rate to ~~reimburse~~discount the ~~retailer for a portion~~lease payments based on information available at lease commencement.

Lease Position

The table below presents the lease-related assets and liabilities recorded on the balance sheet as of June 30, 2019:



	Classification on the Balance Sheet	June 30, 2019
Assets
Noncurrent	Operating lease right-of-use asset	$	179,320

Liabilities
Current	Operating leases - current portion	$	38,652
Noncurrent	Operating leases - long-term portion	154,643
Total operating lease liabilities		$	193,295

Weighted-average remaining lease term		5.9 years
Weighted-average discount rate⁽¹⁾		4.4		%

(1) Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.

Lease Costs

The table below presents certain information related to lease costs ~~incurred by~~for leases during the ~~retailer~~three and six months ended June 30, 2019:



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost	$	11,544	$	22,901
Short-term lease cost	9		16
Less: Sublease Income	147		277
Total lease cost	$	11,406	$	22,640

Other Information

The table below presents supplemental cash flow information related to ~~advertise and promote certain~~leases as of the ~~Company's products.~~ six months ended June 30, 2019:



	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for operating leases	$	22,963

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

June 30, 2019

($ in thousands except share and per share data)

Undiscounted Cash Flows

The ~~Company estimates~~table below reconciles the ~~costs~~undiscounted cash flows for each of ~~co-op advertising programs based~~the first five years and total of the remaining years to the lease liabilities recorded on the ~~terms~~balance sheet as of ~~the agreements with its retailer customers.~~June 30, 2019:

~~Rights of Return~~



	Operating Leases
2019 (remaining six months)	$	23,422
2020	45,349
2021	39,084
2022	30,762
2023	22,397
Thereafter	58,679
Total minimum lease payments	219,693
Less: interest	26,398
Present value of lease liabilities	$	193,295

The Company’s Retail segment accepts returns within 30 days from the date of sale for unworn merchandise which the Company is able to re-sell through the channel. The Company does not accept returns as a normal business practice from its branded and private label wholesale customers except for our cold weather accessories business and our Blondo and Kate Spade brands product lines. The Company estimates returns based on historical experience and current market conditions. Such amounts have historically not been material.

Note H – Share Repurchase Program

The Company's Board of Directors authorized a share repurchase program (the “Share Repurchase Program”), effective as of January 1, 2004. The Share Repurchase Program does not have a fixed expiration or termination date and may be modified or terminated by the Board of Directors at any time. On several occasions the Board of Directors has increased the amount authorized for repurchase ~~most~~of the Company's common stock. Most recently, on ~~July 28, 2017 when~~April 24, 2019, the Board of Directors approved the extension of the Company's Share Repurchase Program for ~~an additional~~up to $200,000 in repurchases of the Company's common ~~stock.~~stock, which includes the amount remaining under the prior authorization. The Share Repurchase Program permits the Company to effect repurchases from time to time through a combination of open market repurchases or in privately negotiated transactions at such prices and times as are determined to be in the best interest of the Company. During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, an aggregate of ~~1,471,848~~1,494,171 shares of the Company's common stock were repurchased under the Share

~~STEVEN MADDEN, LTD. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~ – ~~Unaudited~~

~~September 30, 2018~~

~~($ in thousands except share and per share data)~~

~~Note H – Share Repurchase Program (continued)~~

Repurchase Program, at a weighted average price per share of ~~$32.79,~~$32.26, for an aggregate purchase price of approximately ~~$48,264.~~$48,206, which includes the amount remaining under the prior authorization. As of ~~September~~June 30, ~~2018,~~2019, approximately ~~$132,597~~$166,754 remained available for future repurchases under the Share Repurchase Program.

The Steven Madden, Ltd. ~~2006 Stock~~2019 Incentive Compensation Plan provides the Company with the right to deduct or withhold, or require employees to remit to the Company, an amount sufficient to satisfy any applicable tax withholding obligations applicable to stock-based compensation awards. To the extent permitted, employees may elect to satisfy all or part of such withholding obligations by tendering to the Company previously owned shares or by having the Company withhold shares having a fair market value equal to the ~~minimum statutory~~employee's withholding tax ~~withholding rate that could be imposed on the transaction.~~obligation. During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, an aggregate of ~~83,594~~90,016 shares were withheld in connection with the settlement of vested restricted stock to satisfy tax withholding requirements, at an average price per share of ~~$31.29,~~$32.77, for an aggregate purchase price of approximately ~~2,617.~~$2,950.

Note I – Net Income Per Share of Common Stock

Basic net income per share is based on the weighted average number of shares of common stock outstanding during the period, which does not include unvested restricted common stock subject to forfeiture of ~~5,891,000 and 5,886,000~~5,464,000 shares for the ~~three and nine months~~period ended ~~September~~June 30, ~~2018, respectively,~~2019, compared to ~~6,327,000 and 6,345,000~~5,918,000 shares for the ~~three and nine months~~period ended ~~September~~June 30, ~~2017, respectively.~~2018. Diluted net income per share reflects: (a) the potential dilution assuming shares of common stock were issued upon the exercise of outstanding in-the-money options and the proceeds thereof were used to purchase shares of the Company’s common stock at the average market price during the period, and (b) the vesting of granted non-vested restricted stock awards for which the assumed proceeds upon vesting are deemed to be the amount of compensation cost not yet recognized attributable to future services using the treasury stock method, to the extent dilutive. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, options to purchase approximately 048,000 and ~~102,000~~56,000 shares of common stock,

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

June 30, 2019

($ in thousands except share and per share data)

respectively, have been excluded from the calculation of diluted net income per share as compared to 0approximately 41,000 and ~~75,000~~21,000 shares that were excluded for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, as the result would have been ~~antidilutive.~~anti-dilutive. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, all unvested restricted stock awards were dilutive.

Note J – Income Taxes

The Company’s provision for income taxes for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, is based on the estimated annual effective tax rate, plus or minus discrete items. The following table presents the provision for income taxes and the effective tax rates for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Income before provision for income taxes	$	45,895		$	42,617		$	91,747		$	79,771
Provision for income taxes	$	9,784		$	10,172		$	20,371		$	18,128
Effective tax rate	21.3		%	23.9		%	22.2		%	22.7		%

Three months ended September 30, Nine months ended September 30,
2018 2017 2018 2017
Income before provision for income taxes $ 71,076
$ 66,007
$ 150,847
$ 140,074
Provision for income taxes $ 14,757
$ 21,181
$ 32,885
$ 45,703
Effective tax rate 20.8 % 32.1 % 21.8 % 32.6 %

The primary ~~difference~~differences between the Company’s effective tax rates for the three and ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 ~~and 2017 is~~are due to ~~the reduction of the US statutory tax rate from 35% to 21%, which was~~ a ~~result of the Tax Cuts and Jobs Act (the “Tax Cuts Act”). The effective tax rate may vary significantly due to fluctuations~~decrease in the amount of Global Intangible Low-Taxed Income (“GILTI”) tax incurred, a decrease in the state taxes incurred, and ~~source, including both foreign and domestic, of pretax~~a partially offsetting increase in 2019 pre-tax income ~~and changes~~ in ~~amounts of non-deductible expenses and other items that could impact the effective~~jurisdictions with high tax ~~rate.~~rates.

~~STEVEN MADDEN, LTD. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~ – ~~Unaudited~~

~~September 30, 2018~~

~~($ in thousands except share and per share data)~~

~~Note J – Income Taxes (continued)~~

~~Provisional amounts in effective rate~~

The ~~Tax Cuts Act, which~~Company recognizes interest and penalties, if any, related to uncertain income tax positions in income tax expense. Accrued interest and penalties on unrecognized tax benefits and interest and penalty expense was ~~enacted on December 22,~~immaterial to the consolidated financial statements for all periods presented. The unrecognized tax benefits have not materially changed for the six months ended June 30, 2019.

The Company files income tax returns in the U.S., for federal, state, and local purposes, and in certain foreign jurisdictions. The Company's tax years 2015 through 2018 remain open to examination by most taxing authorities. During 2017, ~~reduces~~ the U.S. ~~federal corporate~~Internal Revenue Service completed its audit of the Company's 2014 U.S. income tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, creates new taxes on certain foreign sourced earnings, and repeals certain performance based compensation exceptions. We are applying the guidance in Staff Accounting Bulletin 118 when accounting for the enactment-date effects of the Tax Cuts Act. At September 30, 2018, we have not completed our accounting for all of the tax effects of the Tax Cuts Act. The Company expects to complete its assessment of these items within the measurement period, and any adjustments to the provisional amounts initially recorded will be included as an adjustment to income tax expense or benefit in the period in which the amounts are determined.return.

~~Foreign tax effects~~

~~Transition Tax:~~ The one-time transition tax is based on our total post-1986 earnings and profits ("E&P") which we had deferred from U.S. income taxes under previous U.S. law. We originally recorded a provisional amount for our one-time transition tax liability attributable to our foreign subsidiaries, resulting in a transition tax liability of $21,994 recorded in other liabilities at December 31, 2017. At this time, we are further analyzing the current estimate of our transition tax calculation to finalize it no later than the fourth quarter of 2018. As of September 30, 2018, the Company continues to have provisional amounts recorded for the one-time transition tax liability for which overpayments of 2017 tax payments have been offset against the one-time transition tax liability at September 30, 2018. As we continue to refine our E&P analysis, we will refine our calculations of the one-time transition tax, which could affect the measurement of this liability. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.

Note K – Equity-Based Compensation

In ~~March 2006,~~February 2019, the Company's Board of Directors approved the Steven Madden, Ltd. ~~2006 Stock~~2019 Incentive Compensation Plan ~~as amended~~ (the ~~“Plan”~~“2019 Plan”), under which nonqualified stock options, stock appreciation rights, performance shares, restricted stock, other stock-based awards and performance-based cash awards may be granted to employees, consultants and non-employee directors. The 2019 Plan is the successor to the Company's Amended and Restated 2006 Stock Incentive Plan, as amended (the "2006 Plan"), the term of which expired on April 6, 2019. The Company's stockholders approved the 2019 Plan at the Company's annual meeting of stockholders held on May 24, 2019.

The following table summarizes the number of shares of common stock authorized for use under the 2019 Plan, the number of stock-based awards granted (net of expired or cancelled awards) under the 2019 Plan and the number of shares of common stock available for the grant of stock-based awards under the 2019 Plan:



Common stock authorized	~~35,199,000~~11,000,000
Stock-based awards, including restricted stock and stock options granted, net of expired or cancelled	(~~33,861,447~~212,425	)
Common stock available for grant of stock-based awards as of ~~September~~June 30, ~~2018~~2019	~~1,337,553~~10,787,575

~~Total equity-based compensation for the~~ ~~three~~ ~~and nine months ended September 30, 2018 and 2017 is as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Restricted stock $ 3,937
$ 3,902
$ 12,075
$ 12,540
Stock options 1,168
1,005
3,265
3,140
Total $ 5,105
$ 4,907
$ 15,340
$ 15,680

~~Equity-based compensation is included in operating expenses on the Company’s condensed consolidated statements of income.~~

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

~~September~~June 30, ~~2018~~2019

($ in thousands except share and per share data)

~~Note K – Equity-Based Compensation (continued)~~Total equity-based compensation for the three and six months ended June 30, 2019 and 2018 is as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Restricted stock	$	4,938	$	4,212	$	9,555	$	8,138
Stock options	999		1,130		2,053		2,097
Total	$	5,937	$	5,342	$	11,608	$	10,235

Equity-based compensation is included in operating expenses on the Company’s Condensed Consolidated Statements of Income.

Stock Options

Cash proceeds and intrinsic values related to total stock options exercised during the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 are as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Proceeds from stock options exercised	$	1,077	$	9,596	$	1,799	$	11,115
Intrinsic value of stock options exercised	$	513	$	4,902	$	842	$	5,479

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Proceeds from stock options exercised $ 1,686
$ 5,663
$ 12,801
$ 11,312
Intrinsic value of stock options exercised $ 1,258
$ 1,220
$ 6,737
$ 4,729

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, options to purchase approximately ~~132,304~~77,075 shares of common stock with a weighted average exercise price of ~~$30.25~~$33.77 and options to purchase approximately ~~698,732~~480,762 shares of common stock with a weighted average exercise price of ~~$25.68~~$27.68 vested, respectively. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, options to purchase approximately ~~84,533~~79,901 shares of common stock with a weighted average exercise price of ~~$23.15~~$25.94 and options to purchase approximately ~~523,545~~566,429 shares of common stock with a weighted average exercise price of ~~$22.23~~$24.62 vested, respectively. As of ~~September~~June 30, ~~2018,~~2019, there were unvested options relating to ~~1,718,970~~1,203,775 shares of common stock outstanding with a total of ~~$8,883~~$6,088of unrecognized compensation cost and an average vesting period of ~~2.8 years.~~2.4.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of options granted, which requires several assumptions. The expected term of the options represents the estimated period of time until exercise and is based on the historical experience of similar awards. Expected volatility is based on the historical volatility of the Company’s common stock. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. The dividend yield is based on the Company's annualized dividend per share amount divided by the Company's stock price. The following weighted average assumptions were used for stock options granted during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~:2018:



	2019	2018
Volatility	32.0% to 33.4%	25.1% to 27.2%
Risk free interest rate	2.3% to 2.5%	2.1% to 2.7%
Expected life in years	3.0 to 5.0	3.0 to 5.0
Dividend yield	1.7%	1.7%
Weighted average fair value	$8.31	$6.45

2018 2017
Volatility 25.1% to 27.2% 23.0% to 26.4%
Risk free interest rate 2.1% to 2.7% 1.5% to 2.0%
Expected life in years 3.4 to 4.9 3.4 to 5.0
Dividend yield 1.7% 0.0%
Weighted average fair value $6.52 $5.94

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

~~September~~June 30, ~~2018~~2019

($ in thousands except share and per share data)

~~Note K – Equity-Based Compensation (continued)~~

Activity relating to stock options granted under the Company’s plans and outside the plans during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 is as follows:



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2019	2,815,000		$	26.03
Granted	34,000		32.46
Exercised	(80,000	)	22.53
Outstanding at June 30, 2019	2,769,000		$	26.21	4.3 years	$	21,435
Exercisable at June 30, 2019	1,565,000		$	26.15	3.7 years	$	12,211

Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value
Outstanding at January 1, 2018 2,848,000
$ 23.87

Granted 576,000
32.40

Exercised (581,000 ) 22.03

Forfeited (23,000 ) 22.59

Outstanding at September 30, 2018 2,820,000
$ 26.00
4.9 years $ 26,128
Exercisable at September 30, 2018 1,101,000
$ 24.72
4.0 years $ 11,607

Restricted Stock

The following table summarizes restricted stock activity during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~:2018:



	2019				2018
	Number of Shares		Weighted Average Fair Value at Grant Date		Number of Shares		Weighted Average Fair Value at Grant Date
Outstanding at January 1,	5,135,000		$	18.42	5,874,000		$	17.37
Granted	625,000		32.56		330,000		30.84
Vested	(281,000	)	26.03		(272,000	)	23.56
Forfeited	(15,000	)	26.86		(14,000	)	25.09
Outstanding at June 30,	5,464,000		$	19.60	5,918,000		$	17.81

2018 2017
Number of Shares Weighted Average Fair Value at Grant Date Number of Shares Weighted Average Fair Value at Grant Date
Non-vested at January 1, 5,873,000
$ 17.37
6,287,000
$ 17.29
Granted 372,000
31.47
389,000
24.92
Vested (294,000 ) 23.79
(320,000 ) 22.17
Forfeited (71,000 ) 25.61
(51,000 ) 23.39
Non-vested at September 30, 5,880,000
$ 17.84
6,305,000
$ 17.46

As of ~~September~~June 30, ~~2018,~~2019, the Company had ~~$59,527~~$64,058 of total unrecognized compensation cost related to restricted stock awards granted under the 2019 Plan and the 2006 Plan. This cost is expected to be recognized over a weighted average of ~~4.8~~4.3 years. The Company determines the fair value of its restricted stock awards based on the market price of its common stock on the date of grant.

On ~~June 18, 2018,~~March 25, 2019, pursuant to an amendment of the employment agreement between the Company and its Creative and Design Chief, Steven Madden, which effected the extension of the term of the agreement for three years through December 31, 2026, Mr. Madden was granted ~~an option to purchase 225,000~~200,000 restricted shares of the Company's common stock. The restricted stock award will vest in three nearly equal annual installments commencing on December 31, 2024. As of June 30, 2019, Mr. Madden has options unexercised for 675,000 shares of the Company's common stock ~~at an exercise price~~and 4,134,238 restricted shares of ~~$35.95 per share, which option is exercisable in equal quarterly installments commencing on September 18, 2018. As of September 30, 2018, 1,068,750 shares remain unvested.~~the Company's common stock.

~~STEVEN MADDEN, LTD. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~ – ~~Unaudited~~

~~September 30, 2018~~

~~($ in thousands except share and per share data)~~

Note L – Goodwill and Intangible Assets

The following is a summary of the carrying amount of goodwill by segment as of ~~September~~June 30, ~~2018~~:

2019:

Wholesale
Net Carrying Amount
Footwear Accessories Retail
Balance at January 1, 2018 $ 84,862
$ 49,324
$ 14,352
$ 148,538
Translation and other 220
—
198
418
Balance at September 30, 2018 $ 85,082
$ 49,324
$ 14,550
$ 148,956



	Wholesale						Net Carrying Amount
	Footwear		Accessories		Retail		Net Carrying Amount
Balance at January 1, 2019	$	84,551	$	49,324	$	14,237	$	148,112
Translation and other	287		—		167		454
Balance at June 30, 2019	$	84,838	$	49,324	$	14,404	$	148,566

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

June 30, 2019

($ in thousands except share and per share data)

The following table details identifiable intangible assets as of ~~September~~June 30, ~~2018~~2019:


	Estimated Lives	Cost Basis		Accumulated Amortization (1)		Impairment (2)		Net Carrying Amount		Estimated Lives	Cost Basis		Accumulated Amortization (1)		Impairment (2) (3)		Net Carrying Amount
Trade names	6–10 years	$	9,220	$	5,942	$	—	$	3,278	6–10 years	$	9,220	$	8,168	$	—	$	1,052
Customer relationships	10 years	47,019		27,053		—		19,966		10 years	47,019		29,508		—		17,511
License agreements	3–6 years	5,600		5,600		—		—		3–6 years	5,600		5,600		—		—
Non-compete agreement	5 years	2,440		2,440		—		—		5 years	2,440		2,440		—		—
Re-acquired right	2 years	4,200		4,200		—		—		2 years	4,200		4,200		—		—
Other	3 years	14		14		—		—		3 years	14		14		—		—
		68,493		45,249		—		23,244			68,493		49,930		—		18,563
Re-acquired right	indefinite	35,200		8,419		—		26,781		indefinite	35,200		8,438		—		26,762
Trademarks	indefinite	100,333		—		4,045		96,288		indefinite	100,333		—		8,095		92,238
		$	204,026	$	53,668	$	4,045	$	146,313		$	204,026	$	58,368	$	8,095	$	137,563

(1) Includes the effect of foreign currency translation related primarily to the movements of the Canadian dollar and Mexican peso in relation to the U.S. dollar. Includes acceleration of accumulated amortization of the trade names of $1,132, related to the termination of the Kate Spade license agreement which will occur by the end of the current fiscal year.

(2) An impairment charge of $3,045 was recorded in the first quarter of 2015, and a final impairment charge of $1,000 was recorded in the fourth quarter of 2017 related to the Company's Wild Pair trademark. The impairment was triggered by a loss of future anticipated cash flows from a significant customer.

(3) An impairment charge of $4,050 was recorded in the second quarter of 2019 related to the Company's Brian Atwood trademark. The impairment was triggered by the Company's decision to discontinue distribution of the brand as the Company explores alternatives.

The amortization of intangible assets amounted to $1,333 and $2,667 for the three and six months ended June 30, 2019, respectively, compared to $1,327 and $2,631 for the three and six months ended June 30, 2018 and is included in operating expenses in the Company's Condensed Consolidated Statements of Income. The estimated future amortization expense of purchased intangibles as of ~~September~~June 30, ~~2018~~2019 is as follows:



2019 (remaining six months)	$	2,172
2020	2,606
2021	1,933
2022	1,502
2023	1,502
Thereafter	8,848
	$	18,563

2018 (remaining three months) $ 1,126
2019 4,432
2020 3,627
2021 2,042
2022 1,523
Thereafter 10,494
$ 23,244

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

June 30, 2019

($ in thousands except share and per share data)

Note M – Derivative Instruments

The Company uses derivative instruments, specifically, forward foreign exchange contracts, to manage the risk associated with the volatility of future cash flows. The foreign exchange contracts are used to mitigate the impact of exchange rate fluctuations on certain forecasted purchases of inventory and are designated as cash flow hedging instruments. As of ~~September~~June 30, ~~2018,~~2019, the

~~STEVEN MADDEN, LTD. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~ – ~~Unaudited~~

~~September 30, 2018~~

~~($ in thousands except share and per share data)~~

~~Note M – Derivative Instruments (continued)~~

fair value of the Company's foreign currency derivatives, which is included on the ~~condensed consolidated balance sheets~~Condensed Consolidated Balance Sheets in other ~~assets,~~liabilities, is ~~$262.~~$139. As of ~~September~~June 30, ~~2018, $177~~2019, $98 of ~~gains~~losses related to cash flow hedges are recorded in accumulated other comprehensive ~~income, net of taxes~~loss, before tax, and are expected to be recognized in earnings at the same time the hedged items affect earnings. As of ~~September~~June 30, ~~2017, $503~~2018, $759 of ~~losses~~gains related to cash flow hedges were recorded in accumulated other comprehensive ~~loss, net of taxes.~~income, before tax. As of ~~September~~June 30, ~~2018,~~2019, the Company's hedging activities was considered effective and, thus, no ineffectiveness from hedging activities were recognized in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~income.~~Income. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, losses of ~~$13~~$8 and ~~$39~~$8 were reclassified from accumulated other comprehensive income and recognized in the income statement in cost of sales, as compared to ~~gains~~losses of ~~$17~~$29 and ~~losses of~~ $26 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018.

Note N – Commitments, Contingencies and Other

Future Minimum Royalty and Advertising Payments:

The Company has minimum commitments related to the Company’s license agreements. The Company sources, distributes, advertises and sells pursuant to its exclusive license agreements with unaffiliated licensors. Royalty amounts under the license agreements are generally based on a stipulated percentage of sales, although most of these agreements contain provisions for the payment of minimum annual royalty amounts. The license agreements have various terms and some have additional renewal options, provided that minimum sales levels are achieved. As of ~~September~~June 30, ~~2018~~2019 the Company had future minimum royalty and advertising payments of ~~$55,246.~~$34,150.

Legal ~~proceedings:~~Proceedings:

The Company has been named as a defendant in certain lawsuits in the normal course of business. In the opinion of management, after consulting with legal counsel, the liabilities, if any, resulting from these matters should not have a material effect on the Company's financial position or results of operations. It is the policy of management to disclose the amount or range of reasonably possible losses in excess of recorded amounts or cash flows.

Note O – Operating Segment Information

The Company operates the following business segments: Wholesale Footwear, Wholesale Accessories, Retail, First Cost and Licensing. The Wholesale Footwear segment, through sales to department stores, mid-tier retailers, mass market merchants, online retailers and specialty stores, derives revenue, both domestically and internationally (via our International business), from sales of branded and private label women’s, men’s, girls’ and children’s footwear. The Wholesale Accessories segment, which includes branded and private label handbags, belts and small leather goods as well as cold weather and selected other fashion accessories, derives revenue, both domestically and ~~worldwide (via our International business),~~internationally, from sales to department stores, mid-tier retailers, mass market merchants, online retailers and specialty stores. Our Wholesale Footwear and Wholesale Accessories segments, through our International business, derive revenue from certain territories within Asia, ~~Albania, Austria, Belgium, Bulgaria, Canada, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Ireland, Kosovo, Lithuania, Latvia, Luxembourg, Mexico,~~Europe, North America (excluding the ~~Netherlands, Norway, Poland, Romania, Russia, Slovakia, Slovenia, Sweden, Switzerland,~~United States) and ~~Tunisia~~Africa and, under special distribution arrangements, in various other territories within Australia, the Middle East, India, South and Central America and New Zealand and pursuant to a partnership agreement in Singapore. The Retail segment, through the operation of Company-owned retail stores in the United States, Canada and Mexico, our joint ventures in South Africa, China, Taiwan and ~~Taiwan~~Israel and the Company’s websites, derives revenue from sales of branded women’s, men’s and children’s footwear, accessories and licensed products to consumers. The First Cost segment represents activities of a subsidiary that earns commissions and design fees for serving as a buying agent of footwear products to mass-market merchandisers, mid-tier department stores and other retailers with respect to their purchase of footwear. In the Licensing segment, the Company generates revenue by licensing its Steve Madden®, Steven by Steve Madden® and Madden Girl® trademarks and other trademark rights for use in connection with the manufacture, marketing and sale of eyewear, outerwear, hosiery, activewear, sleepwear, jewelry, watches, hair accessories, umbrellas, bedding, luggage, fragrance and men’s leather accessories. In addition, this segment licenses the Betsey Johnson® trademark for use in connection with the manufacture, marketing and sale of women's and children's apparel, hosiery, ~~swimwear,~~ outerwear, ~~sleepwear, activewear,~~

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

~~September~~June 30, ~~2018~~2019

($ in thousands except share and per share data)

~~Note O – Operating Segment Information (continued)~~

sleepwear, activewear, jewelry, watches, bedding, luggage, ~~stationery,~~ umbrellas and household goods. The Licensing segment also licenses the Dolce Vita® trademark for use in connection with the manufacture, marketing and sale of ~~women's and children’s outerwear and~~ swimwear.



As of and for the three months ended,	Wholesale Footwear		Wholesale Accessories		Total Wholesale		Retail			First Cost		Licensing		Consolidated
June 30, 2019
Net sales to external customers	$	286,237	$	77,265	$	363,502	$	81,472		$	—	$	—	$	444,974
Gross profit	94,657		22,012		116,669		48,676			—		—		165,345
Commissions and licensing fees – net	—		—		—		—			951		2,196		3,147
Income/(loss) from operations	38,429		4,750		43,179		(1,693		)	951		2,196		44,633
Segment assets	$	911,077	$	101,041	1,012,118		253,025			8,721		7,696		1,281,560
Capital expenditures					$	1,273	$	1,542		$	—	$	—	$	2,815
June 30, 2018
Net sales to external customers	$	252,134	$	69,271	$	321,405	$	74,348		$	—	$	—	$	395,753
Gross profit	78,956		22,045		101,001		46,773			—		—		147,774
Commissions and licensing fees – net	—		—		—		—			623		1,621		2,244
Income from operations	28,916		6,517		35,433		3,907			623		1,621		41,584
Segment assets	$	769,028	$	179,716	948,744		120,352			18,546		—		1,087,642
Capital expenditures					$	1,247	$	1,058		$	—	$	—	$	2,305

As of and for the six months ended,	Wholesale Footwear		Wholesale Accessories		Total Wholesale		Retail			First Cost		Licensing		Consolidated
June 30, 2019
Net sales to external customers	$	562,825	$	148,772	$	711,597	$	144,317		$	—	$	—	$	855,914
Gross profit	192,978		43,928		236,906		85,436			—		—		322,342
Commissions and licensing fees – net	—		—		—		—			535		3,839		4,374
Income/(loss) from operations	86,701		9,617		96,318		(11,399		)	535		3,839		89,293
Segment assets	$	911,077	$	101,041	1,012,118		253,025			8,721		7,696		1,281,560
Capital expenditures					$	2,965	$	3,249		$	—	$	—	$	6,214
June 30, 2018
Net sales to external customers	$	527,190	$	125,370	$	652,560	$	132,207		$	—	$	—	$	784,767
Gross profit	169,244		39,660		208,904		79,603			—		—		288,507
Commissions and licensing fees – net	—		—		—		—			1,491		4,412		5,903
Income/(loss) from operations	67,293		8,926		76,219		(3,981		)	1,491		4,412		78,141
Segment assets	$	769,028	$	179,716	948,744		120,352			18,546		—		1,087,642
Capital expenditures					$	2,772	$	2,479		$	—	$	—	$	5,251

As of and for the three months ended, Wholesale Footwear Wholesale Accessories Total Wholesale Retail First Cost Licensing Consolidated
September 30, 2018

Net sales to external customers $ 297,266
$ 91,278
$ 388,544
$ 69,938
$ —
$ —
$ 458,482
Gross profit 103,380
29,806
133,186
42,031
—
—
175,217
Commissions and licensing fees – net —
—
—

2,390
2,604
4,994
Income/(loss) from operations 53,286
14,001
67,287
(2,077 ) 2,390
2,604
70,204
Segment assets $ 777,027
$ 204,165
981,192
122,635
21,232
—
1,125,059
Capital expenditures

$ 1,899
$ 1,014
$ —
$ —
$ 2,913
September 30, 2017

Net sales to external customers $ 300,565
$ 76,365
$ 376,930
$ 64,263
$ —
$ —
$ 441,193
Gross profit 102,891
24,877
127,768
38,123
—
—
165,891
Commissions and licensing fees – net —
—
—
—
2,028
2,718
4,746
Income/(loss) from operations 52,366
10,301
62,667
(1,970 ) 2,028
2,718
65,443
Segment assets $ 790,405
$ 139,852
930,257
128,198
12,948
—
1,071,403
Capital expenditures

$ 1,348
$ 2,690
$ —
$ —
$ 4,038

As of and for the nine months ended, Wholesale Footwear Wholesale Accessories Total Wholesale Retail First Cost Licensing Consolidated
September 30, 2018

��

Net sales to external customers $ 824,456
$ 216,648
$ 1,041,104
$ 202,145
$ —
$ —
$ 1,243,249
Gross profit 272,624
69,466
342,090
121,634
—
—
463,724
Commissions and licensing fees – net —
—
—
—
3,881
7,016
10,897
Income/(loss) from operations 120,579
22,927
143,506
(6,058 ) 3,881
7,016
148,345
Segment assets $ 777,027
$ 204,165
981,192
122,635
21,232
—
1,125,059
Capital expenditures

$ 4,671
$ 3,493
$ —
$ —
$ 8,164
September 30, 2017

Net sales to external customers $ 799,837
$ 195,804
$ 995,641
$ 186,087
$ —
$ —
$ 1,181,728
Gross profit 263,368
62,349
325,717
112,288
—
—
438,005
Commissions and licensing fees – net —
—
—
—
4,864
5,974
10,838
Income/(loss) from operations 110,791
19,603
130,394
(3,114 ) 4,864
5,974
138,118
Segment assets $ 790,405
$ 139,852
930,257
128,198
12,948
—
1,071,403
Capital expenditures

$ 3,800
$ 7,910
$ —
$ —
$ 11,710

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

~~September~~June 30, ~~2018~~2019

($ in thousands except share and per share data)

~~Note O – Operating Segment Information (continued)~~

Revenues by geographic area for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 are as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Domestic (a)	$	399,309	$	356,271	$	763,624	$	697,866
International	45,665		39,482		92,290		86,901
Total	$	444,974	$	395,753	$	855,914	$	784,767
(a) Includes revenues of $99,284 and $174,106 for the three and six months ended June 30, 2019, respectively, and $93,655 and $190,688 for the comparable periods in 2018 related to sales to U.S. customers where the title is transferred outside the U.S. and the sale is recorded by our international business.

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Domestic (a) $ 393,068
$ 388,350
$ 1,090,561
$ 1,061,867
International 65,414
52,843
152,688
119,861
Total $ 458,482
$ 441,193
$ 1,243,249
$ 1,181,728
(a) Includes revenues of $69,078 and $259,766 for the three and nine months ended September 30, 2018, respectively, and $87,662 and $258,603 for the comparable periods in 2017 related to sales to U.S. customers where the title is transferred outside the U.S. and the sale is recorded by our international business.

Note P – Recent Accounting Pronouncements

Recently Adopted

In ~~May 2014,~~February 2016, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ~~new accounting guidance ("Topic 606"),~~ Accounting Standards Update No. ~~2014-09~~2016-02 ("ASU ~~2014-09"~~2016-02"), ~~"Revenue~~"Leases," as amended, which is effective January 1, 2019. Under ASU 2016-02, lessees will be required to recognize for all leases with terms longer than twelve months, at the commencement date of the lease, a lease liability, which is a lessee’s obligation to make lease payments arising from ~~Contracts~~a lease measured on a discounted basis, and a right-to-use asset, which is an asset that represents the lessee’s right to use or control the use of a specified asset for the lease term. Leases will be classified as either finance or operating, with ~~Customers," on revenue~~classification affecting the pattern of expense recognition. The Company adopted the new standard ~~is an update to Revenue Recognition Topic 605 and provides for a single five-step model to be applied~~on the effective date January 1, 2019. A modified retrospective transition approach was used, applying the new standard to all ~~revenue contracts with customers as well as requiring additional financial statement disclosures that will enable users to understand~~leases existing at the ~~nature, amount, timing and uncertainty~~date of ~~revenue and cash flows relating to customer contracts. Effective January 1, 2018,~~initial application. The Company applied ASC-840, including disclosure requirements, in the comparative periods in the year the Company adopted the requirements of Topic 606 using the cumulative effect adjustment approach. The impacts to the financial statements of this adoption are primarily related to balance sheet classification, including amounts associated with the change in balance sheet classification of the sales returns reserves, with no impact to the income statement as the Company's existing revenue recognition policies are in line with Topic 606.new guidance. (See Note G - Leases)

In ~~January 2016,~~February 2018, the FASB issued Accounting Standards Update ~~2016-01~~No. 2018-02 ("ASU ~~2016-01"~~2018-02"), ~~"Financial Instruments~~"Income Statement - ~~Overall (Subtopic 825-10)~~Reporting Comprehensive Income (Topic 220): ~~Recognition~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," which allows for stranded tax effects in accumulated other comprehensive income resulting from the U.S. Tax Cuts and ~~Measurement of Financial Assets and Financial Liabilities."~~Jobs Act to be reclassified to retained earnings. ASU 2016-01 generally requires companies to measure investments in equity securities, except those accounted for under the equity method, at fair value and recognize any changes in fair value in net income. The new guidance must be applied using a modified-retrospective approach and2018-02 is effective ~~for periods beginning after December 15, 2017~~January 1, 2019 and ~~early adoption is not permitted. The Company adopted the provisions of ASU 2016-01 in the first quarter of 2018 and the adoption~~ did not have ~~a material~~any significant impact on the ~~Company's~~Company’s financial ~~statements as the Company does not carry investments in equity securities.~~position or results of operations.

In August 2016, the FASB issued Accounting Standards Update 2016-15 ("ASU 2016-15"), "Classification of Certain Cash Receipts and Cash Payments." ASU 2016-15 clarifies how certain cash receipts and payments should be presented in the statement of cash flows. The main provisions are related to certain types of debt, contingent consideration, insurance proceeds and equity method investee distributions. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years with early adoption permitted. The Company adopted the provisions of ASU 2016-15 in the first quarter of 2018. The adoption did not have a material impact on the Company's financial statements as the Company's current financial statements are in line with the provision.

Not Yet Adopted

In August 2018, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued Accounting Standards Update No. 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” This new guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This new guidance is effective for the Company on a prospective or retrospective basis beginning on January 1, 2020, with early adoption permitted. While the Company is currently

~~STEVEN MADDEN, LTD. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~ – ~~Unaudited~~

~~September 30, 2018~~

~~($ in thousands except share and per share data)~~

~~Note P – Recent Accounting Pronouncements (continued)~~

assessing the impact of the new guidance, it is not expected to have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued Accounting Standards Update No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This new guidance removes certain disclosure requirements related to the fair value hierarchy, modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements. The new disclosure requirements include disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This new guidance is effective for the Company beginning on January 1, 2020, with early adoption permitted. Certain disclosures in the new guidance will need to be applied on a retrospective basis and others on a prospective basis. While the Company is currently assessing the impact of the new guidance, it is not expected to have a material impact on the Company’s consolidated financial statements.

In February 2018, the FASB issued Accounting Standards Update No. 2018-02 ("ASU 2018-02"), "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," which allows for stranded tax effects

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

June 30, 2019

($ in ~~accumulated other comprehensive income resulting from the U.S. Tax Cuts~~thousands except share and Jobs Act to be reclassified to retained earnings. ASU 2018-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact of adopting the new standard and does not expect the new standard to have a material impact on the Company’s financial position or results of operations.per share data)

In August 2017, the FASB issued Accounting Standards Update 2017-12 ("ASU 2017-12"), "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." ASU 2017-12 changes the recognition and presentation requirements of hedge accounting. The guidance provides new alternatives for applying hedge accounting to additional hedging strategies and measuring the hedged item in fair value hedges of interest rate risk, as well as applies new alternatives for reducing the cost and complexity of applying hedge accounting by easing the requirements for effectiveness testing, hedge documentation and application of the critical terms match method, and reducing the risk of material error correction if a company applies the shortcut method inappropriately. The guidance is effective for annual and interim periods in fiscal years beginning after December 15, 2018 and early adoption is permitted any time after the issuance of ASU 2017-12, including in an interim period. The Company is currently evaluating the effect that the new guidance will have on its financial statements and related disclosures.

In June 2016, the FASB issued Accounting Standards Update 2016-13 ("ASU 2016-13"), "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the effect that the new guidance will have on its financial statements and related disclosures.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 ("ASU 2016-02"), "Leases," as amended, which is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 with early adoption permitted. Under ASU 2016-02, lessees will be required to recognize for all leases with terms longer than twelve months, at the commencement date of the lease, a lease liability, which is a lessee’s obligation to make lease payments arising from a lease measured on a discounted basis, and a right-to-use asset, which is an asset that represents the lessee’s right to use or control the use of a specified asset for the lease term. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition.

The Company expects to adopt the new standard on the effective date January 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. The Company will continue to apply ASC840, including disclosure requirements, in the comparative periods in the year the Company adopts the new guidance.

The new standard provides a number of optional practical expedients. The Company expects to elect the package of three practical expedients. As such, the Company will not reassess whether expired or existing contracts are or contain a lease; will not need to

~~STEVEN MADDEN, LTD. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~ – ~~Unaudited~~

~~September 30, 2018~~

~~($ in thousands except share and per share data)~~

~~Note P – Recent Accounting Pronouncements (continued)~~

reassess the lease classifications or reassess the initial direct costs associated with expired or existing leases. The Company expects not to elect the hindsight practical expedient and the land easement practical expedient; the latter not being applicable to the Company.

The Company expects that this standard will have a material effect on our financial statements. While the Company continues to assess all of the effects of adoption, the Company believes the most significant effects relate to: the recognition of new right of use assets and lease liabilities on our balance sheet for primarily real estate operating leases; and providing significant new disclosures about our leasing activities. The Company does not expect a significant change in our leasing activities between now and adoption.

On adoption, the Company currently expects to recognize additional operating liabilities ranging from $200,000 to $250,000, with corresponding right of use assets of the same amount based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases, adjusted for prepaid or accrued rent, as applicable.

~~STEVEN MADDEN, LTD. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~ – ~~Unaudited~~

~~September 30, 2018~~

~~($ in thousands except share and per share data)~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations for the three and ~~nine~~six month periods ended ~~September~~June 30, ~~2018~~2019 should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.

All references in this Quarterly Report to "we," "our," "us" and the "Company," refer to Steven Madden, Ltd. and its subsidiaries unless the context indicates otherwise.

This Quarterly Report contains certain “forward-looking statements” as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally, forward-looking statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may”, “will”, “expect”, “believe”, “anticipate”, “project”, “plan”, “intend”, “estimate”, and “continue”, and their opposites and similar expressions are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, that may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect our results include, but are not limited to, the risks and uncertainties discussed in this Quarterly Report or our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.

Overview:

($ in thousands, except ~~retail sales data per square foot,~~ earnings per share and per share data)

Steven Madden, Ltd. and its subsidiaries ~~(collectively, the “Company”, "we", "our", "us", as applicable)~~ design, source, market and sell fashion-forward branded and private label footwear for women, men and children. In addition, we design, source, market and sell brand and private label fashion handbags and accessories. We market and sell our products through better department stores, major department stores, mid-tier department stores, specialty stores, luxury retailers, value priced retailers, national chains, mass merchants, online retailers, and catalog retailers throughout the United States, Canada, Mexico, ~~and~~ certain European nations including Albania, Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Ireland, Kosovo, Latvia, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Romania, Russia, Slovakia, Slovenia, Sweden and Switzerland, and Tunisia. In addition, our products are marketed through our retail stores and our e-commerce websites within the United States, Canada and Mexico, our joint ventures in South Africa, China, Taiwan and ~~Taiwan,~~Israel, and under special distribution arrangements in Asia, ~~Europe (excluding the aforementioned nations),~~certain European nations, Australia, India, the Middle East, South and Central America and New Zealand and pursuant to a partnership agreement in Singapore. Our product line includes a broad range of contemporary styles designed to establish or capitalize on market trends, complemented by core product offerings. We have established a reputation for design creativity and our ability to offer quality products in popular styles at accessible price points, delivered in an efficient manner and time frame.

On ~~September 17, 2018, the Company announced that on~~ September 11, 2018, the Company's Board of Directors declared a three-for-two stock split of the Company's outstanding shares of common stock, effected in the form of a stock dividend on the Company's outstanding common stock. Stockholders of record at the close of business on October 1, 2018 received one additional share of Steven ~~Madden.~~Madden, Ltd. common stock for every two shares of common stock owned on that date. Stockholders received cash in lieu of any fractional shares of common stock they otherwise would have received in connection with the dividend. The additional shares were distributed to the

Company's stockholders on October 11, 2018. All share and per share data provided herein gives effect to this stock split, applied retroactively.

Key Performance Indicators and Statistics

The following measurements are among the key business indicators reviewed by various members of management to measure consolidated and segment results of the Company:

net sales

gross profit margin

operating expenses

income from operations

adjusted EBITDA

adjusted EBIT

~~same store sales~~

inventory turnover

accounts receivable average collection days

cash flow and liquidity determined by the Company’s working capital and free cash flow

store metrics, such as same store sales, sales per square foot, average unit retail, conversion, average units per transaction, and contribution margin.

While not all of these metrics are disclosed due to the proprietary nature of the information, many of these metrics are disclosed and discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Non-GAAP Financial Measures

The Company’s reported results are presented in accordance with generally accepted accounting principles in the United States ("GAAP"). The Company uses adjusted earnings before interest and taxes ("Adjusted EBIT") and adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), as calculated in the table below, as non-GAAP measures, in internal management reporting and planning processes as well as in evaluating the performance of the Company. Management believes these measures are useful to investors in evaluating the Company’s ongoing operating and financial results. By providing these non-GAAP measures, as a supplement to GAAP information, we believe we are enhancing investors’ understanding of our business and our results of operations. The non-GAAP financial measures are limited in their usefulness and should be considered in addition to, and not in lieu of, U.S. GAAP financial measures. Further, these non-GAAP measures may be unique to the Company, as they may be different from non-GAAP measures used by other companies.

The table below reconciles these metrics to net income as presented in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~income.~~Income for the three and six months ended June 30, 2019 and 2018:


	Year-To-Date Period Ended ($ in thousands)								Three Months Ended June 30,						Six Months Ended June 30,
	September 30, 2018			December 31, 2017			September 30, 2017		2019			2018			2019			2018
($ in thousands)
Net Income	$	117,962		$	119,138		$	94,371	$	36,111		$	32,445		$	71,376		$	61,643
Add back:
Provision for income taxes	32,885			53,189			45,703		9,784			10,172			20,371			18,128
Provision for legal charges	2,837			6,713			—		—			—			—			2,837
Provision for early lease termination charges	1,241			5,123			—		1,543			1,241			2,292			1,241
Schwartz & Benjamin amendment to the equity purchase agreement	—			(10,215		)	—
Bad debt expense related to the Payless ShoeSource bankruptcy	—			5,470			7,500
(Recovery) and provisions for bad debt expense, net of recovery related to the Payless ShoeSource bankruptcy (in First Cost segment)									(143		)	—			1,409			—
Recovery related to the Payless ShoeSource bankruptcy (in Wholesale Footwear segment)									(1,668		)	—			(1,668		)	—
Schwartz & Benjamin acquisition integration charges and related restructuring	1,787			3,639			1,255		—			1,131			—			1,381
Charges related to preferred interest investment	—			2,700			—
Impairment of Wild Pair trademark	—			1,000			—
Schwartz & Benjamin acquisition inventory fair value adjustment	—			591			1,654
Net benefit in connection with the reversal of a contingent liability partially offset by the acceleration of amortization related to the termination of the Kate Spade license agreement									—			—			(1,868		)	—
Impairment of the Brian Atwood trademark									4,050			—			4,050			—
Divisional headquarters relocation expenses									669			—			669			—
Deduct:
Other (expense)/income - net*	(51		)	(5		)	52
Interest, net	2,553			2,548			1,904
Interest and other income – net*									1,262			1,033			2,454			1,630
Adjusted EBIT	154,210			184,805			148,527		49,084			43,956			94,177			83,600
Add back:
Depreciation and amortization	16,206			20,406			14,917		5,325			5,385			10,545			10,727
Loss on disposal of fixed assets	24			1,455			924
Loss/(gain) on disposal of fixed assets									412			(143		)	737			(14		)
Adjusted EBITDA	$	170,440		$	206,666		$	164,368	$	54,821		$	49,198		$	105,459		$	94,313

(*) ~~Consists of~~Includes realized (losses)/gains on marketable securities and foreign exchange (losses)/gains.

Executive Summary

Net sales for the quarter ended ~~September~~June 30, ~~2018~~2019 increased ~~3.9%~~12.4% to ~~$458,482~~$444,974 from ~~$441,193~~$395,753 in the same period of last year. Net income attributable to Steven Madden, Ltd. increased ~~25.6%~~12.8% to ~~$55,563~~$36,572 in the ~~third~~second quarter of ~~2018~~2019 compared to ~~$44,230~~$32,410 in the same period of last year. The effective tax rate for the ~~third~~second quarter of ~~2018~~2019 decreased to ~~20.8%~~21.3% compared to ~~32.1%~~23.9% in the ~~third~~second quarter of last year primarily due to a decrease in the ~~impact~~amount of Global Intangible Low-Taxed Income ("GILTI") tax incurred, a decrease in the ~~Tax Cuts~~state taxes incurred and ~~Jobs Act.~~a partially offsetting increase in 2019 pre-tax income in jurisdictions with high tax rates. Diluted earnings per share increased to ~~$0.64~~$0.44 per share on ~~86,574~~83,869 diluted weighted average shares outstanding compared to ~~$0.51~~$0.38 per share on ~~86,627~~86,258 diluted weighted average shares outstanding in the ~~third~~second quarter of last year.

Our inventory turnover (calculated on a trailing twelve-month average) for the quarters ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 was ~~8.3~~7.9 times and ~~8.2~~8.6 times, respectively. Our total company accounts receivable average collection ~~remained consistent with the prior year at 63~~decreased to 65 days in the ~~third~~second quarter of 2019 compared to 68 days in the second quarter of 2018. primarily due to the results of improved collection efforts with respect to the accounts of certain major customers. As of ~~September~~June 30, ~~2018,~~2019, we had ~~$230,433~~$248,760 in cash, cash equivalents and marketable securities, no long-term debt and total stockholders’ equity of ~~$867,197.~~$827,556. Working capital ~~increased~~decreased to ~~$537,409~~$458,584 as of ~~September~~June 30, ~~2018,~~2019, compared to ~~$437,714~~$480,603 on ~~September~~June 30, ~~2017~~2018. The decrease in working capital was primarily the result of the addition of current operating lease liabilities of $38,652 in accordance with the Company’s adoption of ASU 2016-02, “Leases”.

The following tables set forth information on operations for the periods indicated:

Selected Financial Information

Three Months Ended ~~September~~June 30,

($ in thousands)


	2018					2017					2019					2018
CONSOLIDATED:
Net sales	$	458,482		100.0	%	$	441,193		100.0	%	$	444,974		100.0	%	$	395,753	100.0	%
Cost of sales	283,265			61.8	%	275,302			62.4	%	279,629			62.8	%	247,979		62.7	%
Gross profit	175,217			38.2	%	165,891			37.6	%	165,345			37.2	%	147,774		37.3	%
Commission and licensing fee income – net of expenses	4,994			1.1	%	4,746			1.1	%	3,147			0.7	%	2,244		0.6	%
Operating expenses	110,007			24.0	%	105,194			23.8	%	119,809			26.9	%	108,434		27.4	%
Impairment charges											4,050			0.9	%	—		—	%
Income from operations	70,204			15.3	%	65,443			14.8	%	44,633			10.0	%	41,584		10.5	%
Interest and other income – net	872			0.2	%	564			0.1	%	1,262			0.3	%	1,033		0.3	%
Income before income taxes	71,076			15.5	%	66,007			15.0	%	45,895			10.3	%	42,617		10.8	%
Net income attributable to Steven Madden, Ltd.	$	55,563		12.1	%	$	44,230		10.0	%	$	36,572		8.2	%	$	32,410	8.2	%

By Segment:
WHOLESALE FOOTWEAR SEGMENT:
Net sales	$	297,266		100.0	%	$	300,565		100.0	%	$	286,237		100.0	%	$	252,134	100.0	%
Cost of sales	193,886			65.2	%	197,674			65.8	%	191,580			66.9	%	173,178		68.7	%
Gross profit	103,380			34.8	%	102,891			34.2	%	94,657			33.1	%	78,956		31.3	%
Operating expenses	50,094			16.9	%	50,525			16.8	%	52,178			18.2	%	50,040		19.8	%
Impairment charges											4,050			1.4	%	—		—	%
Income from operations	$	53,286		17.9	%	$	52,366		17.4	%	$	38,429		13.4	%	$	28,916	11.5	%

WHOLESALE ACCESSORIES SEGMENT:
Net sales	$	91,278		100.0	%	$	76,365		100.0	%	$	77,265		100.0	%	$	69,271	100.0	%
Cost of sales	61,472			67.3	%	51,488			67.4	%	55,253			71.5	%	47,226		68.2	%
Gross profit	29,806			32.7	%	24,877			32.6	%	22,012			28.5	%	22,045		31.8	%
Operating expenses	15,805			17.3	%	14,576			19.1	%	17,262			22.3	%	15,528		22.4	%
Income from operations	$	14,001		15.3	%	$	10,301		13.5	%	$	4,750		6.1	%	$	6,517	9.4	%

RETAIL SEGMENT:
Net sales	$	69,938		100.0	%	$	64,263		100.0	%	$	81,472		100.0	%	$	74,348	100.0	%
Cost of sales	27,907			39.9	%	26,140			40.7	%	32,796			40.3	%	27,575		37.1	%
Gross profit	42,031			60.1	%	38,123			59.3	%	48,676			59.7	%	46,773		62.9	%
Operating expenses	44,108			63.1	%	40,093			62.4	%	50,369			61.8	%	42,866		57.7	%
Loss from operations	$	(2,077	)	(3.0	)%	$	(1,970	)	(3.1	)%
(Loss)/income from operations											$	(1,693	)	(2.1	)%	$	3,907	5.3	%
Number of stores	210					202					224					208

FIRST COST SEGMENT:
Other commission income – net of expenses	$	2,390		100.0	%	$	2,028		100.0	%	$	951		100.0	%	$	623	100.0	%

LICENSING SEGMENT:
Licensing income – net of expenses	$	2,604		100.0	%	$	2,718		100.0	%	$	2,196		100.0	%	$	1,621	100.0	%

Selected Financial Information

~~Nine~~Six Months Ended ~~September~~June 30,

($ in thousands)


	2018					2017					2019					2018
CONSOLIDATED:
Net sales	$	1,243,249		100.0	%	$	1,181,728		100.0	%	$	855,914		100.0	%	$	784,767		100.0	%
Cost of sales	779,525			62.7	%	743,723			62.9	%	533,572			62.3	%	496,260			63.2	%
Gross profit	463,724			37.3	%	438,005			37.1	%	322,342			37.7	%	288,507			36.8	%
Commission and licensing fee income – net of expenses	10,897			0.9	%	10,838			0.9	%	4,374			0.5	%	5,903			0.8	%
Operating expenses	326,276			26.2	%	310,725			26.3	%	233,373			27.3	%	216,269			27.6	%
Impairment charges											4,050			0.5	%	—			—	%
Income from operations	148,345			11.9	%	138,118			11.7	%	89,293			10.4	%	78,141			10.0	%
Interest and other income – net	2,502			0.2	%	1,956			0.2	%	2,454			0.3	%	1,630			0.2	%
Income before income taxes	150,847			12.1	%	140,074			11.9	%	91,747			10.7	%	79,771			10.2	%
Net income attributable to Steven Madden, Ltd.	$	116,646		9.4	%	$	93,352		7.9	%	$	71,097		8.3	%	$	61,083		7.8	%

By Segment:
WHOLESALE FOOTWEAR SEGMENT:
Net sales	$	824,456		100.0	%	$	799,837		100.0	%	$	562,825		100.0	%	$	527,190		100.0	%
Cost of sales	551,832			66.9	%	536,469			67.1	%	369,847			65.7	%	357,946			67.9	%
Gross profit	272,624			33.1	%	263,368			32.9	%	192,978			34.3	%	169,244			32.1	%
Operating expenses	152,045			18.4	%	152,577			19.1	%	102,227			18.2	%	101,951			19.3	%
Impairment charges											4,050			0.7	%	—			—	%
Income from operations	$	120,579		14.6	%	$	110,791		13.9	%	$	86,701		15.4	%	$	67,293		12.8	%

WHOLESALE ACCESSORIES SEGMENT:
Net sales	$	216,648		100.0	%	$	195,804		100.0	%	$	148,772		100.0	%	$	125,370		100.0	%
Cost of sales	147,182			67.9	%	133,455			68.2	%	104,844			70.5	%	85,710			68.4	%
Gross profit	69,466			32.1	%	62,349			31.8	%	43,928			29.5	%	39,660			31.6	%
Operating expenses	46,539			21.5	%	42,746			21.8	%	34,311			23.1	%	30,734			24.5	%
Income from operations	$	22,927		10.6	%	$	19,603		10.0	%	$	9,617		6.5	%	$	8,926		7.1	%

RETAIL SEGMENT:
Net sales	$	202,145		100.0	%	$	186,087		100.0	%	$	144,317		100.0	%	$	132,207		100.0	%
Cost of sales	80,511			39.8	%	73,799			39.7	%	58,881			40.8	%	52,604			39.8	%
Gross profit	121,634			60.2	%	112,288			60.3	%	85,436			59.2	%	79,603			60.2	%
Operating expenses	127,692			63.2	%	115,402			62.0	%	96,835			67.1	%	83,584			63.2	%
Loss from operations	$	(6,058	)	(3.0	)%	$	(3,114	)	(1.7	)%
(Loss) from operations											$	(11,399	)	(7.9	)%	$	(3,981	)	(3.0	)%
Number of stores	210					202					224					208

FIRST COST SEGMENT:
Other commission income – net of expenses	$	3,881		100.0	%	$	4,864		100.0	%	$	535		100.0	%	$	1,491		100.0	%

LICENSING SEGMENT:
Licensing income – net of expenses	$	7,016		100.0	%	$	5,974		100.0	%	$	3,839		100.0	%	$	4,412		100.0	%

In February 2018, the Board of Directors of the Company approved the initiation of the Company's quarterly cash dividend. The quarterly cash dividend of ~~$0.13~~$0.14 per share ~~(the per share cash dividend indicated having been adjusted for an October 11, 2018 three-for-two stock split)~~ on the Company's outstanding shares of common stock was approved on ~~July 30, 2018~~April 24, 2019 and paid on June 28, 2019, to stockholders of record as of the close of business on June 18, 2019. The aggregate cash dividends

paid for the quarter ended June 30, 2019 was $11,945. The aggregate cash dividends paid for the six months ended June 30, 2019 was $23,987.

In July 2019, the Board of Directors of the Company declared an additional quarterly cash dividend of $0.14 per share on the Company’s outstanding shares of common stock. The dividend will be paid on September ~~28, 2018,~~27, 2019 to stockholders of record as of the close of business on September ~~18, 2018. The aggregate cash dividends paid for the quarter ended September 30, 2018 was $11,673. The aggregate cash dividends paid for the nine months ended September 30, 2018 was $35,147.~~17, 2019.

RESULTS OF OPERATIONS

($ in thousands)

Three Months Ended ~~September~~June 30, ~~2018~~2019 Compared to Three Months Ended ~~September~~June 30, ~~2017~~2018

Consolidated:

Net sales for the three months ended ~~September~~June 30, ~~2018~~2019 increased ~~3.9%~~12.4% to ~~$458,482~~$444,974 compared to ~~$441,193~~$395,753 in the same period of last year, with growth in the Wholesale Footwear, Wholesale Accessories and Retail segments. Gross margin ~~increased~~slightly decreased to ~~38.2%~~37.2% from ~~37.6%~~37.3% in the prior year period. The ~~increase~~decrease of ~~0.6%~~10 basis points in gross margin in the current period was driven by decreases in gross margin ~~improvements~~primarily in ~~all business~~our Wholesale Accessories and Retail segments. Operating expenses increased in the ~~third~~second quarter of this year to ~~$110,007~~$119,809 from ~~$105,194~~$108,434 in the ~~third~~second quarter of last year. In the ~~third~~second quarter of ~~2018~~2019 and ~~2017~~2018 operating expenses included net charges of ~~$406~~$544 and ~~$488, respectively, due to the integration~~$2,372, respectively. (See "Non-GAAP Financial Measures" above for a description of the ~~Schwartz & Benjamin acquisition~~net benefit and ~~related restructuring.~~charges.) Excluding these ~~charges,~~items, operating expenses as a percentage of sales ~~was 23.9%~~were 26.8% for the ~~third~~second quarter of ~~2018~~2019 compared to ~~23.7%~~26.8% in the ~~third~~second quarter of ~~2017.~~2018. Excluding these items, the increase in operating expenses primarily comprised of (i) higher payroll and related expenses, (ii) higher warehouse and distribution expenses, (iii) higher advertising and promotions, and (iv) higher legal charges. Commission and licensing fee income for the ~~third~~second quarter of ~~2018~~2019 increased to ~~$4,994~~$3,147 compared to ~~$4,746 achieved~~$2,244 in the ~~third~~second quarter of ~~2017.~~2018. The second quarter 2019 Commission and licensing fee income included a $143 recovery associated with the Payless ShoeSource bankruptcy. (See "Non-GAAP Financial Measures" above.) The effective tax rate for the ~~third~~second quarter of ~~2018~~2019 decreased to ~~20.8%~~21.3% compared to ~~32.1%~~23.9% in the ~~third~~second quarter of last year. The decrease in effective tax rate is primarily due to a decrease in the ~~impact~~amount of GILTI tax incurred, a decrease in the ~~Tax Cuts~~state taxes incurred and ~~Jobs Act.~~a partially offsetting increase in 2019 pre-tax income in jurisdictions with high tax rates. Net income attributable to Steven Madden, Ltd. for the ~~third~~second quarter of ~~2018~~2019 increased to ~~$55,563~~$36,572 compared to net income for the ~~third~~second quarter of ~~2017~~2018 of ~~$44,230. Excluding the charges mentioned above, net~~$32,410. Net income attributable to Steven Madden, Ltd. for the ~~third~~second quarter of ~~2018~~2019 increased to ~~$55,867~~$39,536 (excluding (i) $1,727 after-tax benefit, net of bad debt expense associated with the Payless ShoeSource bankruptcy, (ii) $1,156 after-tax expense in connection with a provision for early lease termination charges, (iii) $501 after-tax expense associated with a divisional headquarters relocation, and (iv) $3,033 after-tax impact of an impairment of the Brian Atwood trademark), as compared to ~~$44,537~~$35,185 (excluding (i) $1,028 tax expense related to an impairment to the preferred interest investment in Brian Atwood Italia Holding, LLC, (ii) $833 after-tax expense in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring, and (iii) $914 after-tax impact of an expense associated with a warehouse consolidation) for the same period last year.

Wholesale Footwear Segment:

Net sales from the Wholesale Footwear segment accounted for ~~$297,266,~~$286,237, or ~~64.8%~~64.3%, and ~~$300,565,~~$252,134, or ~~68.1%~~63.7%, of our total net sales for the ~~third~~second quarter of ~~2018~~2019 and ~~2017,~~2018, respectively. The ~~decrease~~increase in net sales in the current period is primarily related to strong growth in the ~~transition~~Steve Madden brand, the addition of the ~~Company's business with one of its~~Anne Klein brand, and an increase in the private label ~~customers from~~business which was mostly offset by no sales to Payless ShoeSource in the ~~wholesale model to the buying agency model.~~current period. Gross margin in the Wholesale Footwear segment was ~~34.8%~~33.1% for the ~~third~~second quarter of ~~2018~~2019 compared to ~~34.2%~~31.3% for the ~~third~~second quarter of ~~2017.~~2018. Gross margin increased ~~0.6%~~1.8% primarily resulting from ~~a shift~~the elimination of sales to the low-margin Payless ShoeSource customer, as well as the strong growth in ~~customer mix and lower inventory close-outs.~~the Steve Madden brand. Operating expenses ~~decreased~~increased to ~~$50,094~~$52,178 in the ~~third~~second quarter of ~~2018~~2019 from ~~$50,525~~$50,040 in the same period of last year. In the ~~third~~second quarter of 2019, operating expenses included a net benefit of $999, which was comprised of a recovery of $1,668 related to the Payless ShoeSource bankruptcy, partially offset by divisional headquarters relocation expenses of $669. Also recorded in the Wholesale Footwear segment was a $4,050 impairment charge for the Brian Atwood trademark impacting operating income. The impairment was triggered by the Company's decision to discontinue distribution of the brand as the Company explores alternatives. In the second quarter of 2018, ~~and 2017,~~ operating expenses included ~~charges~~a charge of ~~$406 and $488, respectively,~~$1,131 related to the integration of the Schwartz & Benjamin acquisition and related restructuring. Excluding these ~~charges,~~items, operating expenses for the second quarter of 2019 increased, however, as a percentage of sales ~~increased~~decreased to ~~16.7%~~18.6% in the ~~third~~second quarter of ~~2018~~2019 compared to ~~16.6%~~19.4% in the same period of ~~2017.~~2018. The increase in operating expenses primarily resulted from higher warehouse and distribution expenses and higher payroll and related expenses associated with higher sales and the addition of the Anne Klein footwear business. Income from

operations increased to ~~$53,286~~$38,429 in the ~~third~~second quarter of ~~2018,~~2019, compared to ~~$52,366~~$28,916 for the comparable period in ~~2017.~~2018. Income from operations, excluding the ~~expenses~~items mentioned above, increased to ~~$53,692~~$41,479 in the ~~third~~second quarter of ~~2018~~2019 compared to ~~$52,854~~$30,047 for the same period last year.

Wholesale Accessories Segment:

Net sales generated by the Wholesale Accessories segment accounted for ~~$91,278,~~$77,265, or ~~19.9%~~17.4%, and ~~$76,365,~~$69,271, or ~~17.3%~~17.5%, of total net sales for the Company in the ~~third~~second quarter of ~~2018~~2019 and ~~2017,~~2018, respectively. The increase in net sales was primarily due to growth in our private label and ~~owned brand~~Steve Madden branded handbags, as well as the addition of Anne Klein handbags. Gross margin in the Wholesale Accessories segment ~~increased~~decreased to ~~32.7%~~28.5% in the ~~third~~second quarter of this year from ~~32.6%~~31.8% in the same period in ~~2017.~~2018. Gross margin decreased 3.3%, resulting from tariffs imposed on accessories and an increase in low-margin private label sales, as well as the addition of Anne Klein handbags when compared to 2018. In the ~~third~~second quarter of ~~2018,~~2019, operating expenses increased to ~~$15,805~~$17,262 compared to ~~$14,576~~$15,528 in the same period of last year. In the second quarter of 2018, operating expenses included a charge of $1,241 related to a warehouse consolidation. Excluding this item, operating expenses as a percentage of sales increased to 22.3% in the second quarter of 2019 compared to 20.6% in the same period of 2018. The increase in operating expenses in the second quarter of 2019 primarily resulted from higher warehouse and distribution expenses, and higher payroll related expenses associated with the increase in sales, as well as the addition of Anne Klein handbags. Income from operations for the Wholesale Accessories segment for the ~~third~~second quarter of ~~2018~~2019 was ~~$14,001~~$4,750 compared to ~~$10,301~~$6,517 for the same period of ~~2017.~~2018. Income from operations, excluding the items mentioned above, decreased to $4,750 in the second quarter of 2019 compared to $7,758 for the same period last year.

Retail Segment:

In the ~~third~~second quarter of ~~2018,~~2019, net sales from the Retail segment accounted for ~~$69,938,~~$81,472, or ~~15.3%~~18.3%, of our total net sales compared to ~~$64,263,~~$74,348, or ~~14.6%~~18.8%, of our total net sales in the same period last year, which represents a ~~$5,675,~~$7,124, or ~~8.8%~~9.6%, increase. The increase in net sales is primarily due to the net addition of ~~8 new~~16 stores from the prior year period and a ~~5.5%~~6.2% increase in comparable stores sales gain. We added ~~16 new~~30 stores, which included additional stores from the addition of our joint venture in Israel and closed 814 stores during the twelve months ended ~~September~~June 30, ~~2018.~~2019. As a result, we had ~~210~~224 retail stores as of ~~September~~June 30, ~~2018~~2019 compared to ~~202~~208 stores as of ~~September~~June 30, ~~2017.~~2018. The ~~210~~224 stores currently in operation include ~~141~~149 Steve Madden® stores, 5966 Steve Madden® outlet stores, 2 ~~Steven��~~Steven® stores, 1 Superga® store and 76 e-commerce websites. In addition, the Company operated 31 concessions in our international markets. Comparable store sales (sales of those stores, including the e-commerce websites, that were open throughout the ~~third~~second quarter of ~~2018~~2019 and ~~2017)~~2018) increased ~~5.5% on a constant currency basis~~6.2% when compared to the prior year period. The Company excludes new locations from the comparable store base for the first twelve months of operations. Stores that are closed for renovations are removed from the comparable store base. In the ~~third~~second quarter of ~~2018,~~2019, gross margin ~~increased~~decreased to ~~60.1%~~59.7% from ~~59.3%~~62.9% in the same period of ~~2017~~2018primarily due to ~~higher margins~~inventory liquidation and markdowns in connection with the wind-down of the Company's joint venture relationship in China as well as aggressive liquidation of slow-moving inventory in the ~~Company's internet business.~~Company’s North American retail operations. In the ~~third~~second quarter of ~~2018,~~

2019, operating expenses increased to ~~$44,108,~~$50,369, or ~~63.1%~~61.8% of net sales, compared to ~~$40,093,~~$42,866, or ~~62.4%~~57.7% of net sales, in the ~~third~~second quarter of last year, primarily due to growth in the ~~net~~Company's e-commerce business and the operation of additional stores. In addition, in the current period, operating expenses included a charge of ~~8 new stores.~~$1,543 related to early lease terminations. Loss from operations for the Retail segment was ~~$2,077~~$1,693 in the ~~third~~second quarter of this year compared to ~~$1,970~~income from operations of $3,907 in the same period of last year. Loss from operations, excluding the items mentioned above, was $150 in the current period of 2019, compared to income from operations of $3,907 in the same period last year.

First Cost Segment:

~~The~~Income from the First Cost segment, which includes net commission income and fees, increased to ~~$2,390~~$951 for the ~~third~~second quarter of ~~2018~~2019 compared to ~~$2,028~~$623 for the comparable period of ~~2017, primarily~~2018. Included in the First Cost segment was a recovery of $143 related to the ~~transition of the Company's business with one of its private label customers from the wholesale model to the buying agency model.~~Payless ShoeSource bankruptcy.

Licensing ~~Segment~~:Segment:

Net licensing income ~~decreased~~increased to ~~$2,604~~$2,196 for the ~~third~~second quarter of ~~2018~~2019 compared to ~~$2,718~~$1,621 for the comparable period of ~~2017~~2018 primarily due to ~~a decrease~~an increase in royalties in connection with the licensing of our ~~Steve Madden® and~~ Betsey Johnson® ~~trademarks.~~trademark.

~~Nine~~

Six Months Ended ~~September~~June 30, ~~2018~~2019 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018

Consolidated:

Net sales for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 increased ~~5.2%~~9.1% to ~~$1,243,249~~$855,914 compared to ~~$1,181,728~~$784,767 in the same period of last year, ~~due to~~with growth in the Wholesale ~~Footwear,~~Accessories, Retail and Wholesale ~~Accessories and Retail~~Footwear segments. Gross margin increased to ~~37.3%~~37.7% from ~~37.1%~~36.8% in the prior year period. ~~Gross~~The increase of 90 basis points in gross margin in the current period was driven by gross margin improvements primarily in our Wholesale Footwear segment. Operating expenses increased in the six months ended June 30, 2019 to $233,373 from $216,269 in the comparable period of 2018. In the first ~~nine~~six months of ~~2017~~2019 and 2018 operating expenses included a ~~non-cash expense~~net benefit of ~~$1,654 associated with the purchase accounting fair value adjustment~~$575 and charges of inventory acquired in connection with the Schwartz & Benjamin acquisition. Excluding the non-cash expense in the prior year period, gross margin increased by 0.1% in the first nine months of 2018 compared to the same period last year. Operating expenses$5,459, respectively. (See "Non-GAAP Financial Measures" above for ~~the nine months ended September 30, 2018 increased to $326,276 from $310,725 in the same period last year. Operating expenses for the nine months ended September 30, 2018 included~~ a charge of $2,837 related to legal charges, $1,787 related to Schwartz & Benjamin integration and restructuring and $1,241 related to closing the Cejon warehouse in Bayonne, NJ. Operating expenses for the nine months ended September 30, 2017 included charges related to the Payless Shoe Source bankruptcy of $7,500 and the integrationdescription of the ~~Schwartz & Benjamin acquisition of $1,255.~~net benefit and charges.) Excluding ~~the impact of the aforementioned charges,~~these items, operating expenses as a percentage of sales increased to ~~25.8%~~27.3% for the first six months of 2019 compared to ~~25.6% for~~26.9% in the ~~same period~~first six months of ~~2017.~~2018. Excluding these items, the increase in operating expenses was primarily comprised of (i) higher warehouse and distribution expenses, (ii) higher payroll and related expenses, (iii) higher advertising and promotions, and (iv) higher legal charges consisting of costs and estimated settlement amounts. Commission and licensing fee income for the ~~nine~~six months ended ~~September~~June 30, ~~2018 increased slightly~~2019 decreased to ~~$10,897~~$4,374 compared to ~~$10,838 achieved~~$5,903 in the ~~same~~comparable period of ~~2017.~~2018, resulting primarily from the provision for bad debt expenses, net of recovery, associated with the Payless ShoeSource bankruptcy. (See "Non-GAAP Financial Measures" above.) The effective tax rate for the first ~~nine~~six months of ~~2018~~2019 decreased to ~~21.8%~~22.2% compared to ~~32.6%~~22.7% in the same period of last year. The decrease in effective tax rate is primarily due to a decrease in the ~~impact~~amount of GILTI tax incurred, a decrease in the ~~Tax Cuts~~state taxes incurred and ~~Jobs Act.~~a partially offsetting increase in 2019 pre-tax income in jurisdictions with high tax rates. Net income attributable to Steven Madden, Ltd. for the ~~nine~~six months ended ~~September~~June 30, 2019 increased to $71,097 compared to net income for the six months ended June 30, 2018 ~~increased to $116,646 compared to $93,352 in the same period last year. Excluding these charges discussed above, net~~of $61,083. Net income attributable to Steven Madden, Ltd. for the ~~nine~~first six months ~~ended September 30, 2018~~of 2019 increased to ~~$122,048~~$74,605 (excluding (i) $344 after-tax recovery net of bad debt expense associated with the Payless ShoeSource bankruptcy, (ii) $1,717 after-tax expense in connection with a provision for early lease termination charges, (iii) $1,399 after-tax net benefit associated with the change in a contingent liability, partially offset by the acceleration of amortization related to the termination of the Kate Spade license agreement as of December 31, 2019, (iv) $501 after-tax expense associated with a divisional headquarters relocation and (v) $3,033 after-tax impact of an impairment of the Brian Atwood trademark), as compared to ~~$101,753~~$66,181 (excluding (i) $2,135 after-tax expense in connection with a provision for legal charges, (ii) $1,021 after-tax expense in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring, (iii) $914 after-tax impact of expense related to a warehouse consolidation, and (iv) $1,028 tax expense related to an impairment to the preferred interest investment in Brian Atwood Italia Holding, LLC) for the ~~corresponding~~same period last year.

Wholesale Footwear Segment:

Net sales from the Wholesale Footwear segment accounted for ~~$824,456,~~$562,825, or ~~66.3%~~65.8%, and ~~$799,837,~~$527,190, or ~~67.7%~~67.2%, of our total net sales for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. The increase in net sales in the current period is primarily related to strong growth in the ~~Company's international markets.~~Steve Madden brand and the addition of the Anne Klein brand which were mostly offset by not recognizing sales to Payless ShoeSource in the current period. Gross margin in the Wholesale Footwear segment ~~increased to 33.1%~~was 34.3% for the ~~nine~~six months ended ~~September~~June 30, ~~2018 from 32.9%~~2019 compared to 32.1% for the comparable period ~~in 2017.~~of 2018. Gross margin ~~for~~increased 2.2% primarily resulting from not recognizing sales to the ~~nine months ended September 30, 2017 included a charge of $1,654 associated with~~low-margin Payless ShoeSource customer, as well as the ~~purchase accounting fair value adjustment of inventory acquired~~strong growth in ~~connection with~~ the ~~Schwartz & Benjamin acquisition. Excluding this charge, gross margin would remain unchanged from adjusted prior year gross margin of 33.1%.~~Steve Madden brand. Operating expenses ~~decreased~~increased to ~~$152,045~~$102,227 in the first ~~nine~~six months of ~~2018~~2019 from ~~$152,577~~$101,951 in the same period of last year. In the first ~~nine~~six months of 2019, operating expenses included a net benefit of $2,750, comprised of a recovery of $1,668 related to the Payless ShoeSource bankruptcy and a net benefit of $1,868 associated with the change of a contingent liability and the acceleration of amortization related to the termination of the Kate Spade license agreement as of December 31, 2019, partially offset by divisional headquarters relocation expenses of $669 and a charge of $117 related to an early lease termination. Also recorded in the Wholesale Footwear segment was a $4,050 impairment charge for the Brian Atwood trademark impacting operating income. In the first six months of 2018, operating expenses ~~for this segment~~ included charges of $2,837 in connection with provisions for legal ~~fees~~charges and ~~$1,787 for Schwartz & Benjamin integration and restructuring costs. Operating expenses for the nine months ended September 30, 2017 included charges~~$1,241 related to ~~the Payless Shoe Source bankruptcy of $7,500 and~~a warehouse consolidation, as well as $1,381 related to the integration of the Schwartz & Benjamin acquisition ~~of $1,255.~~and related restructuring. Excluding these ~~charges,~~items, operating expenses for the first half of 2019 increased, however, operating expenses as a percentage of sales decreased to 17.9% in the ~~nine~~first six months of ~~2018~~2019 compared to ~~18.0%~~18.5% in the same period of ~~2017.~~2018. The increase in operating expenses primarily resulted from higher warehouse and distribution expenses and higher payroll and related expenses associated with higher sales and the addition of the Anne Klein footwear business. Income from operations increased to $86,701 in the six months ended June 30, 2019, compared to $67,293 for the ~~Wholesale Footwear segment for~~comparable period in 2018. Income from operations, excluding the ~~nine~~items mentioned above, increased to $88,001 in the first six months ~~ended September 30, 2018 increased 8.8% to $120,579~~of 2019 compared to ~~$110,791~~$71,511 for the same period of 2017. Income from operations for the Wholesale Footwear segment, excluding the aforementioned charges, increased 3.3% to $125,203 for the nine months ended September 30, 2018 from $121,200 in the same period of 2017.last year.

Wholesale Accessories Segment:

Net sales generated by the Wholesale Accessories segment accounted for ~~$216,648,~~$148,772, or 17.4%, and ~~$195,804,~~$125,370, or ~~16.6%~~16.0%, of total net sales for the Company infor the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. The increase in net sales iswas primarily ~~attributable~~

due to growth in our private label ~~handbag business.~~and Steve Madden branded handbags, as well as the addition of Anne Klein handbags. Gross margin in the Wholesale Accessories segment ~~increased~~decreased to ~~32.1%~~29.5% in the first ~~nine~~six months of this year from ~~31.8%~~31.6% in the same period of 2018. The 2.1% decrease in ~~2017 due to improvements~~gross margin resulted from tariffs imposed on accessories and an increase in ~~margin of the Company's~~low-margin private label ~~business.~~sales as well as the addition of Anne Klein handbags when compared to 2018. In the ~~nine months~~six-month period ended ~~September~~June 30, ~~2018,~~2019, operating expenses increased to ~~$46,539~~$34,311 compared to ~~$42,746~~$30,734 in the same period of last year. ~~Operating~~In the six months ended June 30, 2018, operating expenses ~~in the current period include~~included a charge of $1,241 ~~in connection with closing the Cejon~~related to a warehouse ~~in Bayonne, NJ.~~consolidation. Excluding this ~~charge,~~item, operating expenses in the first six months of 2019 increased, however, operating expenses as a percentage of sales decreased to ~~20.9%~~23.1% in the first ~~nine~~six months of ~~2018~~2019 compared to ~~21.8%~~23.5% in the same period of ~~2017.~~2018. The increase in operating expenses in the six months ended June 30, 2019 primarily resulted from higher warehouse and distribution expenses associated with an increase in sales. Income from operations for the Wholesale Accessories segment for the ~~nine~~first six months ~~ended September 30, 2018 increased to $22,927~~of 2019 was $9,617 compared to ~~$19,603~~$8,926 for the same period of ~~2017.~~2018. Income from operations, ~~for the Wholesale Accessories segment,~~ excluding the ~~charge~~item mentioned above, ~~increased 23.3%~~decreased to ~~$24,168 for~~$9,617 in the first ~~nine~~six months of ~~2018~~2019 compared to ~~$19,603~~$10,167 for the same period of last year.

Retail Segment:

~~For~~In the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, net sales from the Retail segment accounted for ~~$202,145,~~$144,317, or ~~16.3%~~16.9%, of our total net sales compared to ~~$186,087,~~$132,207, or ~~15.7%~~16.8%, of our total net sales in the same period last year, which represents a ~~$16,058,~~$12,110, or ~~8.6%~~9.2%, increase. The increase in net sales ~~reflects~~is primarily due to the net addition of ~~8 new~~16 stores from the prior year ~~coupled with~~period and a ~~2.1% gain~~6.2% increase in comparable ~~store sales.~~stores sales gain. We added ~~16 new~~30 stores, which included additional stores from the addition of our joint venture in Israel and closed 814 stores during the twelve months ended ~~September~~June 30, ~~2018.~~2019. As a result, we had ~~210~~224 retail stores as of ~~September~~June 30, ~~2018~~2019 compared to ~~202~~208 stores as of ~~September~~June 30, ~~2017.~~2018. The ~~210~~224 stores currently in operation include ~~141~~149 Steve Madden® stores, 5966 Steve Madden® outlet stores, 2 Steven® stores, 1 Superga® store and 76 e-commerce websites. In addition, the Company operated 31 concessions in our international markets. Comparable store sales (sales of those stores, including the e-commerce websites, that were open throughout the first ~~nine~~six months of ~~2018~~2019 and ~~2017)~~2018) increased ~~2.1% on a constant currency basis~~6.2% when compared to the prior year period. The Company excludes new locations from the comparable store base for the first twelve months of operations. Stores that are closed for renovations are removed from the comparable store base. In the ~~first nine~~six months ~~of 2018,~~ended June 30, 2019, gross margin decreased to ~~60.2%~~59.2% from ~~60.3%~~60.2% in the same period of ~~2017.~~2018primarily due to inventory liquidation and markdowns in connection with the wind-down of the Company's joint venture relationship in China as well as aggressive liquidation of slow-moving inventory in the Company’s North American retail operations. In the ~~nine~~first six months ~~ended 2018,~~of 2019, operating expenses increased to ~~$127,692,~~$96,835, or 67.1% of net sales, compared to $83,584, or 63.2% of net sales, ~~compared to $115,402, or 62.0% of net sales,~~ in the ~~same~~comparable period of last year, primarily due to the ~~new store openings. Losses~~growth in the Company's e-commerce business and the operation of additional stores. In addition, in the current period, operating expenses included a charge of $2,175 related to early lease terminations. Loss from operations for the Retail segment ~~were $6,058~~was $11,399 in the ~~first nine~~six months ~~of this year~~ended June 30, 2019 compared to ~~losses of $3,114~~$3,981 in the same period of last year. Loss from operations, excluding the items mentioned above, resulted in a loss from operations of $9,224 in the current period of 2019, compared to $3,981 in the same period last year.

First Cost Segment:

~~The~~Income from the First Cost segment, which includes net commission income and fees, decreased to ~~$3,881~~$535 for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 compared to ~~$4,864~~$1,491 for the comparable period of ~~2017~~2018, primarily due to ~~changes in allocation~~a charge of ~~expenses~~$1,409 for provisions for bad debt, net of recovery related to ~~this segment.~~the Payless ShoeSource bankruptcy.

Licensing Segment:

Net licensing income ~~increased~~decreased to ~~$7,016~~$3,839 for the ~~first nine months of 2018~~six-month period ended June 30, 2019 compared to ~~$5,974~~$4,412 for the comparable period of ~~2017~~2018 primarily due to ~~an increase~~a decrease in royalties in connection with the licensing of our Betsey Johnson® trademark.

LIQUIDITY AND CAPITAL RESOURCES

($ in thousands)

Our primary source of liquidity is cash flows generated from our operations. Our primary use of this liquidity is to fund our ongoing cash requirements, including working capital requirements, share repurchases, acquisitions, system enhancements, retail store expansion and remodeling and payment of dividends.

Cash, cash equivalents and short-term investments totaled ~~$230,433~~$248,760 and ~~$245,241~~$266,999 at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. Of the total cash, cash equivalents and short-term investments at ~~September~~June 30, ~~2018, $160,543,~~2019, $149,781, or approximately ~~70%~~60%, was held in our foreign subsidiaries and of the total cash, cash equivalents and short-term investments at December 31, ~~2017, $135,884,~~2018, $198,110, or approximately ~~55%~~74%, was held in our foreign subsidiaries.

As of September 30, 2018, the Company has calculated $21,994 related to the one-time transition tax and related withholding tax expense on the deemed repatriation of cumulative foreign earnings under the Tax Cuts and Jobs Act, for which overpayments of 2017 tax payments have been offset against the one-time transition tax liability at September 30, 2018.

The Company has a collection agency agreement with Rosenthal & Rosenthal, Inc. (“Rosenthal”). The agreement provides us with a credit facility in the amount of $30,000, having a sub-limit of $15,000 on the aggregate face amount of letters of credit, at an interest rate based, at our election, upon either the prime rate or LIBOR. The agreement can be terminated by the Company or Rosenthal at any time with 60 days’ prior written notice. As of ~~September~~June 30, ~~2018~~2019 we had no borrowings against this credit facility.

As of ~~September~~June 30, ~~2018,~~2019, we had working capital of $~~537,409~~458,584, cash and cash equivalents of ~~$172,537~~$212,664 and investments in marketable securities of $~~57,896~~.36,096 and we did not have any long-term debt.

We believe that based upon our current financial position and available cash, cash equivalents and marketable securities, the Company will meet all of its financial commitments and operating needs for at least the next twelve months.

OPERATING ACTIVITIES

($ in thousands)

Cash provided by operations was ~~$46,467~~$59,761 for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 compared to ~~cash provided by operations of $35,010~~$44,927 in the same period of last year. The primary ~~sources~~source of cash ~~were~~was from net income of ~~$117,962~~$71,376 and an increase in accounts payable and accrued ~~expenses. These cash sources were~~expenses of $26,232, partially offset by ~~uses of~~ cash ~~related to an~~used from the increase in factor accounts ~~receivable and inventories.~~receivables of $43,832.

INVESTING ACTIVITIES

($ in thousands)

During the ~~nine~~six months ended ~~September~~June 30, ~~2018~~,2019, we invested ~~$42,531~~$37,426 in marketable securities and received ~~$76,373~~$69,488 from the maturities and sales of marketable securities. We also made capital expenditures of ~~$8,164,~~$6,214, principally for leasehold improvements to office space, systems enhancements, improvements to existing stores ~~leasehold improvements to office space,~~ and new stores.

FINANCING ACTIVITIES

($ in thousands)

During the ~~nine~~six months ended ~~September~~June 30, ~~2018~~,2019, net cash used in financing activities was ~~$80,227,~~$73,174, which consisted of share repurchases of ~~$50,881,~~$51,156, cash dividends paid of ~~$35,147~~$23,987 and ~~a contingent liability payment~~distribution of ~~$7,000 related to our Schwartz & Benjamin acquisition.~~noncontrolling interest earnings of $1,113. These payments were partially offset by an investment in noncontrolling interest of $1,283 and proceeds from the exercise of stock options of ~~$12,801.~~$1,799.

CONTRACTUAL OBLIGATIONS

($ in thousands)

Our contractual obligations as of ~~September~~June 30, ~~2018~~2019 were as follows:


	Payment due by period										Payment due by period
Contractual Obligations	Total		Remainder of 2018		2019-2020		2021-2022		2023 and after		Total		Remainder of 2019		2020-2021		2022-2023		2024 and after
Operating lease obligations	$	233,472	$	12,065	$	83,438	$	63,686	$	74,283	$	219,693	$	23,422	$	84,433	$	53,159	$	58,679
Purchase obligations	88,556		88,556		—		—		—		91,099		91,099		—		—		—
Contingent payment liabilities	3,000		—		3,000		—		—
Future minimum royalty payments	55,246		2,516		32,585		16,520		3,625
Future minimum royalty and advertising payments											34,150		5,355		16,910		11,885		—
Transition tax											17,973		1,563		3,126		4,493		8,791
Total	$	380,274	$	103,137	$	119,023	$	80,206	$	77,908	$	362,915	$	121,439	$	104,469	$	69,537	$	67,470

At ~~September~~June 30, ~~2018~~,2019, we had no open letters of credit for the purchase of ~~inventory of approximately $812.~~

inventory.

Virtually all of our products are produced by independent manufacturers at overseas locations, the majority of which are located in China, with a small and growing percentage located in Italy, Mexico, Vietnam and Cambodia and smaller volumes in Brazil, India, The Netherlands, The Dominican Republic, Spain and South Korea. We have not entered into any long-term manufacturing or supply contracts with any of these foreign manufacturers. We believe that a sufficient number of alternative sources exist outside of the United States for the manufacture of our products. Purchases are made primarily in United States dollars.

~~On January 3, 2012, the~~

The Company ~~and~~has employment agreements with its Creative and Design Chief, Steven Madden, entered into an amendment, dated as of December 31, 2011, to Mr. Madden’s then existing employment agreement with the Company. The amended agreement, which extends the term of Mr. Madden's employment through December 31, 2023, provides to Mr. Madden a base salary of approximately $7,026 per annum for the period January 1, 2016 through the expiration of the employment agreement on December 31, 2023.

~~The Company has employment agreements with~~and certain executive officers, which provide for the payment of compensation aggregating approximately ~~$951~~$5,553 in the remainder of ~~2018, $2,590~~2019, $9,378 in ~~2019~~2020, $8,668 in 2021, $7,026 in 2022 and ~~$790~~$7,026 in ~~2020.~~2023. In addition, some of these employment agreements provide for discretionary bonuses and some provide for incentive compensation based on various performance criteria as well as other benefits including ~~stock options.~~stock-related compensation.

~~In connection with our acquisition~~Transition tax of ~~Schwartz & Benjamin on January~~$17,973 was the result of the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). Excluded from the contractual obligations table above are long-term taxes payable of $1,511 as of June 30, ~~2017,~~2019 primarily related to uncertain tax positions, for which we are ~~subject~~unable to make a ~~potential payment~~reasonably reliable estimate of ~~$3,000~~the timing of payments in individual years beyond one year due to uncertainties in the ~~sellers~~timing of ~~Schwartz & Benjamin contingent upon the non-cancellation of a certain license agreement through certain dates.~~tax audit outcomes.

DIVIDENDS

In ~~February 2018,~~April 2019, the Board of Directors of the Company declared a quarterly cash dividend of ~~$0.13~~$0.14 per share (the per share cash dividend indicated having been adjusted for an October 11, 2018 three-for-two stock split) on the Company’s outstanding shares of common stock. The dividend was paid on March 29, 2018, to stockholders of record as of the close of business on March 12, 2018. The total cash dividends paid for the three months ended March 31, 2018 was $11,758.

In April 2018, the Board of Directors of the Company declared an additional quarterly cash dividend of $0.13 per share (the per share cash dividend indicated having been adjusted for an October 11, 2018 three-for-two stock split) on the Company’s outstanding shares of common stock. The dividend was paid on June ~~29, 2018~~28, 2019 to stockholders of record as of the close of business on June ~~12, 2018.~~18, 2019. The total cash dividends paid for the three months ended June 30, ~~2018~~2019 was ~~$11,716.~~$11,945.

In July ~~2018,~~2019, the Board of Directors of the Company declared an additional quarterly cash dividend of $0.13 per share (the per share cash dividend indicated having been adjusted for an October 11, 2018 three-for-two stock split) on the Company’s outstanding shares of common stock. The dividend was paid on September 28, 2018 to stockholders of record as of the close of business on September 18, 2018. The total cash dividends paid for the three months ended September 30, 2018 was $11,673.

~~In October 2018, the Board of Directors of the Company declared an increase to the quarterly cash dividend to~~ $0.14 per share on the Company’s outstanding shares of common stock. The dividend will be paid on ~~December 31, 2018~~September 27, 2019 to stockholders of record as of the close of business on ~~December 21, 2018.~~September 17, 2019.

Future quarterly cash dividend payments are subject to the discretion of our Board of Directors and contingent upon future earnings, our financial condition, capital requirements, general business conditions, and other factors. Therefore, we can give no assurance that cash dividends of any kind will be paid to holders of our common stock in the future.

INFLATION

We do not believe that inflation had a significant effect on our sales or profitability in the three months ended ~~September~~June 30, ~~2018~~2019. Historically, we have minimized the impact of product cost increases by increasing prices, changing suppliers and by improving operating efficiencies. However, no assurance can be given that we will be able to offset any such inflationary cost increases in the future.

~~OFF BALANCE~~OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES AND THE USE OF ESTIMATES

~~Apart from the adoption of ASU 2014-09 (see Note G to the Condensed Consolidated Financial Statements included in this Quarterly Report), there~~There have been no material changes to our critical accounting policies and the use of estimates from these disclosures reported in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017~~2018 filed with the Securities and Exchange Commission on ~~March 1, 2018.~~February 28, 2019.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

($ in thousands)

We do not engage in the trading of market risk sensitive instruments in the normal course of business. Our financing arrangements are subject to variable interest rates, primarily based on the prime rate and LIBOR. The terms of our collection agency agreements with Rosenthal & Rosenthal, Inc. can be found in the Liquidity and Capital Resources section of Item 2 and in Note D to the Condensed Consolidated Financial Statements included in this Quarterly Report.

As of ~~September~~June 30, ~~2018~~2019, we held marketable securities valued at ~~$57,896,~~$36,096, which consist ~~primarily~~ of certificates of deposit and corporate bonds. The values of these securities may fluctuate as a result of changes in values, market interest rates and credit risk. We have the ability to hold these investments until maturity. In addition, any decline in interest rates would be expected to reduce our interest income.

We face market risk to the extent that our U.S. or foreign operations involve the transaction of business in foreign currencies. Also, our inventory purchases are primarily done in foreign jurisdictions and inventory purchases may be impacted by fluctuations in

the exchange rates between the U.S. dollar and the local currencies of our contract manufacturers, which could have the effect of increasing the cost of goods sold in the future. We manage these risks primarily by denominating these purchases in U.S. dollars. To mitigate the risk of purchases that are denominated in foreign currencies we may enter into forward foreign exchange contracts for terms of no more than two years. A description of our accounting policies for derivative financial instruments is included in Note M to the Condensed Consolidated Financial Statements.

In the first ~~nine~~six months of ~~2018,~~2019, the Company entered into forward foreign exchange contracts totaling ~~$36,564.~~$29,280. We performed a sensitivity analysis based on a model that measures the impact of a hypothetical change in foreign currency exchange rate to determine the effects that market risk exposures may have on the fair values of our forward foreign exchange contracts that were outstanding as of ~~September~~June 30, ~~2018.~~2019. As of ~~September~~June 30, ~~2018,~~2019, a 10% appreciation or depreciation of the U.S. dollar against the exchange rates for foreign currencies under forward foreign exchange contracts would result in a net increase or decrease, respectively, in the fair value of our derivatives portfolio of approximately ~~$1,770.~~$2,754.

In addition, we are exposed to translation risk in connection with our foreign operations in Canada, Mexico, Europe, South Africa, China, Taiwan and ~~Taiwan~~Israel because our subsidiaries and joint ventures in these countries utilize the local currency as their functional currency and those financial results must be translated into U.S. dollars. As currency exchange rates fluctuate, foreign currency exchange rate translation adjustments reflected in our financial statements with respect to our foreign operations affects the comparability of financial results between years.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934 ~~as amended~~ (the ~~"Exchange Act"~~“Exchange Act”), our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the ~~quarterly period ended September 30, 2018~~fiscal quarter covered by this Quarterly Report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were, as of the end of the fiscal quarter covered by this Quarterly Report, ~~on Form 10-Q. Disclosure controls and procedures are designed~~effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Based on their evaluation as of September 30, 2018, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were not effective because of the material weakness in our internal control over financial reporting described below. Notwithstanding the material weakness in our internal control over financial reporting as of September 30, 2018, management has concluded that the consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

~~Management’s Report on Internal Control Over Financial Reporting~~

Management of Steven Madden, Ltd. is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act). Our internal control over financial reporting is a process designed by, or under the supervision of, our principal executive officer and principal financial officer, and effected by the board of directors,

management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

With the participation of the Chief Executive Officer and the Chief Financial Officer, our management conducted an evaluation of the effectiveness, as of the end of our quarter ended September 30, 2018, of our internal control over financial reporting based on the framework and criteria established in the 2013 Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded that our internal control over financial reporting was not effective as of September 30, 2018. A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant’s financial statements will not be prevented or detected on a timely basis.

We did not design and implement effective control over risk assessment with regard to certain processes and procedures commensurate with our financial reporting requirements which we determined to be a material weakness. Specifically, we did not design and maintain adequate information technology general controls for information systems that are relevant to the preparation of financial statements in the following areas:

administrative user access to the Company’s wholesale, retail and operating systems to ensure appropriate segregation of duties and to adequately restrict access to financial applications and data; and

program change management controls to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records were tested, approved and implemented appropriately.

This material weakness could impact the effectiveness of IT-dependent controls, such as automated controls that address the risk of a material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports, and result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

~~Remediation of Material Weakness~~

As of the filing date of this Quarterly Report for the period ended September 30, 2018, management believes that it has implemented measures sufficient to fully remediate each of the deficiencies resulting in the material weakness. Specific remedial actions undertaken by management have included, without limitation:

~~rationalizing access privileges for all system users;~~

~~documenting the assignment of access privileges and the rationale for allowing access for each authorized user;~~

~~implementing controls that require the periodic re-evaluation of user access privileges, including administrative access; and~~

~~enhancing system monitoring controls to confirm the adequacy of program change management controls.~~

However, remedial controls must operate for a sufficient period of time for a definitive conclusion, through testing, that the deficiencies have been fully remediated and, as such, we can give no assurance that the measures we have undertaken have fully remediated the material weakness that we have identified or that additional material weaknesses will not arise in the future. We will continue to monitor the effectiveness of these and other processes, procedures, and controls and will make any further changes that management determines to be appropriate.

Changes in Internal Control Over Financial Reporting

~~There were no changes in~~As required by Rule 13a-15(d) under the ~~Company’s~~Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated our internal ~~control~~controls over financial reporting ~~(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)~~to determine whether any changes occurred during the ~~quarterly period ended September 30, 2018~~quarter covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there has been no such change during the quarter covered by this Quarterly Report.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company has been named as a defendant in certain lawsuits in the normal course of business. In the opinion of management, after consulting with legal counsel, the liabilities, if any, resulting from these matters should not have a material effect on the Company's financial position or results of operations or cash flows. It is the policy of management to disclose the amount or range of reasonably possible losses in excess of recorded amounts.

~~ITEM 1A. RISK FACTORS~~

~~There have been no material changes in our risk factors from those disclosed in our Amendment No. 1 of the 2017 Annual Report on Form 10-K/A.~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

($ in thousands, except share and per share data)

The following table presents the total number of shares of the Company's common stock, $.0001 par value, purchased by the Company in the three months ended ~~September~~June 30, ~~2018~~2019, the average price paid per share and the approximate dollar value of shares that still could have been purchased at the end of the fiscal period, pursuant to the Company's Share Repurchase Program. See also Note H to the Condensed Consolidated Financial Statements. During the three months ended ~~September~~June 30, ~~2018~~2019, there were no sales by the Company of unregistered shares of the Company's common stock.

Period
Total Number of Shares Purchased (1)

Average Price Paid per Share (1)
Total Number of Shares Purchased as part of Publicly Announced Plans or Programs Maximum Dollar Amount of Shares that May Yet Be Purchased Under the Plans or Programs
7/1/2018 - 7/31/2018 5,751
$ 32.00
—
$ 148,099
8/1/2018 - 8/31/2018 230,351
$ 37.99
230,351
$ 139,347
9/1/2018 - 9/30/2018 180,162
$ 37.98
177,716
$ 132,597
Total 416,264
$ 37.91
408,067
$ 132,597



Period	Total Number of Shares Purchased (1)	Average Price Paid per Share (1)		Total Number of Shares Purchased as part of Publicly Announced Plans or Programs	Maximum Dollar Amount of Shares that May Yet Be Purchased Under the Plans or Programs
4/1/2019 - 4/30/2019	9,415	$	33.99	—	$	200,000
5/1/2019 - 5/31/2019	568,011	$	32.28	565,695	$	181,751
6/1/2019 - 6/30/2019	481,270	$	31.89	470,333	$	166,754
Total	1,058,696	$	32.12	1,036,028	$	166,754

(1) The Steven Madden, Ltd. 2019 Incentive Compensation Plan and its predecessor plan, the Steven Madden, Ltd. Amended and Restated 2006 Stock Incentive Plan, ~~provides~~each provide the Company with the right to deduct or withhold, or require employees to remit to the Company, an amount sufficient to satisfy all or part of the tax withholding obligations applicable to stock-based compensation awards. To the extent permitted, employees may elect to satisfy all or part of such withholding obligations by tendering to the Company previously owned shares or by having the Company withhold shares having a fair market value equal to the ~~minimum statutory~~employee's withholding tax ~~withholding rate that could be imposed on the transaction.~~obligation. Included in this table are shares withheld during the ~~third~~second quarter of ~~2018~~2019 in connection with the settlement of vested restricted stock to satisfy tax withholding requirements, in addition to the shares repurchased pursuant to the Share Repurchase Program. Of the total number of shares repurchased by the Company in the ~~third~~second quarter of ~~2018, 8,198~~2019, 22,668 shares were withheld at an average price per share of ~~$33.83,~~$33.36, for an aggregate purchase price of approximately ~~$277,~~$756, in connection with the settlement of vested restricted stock to satisfy tax withholding requirements.

ITEM 6. EXHIBITS



~~31.1~~3.1	Certificate of Incorporation of Steven Madden, Ltd., as amended †
3.2	Amended & Restated By-Laws of Steven Madden, Ltd., as further amended (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017 filed with the SEC on August 4, 2017)
10.1	Steven Madden, Ltd. 2019 Incentive Compensation Plan, as adopted by the Board of Directors on February 25, 2019 and approved by the stockholders on May 24, 2019 †#
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 †
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 †
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 20022002 †
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 20022002 †
101	The following materials from Steven Madden, Ltd.’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2018,~~2019, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Changes in Stockholders' Equity, (v) the Condensed Consolidated Statements of Cash Flows, and ~~(v)~~(vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text*



†	Filed herewith
#	Indicates management contract or compensatory plan or arrangement required to be identified pursuant to Item 6 of this Quarterly Report on Form 10-Q.
*	This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filing, except to the extent the Company specifically incorporates it by reference.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: ~~November 9, 2018~~August 5, 2019

STEVEN MADDEN, LTD.

/s/ EDWARD R. ROSENFELD

Edward R. Rosenfeld

Chairman and Chief Executive Officer

/s/ ARVIND DHARIA

Arvind Dharia

Chief Financial Officer ~~and Chief Accounting Officer~~

3734



	Maturities as of September 30, 2018				Maturities as of December 31, 2017
	1 Year or Less		1 to 4 Years		1 Year or Less		1 to 4 Years
Corporate bonds	$	26,451	$	—	$	11,979	$	29,523
Certificates of deposit	31,445		—		52,048		—
Total	$	57,896	$	—	$	64,027	$	29,523



2018 (remaining three months)	$	1,126
2019	4,432
2020	3,627
2021	2,042
2022	1,523
Thereafter	10,494
	$	23,244