skx-10q_20200930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2020

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

Commission File Number 001-14429

SKECHERS U.S.A., INC.

(Exact name of registrant as specified in its charter)

Delaware

95-4376145

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

228 Manhattan Beach Blvd.

Manhattan Beach, California

90266

(Address of Principal Executive Office)

(Zip Code)

(310) 318-3100

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class		Trading symbol		Name of each exchange on which registered
Class A Common Stock, par value $0.001 per share		SKX		New York Stock Exchange

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. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 30, 2020, 135,584,212 shares of the registrant’s Class A Common Stock, $0.001 par value per share, were outstanding.

As of October 30, 2020, 21,570,477 shares of the registrant’s Class B Common Stock, $0.001 par value per share, were outstanding.

SKECHERS U.S.A., INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Earnings	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
	Signatures	45

PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SKECHERS U.S.A., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par values)

	September 30,			December 31,
	2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	1,294,222		$	824,876
Short-term investments		106,767			112,037
Trade accounts receivable, less allowances of $41,750 in 2020 and $24,106 in 2019		708,947			645,303
Other receivables		74,727			53,932
Total receivables		783,674			699,235
Inventories		1,053,360			1,069,863
Prepaid expenses and other current assets		147,607			113,580
Total current assets		3,385,630			2,819,591
Property, plant and equipment, net		870,162			738,925
Operating lease right-of-use assets		1,106,047			1,073,660
Deferred tax assets		60,934			49,088
Long-term investments		98,698			94,589
Goodwill		93,497			71,412
Other assets, net		96,426			45,678
Total non-current assets		2,325,764			2,073,352
TOTAL ASSETS	$	5,711,394		$	4,892,943
LIABILITIES AND EQUITY
Current liabilities:
Current installments of long-term borrowings	$	106,702		$	66,234
Short-term borrowings		21,720			5,789
Accounts payable		742,226			764,844
Operating lease liabilities		196,760			191,129
Accrued expenses		193,032			210,235
Total current liabilities		1,260,440			1,238,231
Long-term borrowings, excluding current installments		683,611			49,183
Long-term operating lease liabilities		1,004,584			966,011
Deferred tax liabilities		11,926			322
Other long-term liabilities		109,722			103,089
Total non-current liabilities		1,809,843			1,118,605
Total liabilities		3,070,283			2,356,836
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding		—			—
Class A common stock, $0.001 par value; 500,000 shares authorized; 132,912 and 131,071 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		133			131
Class B common stock, $0.001 par value; 75,000 shares authorized; 21,570 and 22,408 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		22			22
Additional paid-in capital		359,678			306,669
Accumulated other comprehensive loss		(40,549	)		(29,993	)
Retained earnings		2,083,118			2,037,836
Skechers U.S.A., Inc. equity		2,402,402			2,314,665
Non-controlling interests		238,709			221,442
Total stockholders' equity		2,641,111			2,536,107
TOTAL LIABILITIES AND EQUITY	$	5,711,394		$	4,892,943

See accompanying notes to unaudited condensed consolidated financial statements.

SKECHERS U.S.A., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(In thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Sales	$	1,300,886		$	1,353,998		$	3,272,703		$	3,889,319
Cost of sales		675,765			700,934			1,731,349			2,035,911
Gross profit		625,121			653,064			1,541,354			1,853,408
Royalty income		3,216			6,285			11,061			17,827
		628,337			659,349			1,552,415			1,871,235
Operating expenses:
Selling		85,926			97,516			220,222			281,237
General and administrative		450,285			414,417			1,256,228			1,165,637
		536,211			511,933			1,476,450			1,446,874
Earnings from operations		92,126			147,416			75,965			424,361
Other income / (expense):
Interest income		1,884			3,290			5,739			9,500
Interest expense		(4,643	)		(2,012	)		(11,428	)		(5,194	)
Other, net		7,726			(4,194	)		15,882			(8,628	)
Total other income / (expense)		4,967			(2,916	)		10,193			(4,322	)
Earnings before income tax expense		97,093			144,500			86,158			420,039
Income tax expense		14,983			22,766			18,104			75,288
Net earnings		82,110			121,734			68,054			344,751
Net earnings attributable to non-controlling interests		17,832			18,644			22,771			57,723
Net earnings attributable to Skechers U.S.A., Inc.	$	64,278		$	103,090		$	45,283		$	287,028
Net earnings per share attributable to Skechers U.S.A., Inc.:
Basic	$	0.42		$	0.67		$	0.29		$	1.87
Diluted	$	0.41		$	0.67		$	0.29		$	1.86
Weighted average shares used in calculating net earnings per share attributable to Skechers U.S.A., Inc.:
Basic		154,462			153,298			154,061			153,396
Diluted		154,980			153,978			154,707			154,021

See accompanying notes to unaudited condensed consolidated financial statements.

SKECHERS U.S.A., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2020		2019			2020			2019
Net earnings	$	82,110	$	121,734		$	68,054		$	344,751
Other comprehensive income, net of tax:
Gain / (loss) on foreign currency translation adjustment		112,814		(98,416	)		(11,215	)		(92,059	)
Comprehensive income		194,924		23,318			56,839			252,692
Comprehensive income / (loss) attributable to non- controlling interests		46,956		(7,700	)		22,112			31,530
Comprehensive income attributable to Skechers U.S.A., Inc.	$	147,968	$	31,018		$	34,727		$	221,162

See accompanying notes to unaudited condensed consolidated financial statements.

SKECHERS U.S.A., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)

	SHARES				AMOUNT						ACCUMULATED
	CLASS A		CLASS B		CLASS A		CLASS B		ADDITIONAL		OTHER					SKECHERS			NON			TOTAL
	COMMON		COMMON		COMMON		COMMON		PAID-IN		COMPREHENSIVE			RETAINED		U.S.A., INC.			CONTROLLING			STOCKHOLDERS'
	STOCK		STOCK		STOCK		STOCK		CAPITAL		INCOME (LOSS)			EARNINGS		EQUITY			INTEREST			EQUITY
Balance at June 30, 2020		132,882		21,570	$	133	$	22	$	329,958	$	(124,238	)	$	2,018,840	$	2,224,715		$	212,429		$	2,437,144
Net earnings		—		—		—		—		—		—			64,278		64,278			17,832			82,110
Foreign currency translation adjustment		—		—		—		—		—		83,689			—		83,689			29,125			112,814
Distribution to non-controlling interest of consolidated entity		—		—		—		—		—		—			—		—			(20,788	)		(20,788	)
Net unrealized loss on derivative contract		—		—		—		—		—		—			—		—			111			111
Stock compensation expense		—		—		—		—		29,720		—			—		29,720			—			29,720
Shares issued under the Incentive Award Plan		30		—		—		—		—		—			—		—			—			—
Conversion of Class B common stock into Class A common stock		—		—		—		—		—		—			—		—			—			—
Balance at September 30, 2020		132,912		21,570	$	133	$	22	$	359,678	$	(40,549	)	$	2,083,118	$	2,402,402		$	238,709		$	2,641,111

Balance at June 30, 2019		130,275		23,016	$	130	$	23	$	282,822	$	(25,282	)	$	1,875,214	$	2,132,907		$	190,766		$	2,323,673
Net earnings		—		—		—		—		—		—			103,090		103,090			18,644			121,734
Foreign currency translation adjustment		—		—		—		—		—		(72,072	)		—		(72,072	)		(26,344	)		(98,416	)
Distribution to non-controlling interest of consolidated entity		—		—		—		—		—		—			—		—			(16,115	)		(16,115	)
Stock compensation expense		—		—		—		—		10,738		—			—		10,738			—			10,738
Shares issued under the Incentive Award Plan		29		—		—		—		—		—			—		—			—