skx-10q_20210331.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 March 31, 2021

☐	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 April 30, 2021, 134,172,217 shares of the registrant’s Class A Common Stock, $0.001 par value per share, were outstanding.

As of April 30, 2021, 20,949,425 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.	Financial Statements:
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Earnings (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	5
	Condensed Consolidated Statements of Equity (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	Mine Safety Disclosures	20
Item 5.	Other Information	20
Item 6.	Exhibits	21
	Signatures	22

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	As of March 31,			As of December 31,
(in thousands, except par values)	2021			2020
ASSETS
Current assets
Cash and cash equivalents	$	1,284,540		$	1,370,826
Short-term investments		106,028			100,767
Trade accounts receivable, less allowances of $47,468 and $48,562		798,836			619,800
Other receivables		70,758			69,222
Total receivables		869,594			689,022
Inventory		1,067,437			1,016,774
Prepaid expenses and other current assets		137,138			166,962
Total current assets ($920,986 and $862,954 related to VIEs)		3,464,737			3,344,351
Property, plant and equipment, net		992,512			935,441
Operating lease right-of-use assets		1,159,339			1,171,521
Deferred tax assets		63,339			63,884
Long-term investments		124,379			108,412
Goodwill		93,497			93,497
Other assets, net		87,763			95,263
Total non-current assets ($686,035 and $682,068 related to VIEs)		2,520,829			2,468,018
TOTAL ASSETS	$	5,985,566		$	5,812,369
LIABILITIES AND EQUITY
Current liabilities
Current installments of long-term borrowings	$	60,942		$	52,250
Short-term borrowings		1,138			3,297
Accounts payable		807,949			744,077
Operating lease liabilities		217,241			204,370
Accrued expenses		184,109			208,712
Total current liabilities ($544,355 and $526,466 related to VIEs)		1,271,379			1,212,706
Long-term borrowings, excluding current installments		717,595			679,415
Long-term operating lease liabilities		1,039,763			1,065,069
Deferred tax liabilities		10,835			11,439
Other long-term liabilities		114,448			118,077
Total non-current liabilities ($385,807 and $365,235 related to VIEs)		1,882,641			1,874,000
Total liabilities		3,154,020			3,086,706
Commitments and contingencies (Note 10)
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; 134,172 and 133,618 shares issued and outstanding		134			134
Class B Common Stock, $0.001 par value; 75,000 shares authorized; 20,949 and 21,016 shares issued and outstanding		21			21
Additional paid-in capital		377,350			372,165
Accumulated other comprehensive loss		(36,349	)		(27,285	)
Retained earnings		2,234,973			2,136,400
Skechers U.S.A., Inc. equity		2,576,129			2,481,435
Noncontrolling interests		255,417			244,228
Total stockholders' equity		2,831,546			2,725,663
TOTAL LIABILITIES AND EQUITY	$	5,985,566		$	5,812,369

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

	Three Months Ended March 31,
(in thousands, except per share data)	2021			2020
Sales	$	1,428,418		$	1,242,345
Cost of sales		748,796			694,677
Gross profit		679,622			547,668
Royalty income		6,037			5,248
		685,659			552,916
Operating expenses
Selling		85,296			74,055
General and administrative		442,695			434,051
Selling, general and administrative		527,991			508,106
Earnings from operations		157,668			44,810
Other income (expense)
Interest income		796			2,307
Interest expense		(4,113	)		(1,999	)
Other, net		(10,857	)		3,471
Total other income (expense)		(14,174	)		3,779
Earnings before income tax expense		143,494			48,589
Income tax expense		28,985			7,429
Net earnings		114,509			41,160
Less: Net earnings (loss) attributable to noncontrolling interests		15,936			(7,941	)
Net earnings attributable to Skechers U.S.A., Inc.	$	98,573		$	49,101
Net earnings per share attributable to Skechers U.S.A., Inc.
Basic	$	0.64		$	0.32
Diluted	$	0.63		$	0.32
Weighted-average shares used in calculating net earnings per share attributable to Skechers U.S.A, Inc.
Basic		154,818			153,555
Diluted		155,936			154,652

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended March 31,
(in thousands)	2021			2020
Net earnings	$	114,509		$	41,160
Other comprehensive income, net of tax
Loss on foreign currency translation adjustment		(12,505	)		(29,764	)
Comprehensive income		102,004			11,396
Less: Comprehensive income (loss) attributable to noncontrolling interests		12,495			(14,879	)
Comprehensive income attributable to Skechers U.S.A., Inc.	$	89,509		$	26,275

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

	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'
(in thousands)	STOCK			STOCK			STOCK		STOCK		CAPITAL			LOSS			EARNINGS		EQUITY			INTEREST			EQUITY
Balance at December 31, 2020		133,618			21,016		$	134	$	21	$	372,165		$	(27,285	)	$	2,136,400	$	2,481,435		$	244,228		$	2,725,663
Net earnings		—			—			—		—		—			—			98,573		98,573			15,936			114,509
Foreign currency translation adjustment		—			—			—		—		—			(9,064	)		—		(9,064	)		(3,441	)		(12,505	)
Contribution from noncontrolling interests		—			—			—		—		—			—			—		—			14			14
Purchase of noncontrolling interest		—			—			—		—		(6,856	)		—			—		(6,856	)		(3,072	)		(9,928	)
Net unrealized gain on derivative contract		—			—			—		—		—			—			—		—			1,752			1,752
Stock compensation expense		—			—			—		—		12,041			—			—		12,041			—			12,041
Shares issued under the incentive award plan		487			—			—		—		—			—			—		—			—			—
Conversion of Class B Common Stock into Class A Common Stock		67			(67	)		—		—		—			—			—		—			—			—
Balance at March 31, 2021		134,172			20,949		$	134	$	21	$	377,350		$	(36,349	)	$	2,234,973	$	2,576,129		$	255,417		$	2,831,546

Balance at December 31, 2019		131,071			22,408		$	131	$	22	$	306,669		$	(29,993	)	$	2,037,836	$	2,314,665		$	221,442		$	2,536,107
Net earnings		—			—			—		—		—			—			49,101		49,101			(7,941	)		41,160
Foreign currency translation adjustment		—			—			—		—		—			(22,826	)		—		(22,826	)		(6,938	)		(29,764	)
Distributions to noncontrolling interests		—			—			—		—		—			—			—		—			(14,865	)		(14,865	)
Noncontrolling interest of acquired businesses		—			—			—		—		—			—			—		—			49,045			49,045
Stock compensation expense		—			—			—		—		12,441			—			—		12,441			—			12,441
Shares issued under the incentive award plan		376			—			—		—		—			—			—		—			—			—
Shares redeemed for employee tax withholdings		(171	)		—			—		—		(5,659	)		—			—		(5,659	)		—			(5,659	)
Balance at March 31, 2020		131,276			22,408		$	131	$	22	$	313,451		$	(52,819	)	$	2,086,937	$	2,347,722		$	240,743		$	2,588,465

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
(in thousands)	2021			2020
Cash flows from operating activities
Net earnings	$	114,509		$	41,160
Adjustments to reconcile net earnings to net cash from operating activities
Depreciation and amortization		33,008			39,559
Provision for bad debts and returns		7,348			26,277
Stock compensation		12,041			12,441
Deferred income taxes		(446	)		(4,885	)
Net settlement gain		—			(13,877	)
Net foreign currency adjustments		6,015			6,513
Changes in operating assets and liabilities
Receivables		(196,331	)		(187,786	)
Inventory		(57,392	)		77,539
Other assets		29,705			29,733
Accounts payable		69,184			(141,815	)
Other liabilities		(31,415	)		(19,840	)
Net cash used in operating activities		(13,774	)		(134,981	)
Cash flows from investing activities
Capital expenditures		(84,237	)		(74,887	)
Purchases of investments		(71,132	)		(43,788	)
Proceeds from sales and maturities of investments		49,905			42,418
Net cash used in investing activities		(105,464	)		(76,257	)
Cash flows from financing activities
Repayments on long-term borrowings		(46	)		(107	)
Proceeds from long-term borrowings		46,918			570,767
Proceeds from (repayments on) short-term borrowings, net		(2,159	)		7,912
Payments for employee taxes related to stock compensation		—			(5,659	)
Purchase of noncontrolling interest		(9,928	)		—
Contributions from noncontrolling interests		14			—
Distributions to noncontrolling interests		—			(14,865	)
Net cash provided by financing activities