skx-10q_20210630.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 June 30, 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 July 30, 2021, 134,893,597 shares of the registrant’s Class A Common Stock, $0.001 par value per share, were outstanding.

As of July 30, 2021, 20,938,571 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 (Loss) (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	5
	Condensed Consolidated Statements of Equity (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
	Signatures	28

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	As of June 30,			As of December 31,
(in thousands, except par values)	2021			2020
ASSETS
Current assets
Cash and cash equivalents	$	1,091,355		$	1,370,826
Short-term investments		107,626			100,767
Trade accounts receivable, less allowances of $50,912 and $48,562		778,216			619,800
Other receivables		66,298			69,222
Total receivables		844,514			689,022
Inventory		1,057,284			1,016,774
Prepaid expenses and other current assets		145,256			166,962
Total current assets ($963,352 and $862,954 related to VIEs)		3,246,035			3,344,351
Property, plant and equipment, net		1,026,777			935,441
Operating lease right-of-use assets		1,134,145			1,171,521
Deferred tax assets		61,276			63,884
Long-term investments		122,542			108,412
Goodwill		93,497			93,497
Other assets, net		80,459			95,263
Total non-current assets ($687,307 and $682,068 related to VIEs)		2,518,696			2,468,018
TOTAL ASSETS	$	5,764,731		$	5,812,369
LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	831,910		$	744,077
Operating lease liabilities		214,271			204,370
Accrued expenses		248,996			208,712
Current installments of long-term borrowings		42,547			52,250
Short-term borrowings		575			3,297
Total current liabilities ($532,980 and $526,466 related to VIEs)		1,338,299			1,212,706
Long-term borrowings, excluding current installments		268,913			679,415
Long-term operating lease liabilities		1,015,754			1,065,069
Deferred tax liabilities		10,421			11,439
Other long-term liabilities		117,240			118,077
Total non-current liabilities ($383,826 and $365,235 related to VIEs)		1,412,328			1,874,000
Total liabilities		2,750,627			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; 134,884 and 133,618 shares issued and outstanding		135			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		395,951			372,165
Accumulated other comprehensive loss		(34,990	)		(27,285	)
Retained earnings		2,372,342			2,136,400
Skechers U.S.A., Inc. equity		2,733,459			2,481,435
Noncontrolling interests		280,645			244,228
Total stockholders' equity		3,014,104			2,725,663
TOTAL LIABILITIES AND EQUITY	$	5,764,731		$	5,812,369

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	2021			2020			2021			2020
Sales	$	1,657,773		$	729,472		$	3,086,191		$	1,971,817
Cost of sales		808,280			360,906			1,557,075			1,055,583
Gross profit		849,493			368,566			1,529,116			916,234
Royalty income		4,098			2,596			10,135			7,844
		853,591			371,162			1,539,251			924,078
Operating expenses
Selling		132,448			60,240			217,744			134,295
General and administrative		519,934			371,893			962,629			805,944
Selling, general and administrative		652,382			432,133			1,180,373			940,239
Earnings (loss) from operations		201,209			(60,971	)		358,878			(16,161	)
Other income (expense)
Interest income		909			1,547			1,704			3,854
Interest expense		(3,417	)		(4,804	)		(7,530	)		(6,785	)
Other, net		4,666			4,704			(6,190	)		8,157
Total other income (expense)		2,158			1,447			(12,016	)		5,226
Earnings (loss) before income taxes		203,367			(59,524	)		346,862			(10,935	)
Income tax expense (benefit)		41,544			(4,307	)		70,530			3,122
Net earnings (loss)		161,823			(55,217	)		276,332			(14,057	)
Less: Net earnings attributable to noncontrolling interest		24,454			12,880			40,390			4,939
Net earnings (loss) attributable to Skechers U.S.A. Inc.	$	137,369		$	(68,097	)	$	235,942		$	(18,996	)
Net earnings (loss) per share attributable to Skechers U.S.A. Inc.
Basic	$	0.88		$	(0.44	)	$	1.52		$	(0.12	)
Diluted	$	0.88		$	(0.44	)	$	1.51		$	(0.12	)
Weighted-average shares used in calculating net earnings (loss) per share attributable to Skechers U.S.A. Inc.
Basic		155,561			154,138			155,196			153,849
Diluted		156,674			154,138			156,321			153,849

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands)	2021		2020			2021			2020
Net earnings (loss)	$	161,823	$	(55,217	)	$	276,332		$	(14,057	)
Other comprehensive income (loss), net of tax
Gain (loss) on foreign currency translation adjustment		3,012		(94,265	)		(9,493	)		(124,028	)
Comprehensive income (loss)		164,835		(149,482	)		266,839			(138,085	)
Less: Comprehensive income (loss) attributable to noncontrolling interests		26,107		(9,966	)		38,602			(24,845	)
Comprehensive income (loss) attributable to Skechers U.S.A., Inc.	$	138,728	$	(139,516	)	$	228,237		$	(113,240	)

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 March 31, 2021		134,172			20,949	$	134	$	21	$	377,350		$	(36,349	)	$	2,234,973		$	2,576,129		$	255,417		$	2,831,546
Net earnings		—			—		—		—		—			—			137,369			137,369			24,454			161,823
Foreign currency translation adjustment		—			—		—		—		—			1,359			—			1,359			1,653			3,012
Distributions to noncontrolling interests		—			—		—		—		—			—			—			—			(750	)		(750	)
Net unrealized loss on derivative contract		—			—		—		—		—			—			—			—			(129	)		(129	)
Stock compensation expense		—			—		—		—		14,645			—			—			14,645			—			14,645
Proceeds from the employee stock purchase plan		141			—		—		—		4,027			—			—			4,027			—			4,027
Shares issued under the incentive award plan		572			—		1		—		(1	)		—			—			—			—			—
Shares redeemed for employee tax withholdings		(1	)		—		—		—		(70	)		—			—			(70	)		—			(70	)
Balance at June 30, 2021		134,884			20,949	$	135	$	21	$	395,951		$	(34,990	)	$	2,372,342		$	2,733,459		$	280,645		$	3,014,104

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
Net earnings (loss)		—			—		—		—		—			—			(68,097	)		(68,097	)		12,880			(55,217	)
Foreign currency translation adjustment		—			—		—		—		—			(71,419	)		—			(71,419	)		(22,846	)		(94,265	)
Distributions to noncontrolling interests		—			—		—		—		—			—			—			—			(16,189	)		(16,189	)
Net unrealized loss on derivative contract		—			—		—		—		—			—			—			—			(2,159	)		(2,159	)
Stock compensation expense		—			—		—		—