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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, 2023

or

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 27, 2023, 134,270,786 shares of the registrant’s Class A Common Stock, $0.001 par value per share, were outstanding.

As of April 27, 2023, 20,463,521 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

16

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

20

 

Signatures

21

 

 

 

2


 

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

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

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

 

As of

 

 

As of

 

(in thousands)

 

March 31, 2023

 

 

December 31, 2022

 

ASSETS

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

760,040

 

 

$

615,733

 

Short-term investments

 

 

89,507

 

 

 

102,166

 

Trade accounts receivable, less allowances of $61,984 and $59,472

 

 

1,052,687

 

 

 

848,287

 

Other receivables

 

 

82,948

 

 

 

86,036

 

Inventory

 

 

1,502,247

 

 

 

1,818,016

 

Prepaid expenses and other

 

 

222,556

 

 

 

176,035

 

Total current assets ($1,061,021 and $1,014,962 related to VIEs)

 

 

3,709,985

 

 

 

3,646,273

 

Property, plant and equipment, net

 

 

1,377,588

 

 

 

1,345,370

 

Operating lease right-of-use assets

 

 

1,239,222

 

 

 

1,200,565

 

Deferred tax assets

 

 

461,614

 

 

 

454,190

 

Long-term investments

 

 

80,743

 

 

 

70,498

 

Goodwill

 

 

93,497

 

 

 

93,497

 

Other assets, net

 

 

81,822

 

 

 

83,094

 

Total non-current assets ($608,819 and $598,973 related to VIEs)

 

 

3,334,486

 

 

 

3,247,214

 

TOTAL ASSETS

 

$

7,044,471

 

 

$

6,893,487

 

LIABILITIES AND EQUITY

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

892,057

 

 

$

957,384

 

Accrued expenses

 

 

269,225

 

 

 

294,143

 

Operating lease liabilities

 

 

247,411

 

 

 

238,694

 

Current installments of long-term borrowings

 

 

100,469

 

 

 

103,184

 

Short-term borrowings

 

 

30,471

 

 

 

19,635

 

Total current liabilities ($538,025 and $568,158 related to VIEs)

 

 

1,539,633

 

 

 

1,613,040

 

Long-term operating lease liabilities

 

 

1,092,711

 

 

 

1,063,672

 

Long-term borrowings

 

 

230,275

 

 

 

216,488

 

Deferred tax liabilities

 

 

8,722

 

 

 

8,656

 

Other long-term liabilities

 

 

126,835

 

 

 

120,045

 

Total non-current liabilities ($310,148 and $293,726 related to VIEs)

 

 

1,458,543

 

 

 

1,408,861

 

Total liabilities

 

 

2,998,176

 

 

 

3,021,901

 

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;

   134,259 and 134,473 shares issued and outstanding

 

 

134

 

 

 

134

 

Class B Common Stock, $0.001 par value; 75,000 shares authorized;

   20,474 and 20,810 shares issued and outstanding

 

 

20

 

 

 

21

 

Additional paid-in capital

 

 

383,540

 

 

 

403,799

 

Accumulated other comprehensive loss

 

 

(80,217

)

 

 

(84,897

)

Retained earnings

 

 

3,411,374

 

 

 

3,250,931

 

Skechers U.S.A., Inc. equity

 

 

3,714,851

 

 

 

3,569,988

 

Noncontrolling interests

 

 

331,444

 

 

 

301,598

 

Total stockholders' equity

 

 

4,046,295

 

 

 

3,871,586

 

TOTAL LIABILITIES AND EQUITY

 

$

7,044,471

 

 

$

6,893,487

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

3


 

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

Condensed Consolidated Statements of Earnings

(Unaudited)

 

 

 

Three Months Ended March 31,

 

(in thousands, except per share data)

 

2023

 

 

2022

 

Sales

 

$

2,001,928

 

 

$

1,819,594

 

Cost of sales

 

 

1,023,349

 

 

 

995,431

 

Gross profit

 

 

978,579

 

 

 

824,163

 

Operating expenses

 

 

 

 

 

 

 

 

Selling

 

 

128,560

 

 

 

108,209

 

General and administrative

 

 

626,442

 

 

 

540,050

 

Total operating expenses

 

 

755,002

 

 

 

648,259

 

Earnings from operations

 

 

223,577

 

 

 

175,904

 

Other income (expense)

 

 

9,923

 

 

 

(5,746

)

Earnings before income taxes

 

 

233,500

 

 

 

170,158

 

Income tax expense

 

 

43,216

 

 

 

33,992

 

Net earnings

 

 

190,284

 

 

 

136,166

 

Less: Net earnings attributable to noncontrolling interests

 

 

29,841

 

 

 

14,943

 

Net earnings attributable to Skechers U.S.A., Inc.

 

$

160,443

 

 

$

121,223

 

Net earnings per share attributable to Skechers U.S.A., Inc.

 

 

 

 

 

 

 

 

Basic

 

$

1.03

 

 

$

0.78

 

Diluted

 

$

1.02

 

 

$

0.77

 

Weighted-average shares used in calculating net earnings per share attributable to Skechers U.S.A., Inc.

 

 

 

 

 

 

 

 

Basic

 

 

155,140

 

 

 

155,996

 

Diluted

 

 

156,755

 

 

 

157,448

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


 

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

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

 

 

 

Three Months Ended March 31,

 

(in thousands)

 

2023

 

 

2022

 

Net earnings

 

$

190,284

 

 

$

136,166

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

Net unrealized (loss) gain on derivative contract

 

 

(1,416

)

 

 

5,843

 

Gain on foreign currency translation adjustment

 

 

6,851

 

 

 

1,489

 

Comprehensive income

 

 

195,719

 

 

 

143,498

 

Less: Comprehensive income attributable to noncontrolling interests

 

 

30,596

 

 

 

20,021

 

Comprehensive income attributable to Skechers U.S.A., Inc.

 

$

165,123

 

 

$

123,477

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

5


 

 

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

Condensed Consolidated Statements of Equity

(Unaudited)

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Class A Common Stock

 

 

Class B Common Stock

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

Additional paid-in capital

 

 

other comprehensive loss

 

 

Retained earnings

 

 

Skechers U.S.A., Inc. equity

 

 

Noncontrolling interests

 

 

Total stockholders' equity

 

Balance at December 31, 2022

 

 

134,473

 

 

 

20,810

 

 

$

134

 

 

$

21

 

 

$

403,799

 

 

$

(84,897

)

 

$

3,250,931

 

 

$

3,569,988

 

 

$

301,598

 

 

$

3,871,586

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

160,443

 

 

 

160,443

 

 

 

29,841

 

 

 

190,284

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,680

 

 

 

 

 

 

4,680

 

 

 

2,171

 

 

 

6,851

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(750

)

 

 

(750

)

Net unrealized loss on derivative contract

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,416

)

 

 

(1,416

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,252

 

 

 

 

 

 

 

 

 

14,252

 

 

 

 

 

 

14,252

 

Shares issued under the incentive award plan

 

 

225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares redeemed for employee tax withholdings

 

 

(99

)

 

 

 

 

 

 

 

 

 

 

 

(4,498

)

 

 

 

 

 

 

 

 

(4,498

)

 

 

 

 

 

(4,498

)

Repurchases of common stock

 

 

(676

)

 

 

 

 

 

(1

)

 

 

 

 

 

(30,013

)

 

 

 

 

 

 

 

 

(30,014

)

 

 

 

 

 

(30,014

)

Conversion of Class B Common Stock into Class A Common Stock

 

 

336

 

 

 

(336

)

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2023

 

 

134,259

 

 

 

20,474

 

 

$

134

 

 

$

20

 

 

$

383,540

 

 

$

(80,217

)

 

$

3,411,374

 

 

$

3,714,851

 

 

$

331,444

 

 

$

4,046,295

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

135,107

 

 

 

20,939

 

 

$

135

 

 

$

21

 

 

$

429,608

 

 

$

(48,323

)

 

$

2,877,903

 

 

$

3,259,344

 

 

$

282,728

 

 

$

3,542,072

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

121,223

 

 

 

121,223

 

 

 

14,943

 

 

 

136,166

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,501

 

 

 

 

 

 

1,501

 

 

 

(12

)

 

 

1,489

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,650

)

 

 

(4,650

)

Net unrealized gain on derivative contract

 

 

 

 

 

 

 

 

 

 

 

 

 

 

753

 

 

 

 

 

 

 

 

 

753

 

 

 

5,090

 

 

 

5,843

 

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,967

 

 

 

 

 

 

 

 

 

17,967

 

 

 

 

 

 

17,967

 

Shares issued under the incentive award plan

 

 

566

 

 

 

 

 

 

1

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares redeemed for employee tax withholdings

 

 

(192

)

 

 

 

 

 

 

 

 

 

 

 

(7,971

)

 

 

 

 

 

 

 

 

(7,971

)

 

 

 

 

 

(7,971

)

Repurchases of common stock

 

 

(652

)

 

 

 

 

 

(1

)

 

 

 

 

 

(24,999

)

 

 

 

 

 

 

 

 

(25,000

)

 

 

 

 

 

(25,000

)

Balance at March 31, 2022

 

 

134,829

 

 

 

20,939

 

 

$

135

 

 

$

21

 

 

$

415,357

 

 

$

(46,822

)

 

$

2,999,126

 

 

$

3,367,817

 

 

$

298,099

 

 

$

3,665,916

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

6


 

 

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

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

Three Months Ended March 31,

 

(in thousands)

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net earnings

 

$

190,284

 

 

$

136,166

 

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

41,424

 

 

 

36,516

 

Provision for bad debts and returns

 

 

9,792

 

 

 

14,024

 

Stock compensation

 

 

14,252

 

 

 

17,967

 

Deferred income taxes

 

 

(6,146

)

 

 

5,365

 

Net foreign currency adjustments

 

 

(9,605

)

 

 

2,281

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Receivables

 

 

(185,430

)

 

 

(280,334

)

Inventory

 

 

325,478

 

 

 

24,012

 

Other assets

 

 

(76,533

)

 

 

3,515

 

Accounts payable

 

 

(70,945

)

 

 

(65,404

)

Other liabilities

 

 

2,549

 

 

 

(28,871

)

Net cash provided by (used in) operating activities

 

 

235,120

 

 

 

(134,763

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(71,213

)

 

 

(89,398

)

Purchases of investments

 

 

(37,942

)

 

 

(17,992

)

Proceeds from sales and maturities of investments

 

 

40,356

 

 

 

32,178

 

Net cash used in investing activities

 

 

(68,799

)

 

 

(75,212

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Repayments on long-term borrowings

 

 

(3,875

)

 

 

(18,642

)

Proceeds from long-term borrowings

 

 

14,947

 

 

 

2,247

 

Net proceeds from short-term borrowings

 

 

10,836

 

 

 

49,050

 

Payments for employee taxes related to stock compensation

 

 

(4,498

)

 

 

(7,971

)

Repurchases of common stock

 

 

(30,014

)

 

 

(25,000

)

Distributions to noncontrolling interests

 

 

(750

)

 

 

(4,650

)

Net cash used in financing activities

 

 

(13,354

)

 

 

(4,966

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(8,660

)

 

 

8,566

 

Net change in cash and cash equivalents

 

 

144,307

 

 

 

(206,375

)

Cash and cash equivalents at beginning of the period

 

 

615,733

 

 

 

796,283

 

Cash and cash equivalents at end of the period

 

$

760,040

 

 

$

589,908