Skechers U.S.A., Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Provisions for Income Tax Expense (Benefit)

The provisions for income tax expense (benefit) were as follows (in thousands):


	2013		2012			2011
Federal:
Current	$	632	$	(67	)	$	(53,696	)
Deferred		11,537		(6,381	)		(1,896	)

Total federal		12,169		(6,448	)		(55,592	)

State:
Current		519		1,796			(241	)
Deferred		119		(307	)		(10,522	)

Total state		638		1,489			(10,763	)

Foreign:
Current		8,228		5,325			(1,027	)
Deferred		312		(405	)		3,915

Total foreign		8,540		4,920			2,888

Total income taxes (benefit)	$	21,347	$	(39	)	$	(63,467	)

Schedule of Earnings (Loss) before Income Taxes and Income Tax Expense (Benefit)

The Company’s earnings (loss) before income taxes and income tax expense (benefit) for 2013, 2012 and 2011 are as follows (in thousands):


	Years Ended December 31,
	2013						2012						2011
	Earnings (loss)						Earnings (loss)			Income tax			Earnings (loss)			Income tax
	before income			Income tax			before income			expense			before income			expense
Income tax jurisdiction	taxes			expense			taxes			(benefit)			taxes			(benefit)
United States	$	38,705		$	12,807		$	(27,379	)	$	(5,867	)	$	(161,976	)	$	(66,355	)
Canada		4,091			1,187			2,564			545			945			309
Chile		9,622			1,920			5,971			1,043			9,321			2,030
China		6,148			1,646			1,278			319			1,416			354
Jersey (1)		25,348			0			25,162			0			25,109			0
Non-benefited loss operations (2)		(15,841	)		0			(13,492	)		0			(16,844	)		0
Other jurisdictions (3)		14,142			3,787			16,369			3,921			10,982			195

Earnings (loss) before income taxes	$	82,215		$	21,347		$	10,473		$	(39	)	$	(131,047	)	$	(63,467	)

Effective tax rate (4)					26.0	%					(0.4	%)					48.4	%

(1)

Jersey does not assess income tax on corporate net earnings.

(2)

Consists of entities in the following tax jurisdictions where no tax benefit is recognized in the period being reported because of the provision of offsetting valuation allowances: Japan, Brazil, China, Hong Kong and India.

(3)

Consists of entities in the following tax jurisdictions, each of which comprises not more than 5%, of 2013 consolidated income (loss) before taxes: UK, Germany, France, Spain, Belgium, Italy, Netherlands, Switzerland, Malaysia, Thailand, Singapore, China, Hong Kong, Portugal and Austria.

(4)

The effective tax rate is calculated by dividing income tax expense (benefit) by earnings (loss) before income taxes.

Summary of Earnings (Loss) before Income Taxes

Income taxes differ from the statutory tax rates as applied to earnings (loss) before income taxes as follows (in thousands):


	2013			2012			2011

Expected income tax expense (benefit)	$	28,775		$	3,666		$	(45,866	)
State income tax, net of federal benefit		255			1,406			(7,320	)
Rate differential on foreign income		(11,897	)		(8,752	)		(11,808	)
Change in unrecognized tax benefits		740			(149	)		2,906
Non-deductible expenses		(150	)		194			168
Prior year R&D credit claims		(493	)		0			(6,253	)
Other		(1,187	)		79			304
Change in valuation allowance		5,304			3,517			4,402

Total provision (benefit) for income taxes	$	21,347		$	(39	)	$	(63,467	)


Effective tax rate		26.0	%		(0.4	%)		48.4	%

Deferred Tax Assets

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 2013 and 2012 are presented below (in thousands):


DEFERRED TAX ASSETS:	2013			2012
Deferred tax assets – current:
Inventory adjustments	$	5,075		$	8,184
Accrued expenses		17,084			16,082
Allowances for bad debts and chargebacks		6,179			6,751

Total current assets		28,338			31,017

Deferred tax assets – long term:
Loss carryforwards		43,711			50,399
Business credit carryforward		9,763			5,034
Share-based compensation		279			191
Valuation allowance		(19,903	)		(14,599	)

Total long term assets		33,850			41,025

Total deferred tax assets		62,188			72,042

Deferred tax liabilities – current:
Prepaid expenses		6,223			4,486
Deferred tax liabilities – long term:
Depreciation on property, plant and equipment		24,703			24,711

Total deferred tax liabilities		30,926			29,197

Net deferred tax assets	$	31,262		$	42,845

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):


	2013			2012
Beginning balance	$	10,221		$	10,948
Additions for current year tax positions		696			464
Additions for prior year tax positions		164			24
Reductions for prior year tax positions		(5	)		(6	)
Settlement of uncertain tax positions		0			(301	)
Reductions related to lapse of statute of limitations		(260	)		(908	)

Ending balance	$	10,816		$	10,221