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, 2014

Provisions for Income Tax Expense (Benefit)

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


	2014			2013		2012

Federal:
Current	$	7,677		$	632	$	(67	)
Deferred		23,659			11,537		(6,381	)

Total federal		31,336			12,169		(6,448	)

State:
Current		2,060			519		1,796
Deferred		529			119		(307	)

Total state		2,589			638		1,489

Foreign:
Current		5,399			8,228		5,325
Deferred		(140	)		312		(405	)

Total foreign		5,259			8,540		4,920

Total income taxes (benefit)	$	39,184		$	21,347	$	(39	)

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 2014, 2013 and 2012 are as follows (in thousands):


	Years Ended December 31,
	2014						2013						2012
Income tax jurisdiction	Earnings (loss) before income taxes			Income tax expense			Earnings (loss) before income taxes			Income tax expense			Earnings (loss) before income taxes			Income tax expense (benefit)

United States	$	82,778		$	32,500		$	38,705		$	12,807		$	(27,379	)	$	(5,867	)
Canada		6,241			1,572			4,091			1,187			2,564			545
Chile		629			138			9,622			1,920			5,971			1,043
Peoples Republic of China (“China”)		15,201			1,179			6,148			1,646			1,278			319
Jersey (1)		77,555			—			25,348			—			25,162			—
Non-benefited loss operations (2)		(13,021	)		—			(15,841	)		—			(13,492	)		—
Other jurisdictions (3)		21,997			3,795			14,142			3,787			16,369			3,921

Earnings before income taxes	$	191,380		$	39,184		$	82,215		$	21,347		$	10,473		$	(39	)


Effective tax rate (4)					20.5	%					26.0	%					(0.4	)%

(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 and India.

(3)

Consists of entities in the following tax jurisdictions, each of which comprises not more than 5%, of 2014 consolidated earnings (loss) before taxes: UK, Germany, France, Spain, Belgium, Italy, Netherlands, Switzerland, Malaysia, Thailand, Singapore, Hong Kong, Portugal and Austria.

(4)

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

Summary of Earnings before Income Taxes

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


	2014			2013			2012

Expected income tax expense	$	66,981		$	28,775		$	3,666
State income tax, net of federal benefit		1,032			255			1,406
Rate differential on foreign income		(27,364	)		(11,897	)		(8,752	)
Change in unrecognized tax benefits		(2,717	)		740			(149	)
Non-deductible expenses		288			(150	)		194
Prior year R&D credit claims		—			(493	)		—
Other		3,333			(1,187	)		79
Change in valuation allowance		(2,369	)		5,304			3,517

Total provision (benefit) for income taxes	$	39,184		$	21,347		$	(39	)


Effective tax rate		20.5	%		26.0	%		(0.4	)%

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, 2014 and 2013 are presented below (in thousands):


DEFERRED TAX ASSETS:	2014			2013

Deferred tax assets – current:
Inventory adjustments	$	4,942		$	5,075
Accrued expenses		15,103			17,084
Allowances for bad debts and chargebacks		6,407			6,179

Total current assets		26,452			28,338

Deferred tax assets – long term:
Loss carryforwards		23,247			43,711
Business credit carryforward		4,042			9,763
Share-based compensation		2,282			279
Valuation allowance		(17,534	)		(19,903	)

Total long term assets		12,037			33,850

Total deferred tax assets		38,489			62,188

Deferred tax liabilities – current:
Prepaid expenses		7,588			6,223
Deferred tax liabilities – long term:
Depreciation on property, plant and equipment		22,050			24,703

Total deferred tax liabilities		29,638			30,926

Net deferred tax assets	$	8,851		$	31,262

Reconciliation of Unrecognized Tax Benefits

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


	2014			2013

Beginning balance	$	10,816		$	10,221
Additions for current year tax positions		773			696
Additions for prior year tax positions		—			164
Reductions for prior year tax positions		(2,227	)		(5	)
Settlement of uncertain tax positions		—			—
Reductions related to lapse of statute of limitations		(1,426	)		(260	)

Ending balance	$	7,936		$	10,816