skx-10q_20200630.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, 2020

☐	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 28, 2020, 136,302,312 shares of the registrant’s Class A Common Stock, $0.001 par value per share, were outstanding.

As of July 28, 2020, 21,570,477 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.	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Earnings (Loss)	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	43
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	50
Item 4.	Mine Safety Disclosures	50
Item 5.	Other Information	50
Item 6.	Exhibits	51
	Signatures	52

PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par values)

	June 30,			December 31,
	2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	1,352,120		$	824,876
Short-term investments		105,677			112,037
Trade accounts receivable, less allowances of $37,710 in 2020 and $24,106 in 2019		478,011			645,303
Other receivables		68,104			53,932
Total receivables		546,115			699,235
Inventories		1,027,735			1,069,863
Prepaid expenses and other current assets		105,141			113,580
Total current assets		3,136,788			2,819,591
Property, plant and equipment, net		833,103			738,925
Operating lease right-of-use assets		1,102,885			1,073,660
Deferred tax assets		49,198			49,088
Long-term investments		98,236			94,589
Goodwill		93,497			71,412
Other assets, net		94,339			45,678
Total non-current assets		2,271,258			2,073,352
TOTAL ASSETS	$	5,408,046		$	4,892,943
LIABILITIES AND EQUITY
Current liabilities:
Current installments of long-term borrowings	$	69,359		$	66,234
Short-term borrowings		13,870			5,789
Accounts payable		621,142			764,844
Operating lease liabilities		194,508			191,129
Accrued expenses		177,907			210,235
Total current liabilities		1,076,786			1,238,231
Long-term borrowings, excluding current installments		680,109			49,183
Long-term operating lease liabilities		1,099,798			966,011
Deferred tax liabilities		12,435			322
Other long-term liabilities		101,774			103,089
Total non-current liabilities		1,894,116			1,118,605
Total liabilities		2,970,902			2,356,836
Commitments and contingencies
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; 132,882 and 131,071 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively		133			131
Class B common stock, $0.001 par value; 75,000 shares authorized; 21,570 and 22,408 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively		22			22
Additional paid-in capital		329,958			306,669
Accumulated other comprehensive loss		(124,238	)		(29,993	)
Retained earnings		2,018,840			2,037,836
Skechers U.S.A., Inc. equity		2,224,715			2,314,665
Non-controlling interests		212,429			221,442
Total stockholders' equity		2,437,144			2,536,107
TOTAL LIABILITIES AND EQUITY	$	5,408,046		$	4,892,943

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

(Unaudited)

(In thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Sales	$	729,472		$	1,258,565		$	1,971,817		$	2,535,321
Cost of sales		360,906			648,730			1,055,583			1,334,977
Gross profit		368,566			609,835			916,234			1,200,344
Royalty income		2,596			6,341			7,844			11,542
		371,162			616,176			924,078			1,211,886
Operating expenses:
Selling		60,240			113,507			134,295			183,721
General and administrative		371,893			391,588			805,944			751,220
		432,133			505,095			940,239			934,941
Earnings / (loss) from operations		(60,971	)		111,081			(16,161	)		276,945
Other income / (expense):
Interest income		1,547			3,067			3,854			6,209
Interest expense		(4,804	)		(1,905	)		(6,785	)		(3,182	)
Other, net		4,704			553			8,157			(4,433	)
Total other income / (expense)		1,447			1,715			5,226			(1,406	)
Earnings / (loss) before income tax expense (benefit)		(59,524	)		112,796			(10,935	)		275,539
Income tax expense / (benefit)		(4,307	)		20,798			3,122			52,522
Net earnings / (loss)		(55,217	)		91,998			(14,057	)		223,017
Net earnings attributable to non-controlling interests		12,880			16,818			4,939			39,079
Net earnings / (loss) attributable to Skechers U.S.A., Inc.	$	(68,097	)	$	75,180		$	(18,996	)	$	183,938
Net earnings / (loss) per share attributable to Skechers U.S.A., Inc.:
Basic	$	(0.44	)	$	0.49		$	(0.12	)	$	1.20
Diluted	$	(0.44	)	$	0.49		$	(0.12	)	$	1.19
Weighted average shares used in calculating net earnings / (loss) per share attributable to Skechers U.S.A., Inc.:
Basic		154,138			153,413			153,849			153,446
Diluted		154,138			153,912			153,849			154,051

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)

	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019
Net earnings / (loss)	$	(55,217	)	$	91,998	$	(14,057	)	$	223,017
Other comprehensive income / (loss), net of tax:
Gain / (loss) on foreign currency translation adjustment		(94,265	)		2,905		(124,028	)		6,357
Comprehensive income / (loss)		(149,482	)		94,903		(138,085	)		229,374
Comprehensive income / (loss) attributable to non- controlling interests		(9,966	)		15,483		(24,845	)		39,230
Comprehensive income / (loss) attributable to Skechers U.S.A., Inc.	$	(139,516	)	$	79,420	$	(113,240	)	$	190,144

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)

	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'
	STOCK		STOCK			STOCK		STOCK		CAPITAL			INCOME (LOSS)			EARNINGS			EQUITY			INTEREST			EQUITY
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	)
Distribution to non-controlling interest of consolidated entity		—		—			—		—		—			—			—			—			(16,189	)		(16,189	)
Net unrealized loss on derivative contract		—		—			—		—		—			—			—			—			(2,159	)		(2,159	)
Stock compensation expense		—		—			—		—		12,822			—			—			12,822			—			12,822
Proceeds from issuance of common stock under the employee stock purchase plan		138		—			1		—		3,686			—			—			3,687			—			3,687
Shares issued under the Incentive Award Plan		630		—			1		—		(1	)		—			—			—			—			—
Conversion of Class B Common Stock into Class A Common Stock		838		(838	)		—		—		—			—			—			—			—			—
Balance at June 30, 2020		132,882		21,570		$	133	$	22	$	329,958		$	(124,238	)	$	2,018,840		$	2,224,715		$	212,429		$	2,437,144

Balance at March 31, 2019		130,242		23,016		$	130	$	23	$	291,867		$	(29,522	)	$	1,800,034		$	2,062,532		$	172,986		$	2,235,518
Net earnings		—		—			—		—		—			—			75,180			75,180			16,818			91,998
Foreign currency translation adjustment		—		—			—		—		—			4,240			—			4,240			(1,335	)		2,905
Contribution from non-controlling interest of consolidated entity		—		—			—		—		—			—			—			—			22,776			22,776
Distribution to non-controlling interest of consolidated entity		—		—			—		—		—			—			—