skx-10q_20210930.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 September 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 October 29, 2021, 134,902,629 shares of the registrant’s Class A Common Stock, $0.001 par value per share, were outstanding.

As of October 29, 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 (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (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	22
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	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
	Signatures	29

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	As of September 30,			As of December 31,
(in thousands, except par values)	2021			2020
ASSETS
Current assets
Cash and cash equivalents	$	952,076		$	1,370,826
Short-term investments		90,577			100,767
Trade accounts receivable, less allowances of $64,567 and $48,562		758,713			619,800
Other receivables		81,362			69,222
Total receivables		840,075			689,022
Inventory		1,230,349			1,016,774
Prepaid expenses and other current assets		189,598			166,962
Total current assets ($1,011,742 and $862,954 related to VIEs)		3,302,675			3,344,351
Property, plant and equipment, net		1,087,183			935,441
Operating lease right-of-use assets		1,130,279			1,171,521
Deferred tax assets		70,353			63,884
Long-term investments		139,052			108,412
Goodwill		93,497			93,497
Other assets, net		78,536			95,263
Total non-current assets ($693,242 and $682,068 related to VIEs)		2,598,900			2,468,018
TOTAL ASSETS	$	5,901,575		$	5,812,369
LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	846,101		$	744,077
Operating lease liabilities		214,192			204,370
Accrued expenses		232,599			208,712
Current installments of long-term borrowings		43,742			52,250
Short-term borrowings		320			3,297
Total current liabilities ($553,079 and $526,466 related to VIEs)		1,336,954			1,212,706
Long-term borrowings, excluding current installments		282,760			679,415
Long-term operating lease liabilities		1,010,499			1,065,069
Deferred tax liabilities		9,850			11,439
Other long-term liabilities		129,518			118,077
Total non-current liabilities ($395,520 and $365,235 related to VIEs)		1,432,627			1,874,000
Total liabilities		2,769,581			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; 134,903 and 133,618 shares issued and outstanding		135			134
Class B Common Stock, $0.001 par value; 75,000 shares authorized; 20,939 and 21,016 shares issued and outstanding		21			21
Additional paid-in capital		410,376			372,165
Accumulated other comprehensive loss		(44,510	)		(27,285	)
Retained earnings		2,475,481			2,136,400
Skechers U.S.A., Inc. equity		2,841,503			2,481,435
Noncontrolling interests		290,491			244,228
Total stockholders' equity		3,131,994			2,725,663
TOTAL LIABILITIES AND EQUITY	$	5,901,575		$	5,812,369

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share data)	2021			2020			2021			2020
Sales	$	1,550,957		$	1,300,886		$	4,637,147		$	3,272,703
Cost of sales		781,513			675,765			2,338,587			1,731,349
Gross profit		769,444			625,121			2,298,560			1,541,354
Royalty income		7,519			3,216			17,654			11,061
		776,963			628,337			2,316,214			1,552,415
Operating expenses
Selling		119,775			85,926			337,519			220,222
General and administrative		510,941			450,285			1,473,570			1,256,228
Total operating expenses		630,716			536,211			1,811,089			1,476,450
Earnings from operations		146,247			92,126			505,125			75,965
Other income (expense)
Interest income		813			1,884			2,518			5,739
Interest expense		(3,348	)		(4,643	)		(10,878	)		(11,428	)
Other, net		(5,514	)		7,726			(11,705	)		15,882
Total other income (expense)		(8,049	)		4,967			(20,065	)		10,193
Earnings before income taxes		138,198			97,093			485,060			86,158
Income tax expense		21,497			14,983			92,027			18,104
Net earnings		116,701			82,110			393,033			68,054
Less: Net earnings attributable to noncontrolling interest		13,562			17,832			53,952			22,771
Net earnings attributable to Skechers U.S.A. Inc.	$	103,139		$	64,278		$	339,081		$	45,283
Net earnings per share attributable to Skechers U.S.A. Inc.
Basic	$	0.66		$	0.42		$	2.18		$	0.29
Diluted	$	0.66		$	0.41		$	2.17		$	0.29
Weighted-average shares used in calculating net earnings per share attributable to Skechers U.S.A. Inc.
Basic		155,835			154,462			155,413			154,061
Diluted		157,123			154,980			156,590			154,707

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	2021			2020		2021			2020
Net earnings	$	116,701		$	82,110	$	393,033		$	68,054
Other comprehensive income, net of tax
Gain (loss) on foreign currency translation adjustment		(13,027	)		112,814		(22,520	)		(11,215	)
Comprehensive income		103,674			194,924		370,513			56,839
Less: Comprehensive income attributable to noncontrolling interests		10,055			46,956		48,657			22,112
Comprehensive income attributable to Skechers U.S.A., Inc.	$	93,619		$	147,968	$	321,856		$	34,727

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			INCOME (LOSS)			EARNINGS		EQUITY			INTEREST			EQUITY
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
Net earnings		—			—			—		—		—			—			103,139		103,139			13,562			116,701
Foreign currency translation adjustment		—			—			—		—		—			(9,520	)		—		(9,520	)		(3,507	)		(13,027	)
Contributions from noncontrolling interests		—			—			—		—		—			—			—		—			6,717			6,717
Distributions to noncontrolling interests		—			—			—		—		—			—			—		—			(7,126	)		(7,126	)
Net unrealized gain on derivative contract		—			—			—		—		—			—			—		—			200			200
Stock compensation expense		—			—			—		—		14,664			—			—		14,664			—			14,664
Shares issued under the incentive award plan		14			—			—		—		—			—			—		—			—			—
Shares redeemed for employee tax withholdings		(5	)		—			—		—		(239	)		—			—		(239	)		—			(239	)
Conversion of Class B Common Stock into Class A Common Stock		10			(10	)		—		—		—			—			—		—			—			—
Balance at September 30, 2021		134,903			20,939		$	135	$	21	$	410,376		$	(44,510	)	$	2,475,481	$	2,841,503		$	290,491		$	3,131,994

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
Net earnings		—			—			—		—		—			—			64,278		64,278			17,832			82,110
Foreign currency translation adjustment		—			—			—		—		—			83,689			—		83,689			29,125			112,814
Distributions to noncontrolling interests		—			—			—		—		—			—			—		—			(20,788	)		(20,788	)
Net unrealized gain on derivative contract