skx-10q_20220331.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 March 31, 2022

☐	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 28, 2022, 134,881,830 shares of the registrant’s Class A Common Stock, $0.001 par value per share, were outstanding.

As of April 28, 2022, 20,888,571 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)	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	20
Item 4.	Controls and Procedures	20

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	22
	Signatures	23

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	As of March 31,			As of December 31,
(in thousands, except par values)	2022			2021
ASSETS
Current assets
Cash and cash equivalents	$	589,908		$	796,283
Short-term investments		104,933			98,580
Trade accounts receivable, less allowances of $53,868 and $62,684		1,010,599			732,793
Other receivables		71,924			80,043
Inventory		1,449,513			1,470,994
Prepaid expenses and other		198,727			193,547
Total current assets ($1,001,348 and $1,040,765 related to VIEs)		3,425,604			3,372,240
Property, plant and equipment, net		1,184,483			1,128,909
Operating lease right-of-use assets		1,191,885			1,224,580
Deferred tax assets		446,007			451,355
Long-term investments		125,051			145,590
Goodwill		93,497			93,497
Other assets, net		78,583			75,109
Total non-current assets ($606,270 and $608,607 related to VIEs)		3,119,506			3,119,040
TOTAL ASSETS	$	6,545,110		$	6,491,280
LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	812,216		$	876,342
Accrued expenses		258,713			265,420
Operating lease liabilities		225,885			225,658
Current installments of long-term borrowings		58,711			76,967
Short-term borrowings		50,245			1,195
Total current liabilities ($531,491 and $601,929 related to VIEs)		1,405,770			1,445,582
Long-term operating lease liabilities		1,064,231			1,094,748
Long-term borrowings		265,305			263,445
Deferred tax liabilities		11,300			11,820
Other long-term liabilities		132,588			133,613
Total non-current liabilities ($366,490 and $368,994 related to VIEs)		1,473,424			1,503,626
Total liabilities		2,879,194			2,949,208
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; 134,829 and 135,107 shares issued and outstanding		135			135
Class B Common Stock, $0.001 par value; 75,000 shares authorized; 20,939 and 20,939 shares issued and outstanding		21			21
Additional paid-in capital		415,357			429,608
Accumulated other comprehensive loss		(46,822	)		(48,323	)
Retained earnings		2,999,126			2,877,903
Skechers U.S.A., Inc. equity		3,367,817			3,259,344
Noncontrolling interests		298,099			282,728
Total stockholders' equity		3,665,916			3,542,072
TOTAL LIABILITIES AND EQUITY	$	6,545,110		$	6,491,280

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 March 31,
(in thousands, except per share data)	2022			2021
Sales	$	1,819,594		$	1,434,455
Cost of sales		995,431			748,796
Gross profit		824,163			685,659
Operating expenses
Selling		108,209			91,325
General and administrative		540,050			436,666
Total operating expenses		648,259			527,991
Earnings from operations		175,904			157,668
Other expense		(5,746	)		(14,174	)
Earnings before income taxes		170,158			143,494
Income tax expense		33,992			28,985
Net earnings		136,166			114,509
Less: Net earnings attributable to noncontrolling interests		14,943			15,936
Net earnings attributable to Skechers U.S.A., Inc.	$	121,223		$	98,573
Net earnings per share attributable to Skechers U.S.A., Inc.
Basic	$	0.78		$	0.64
Diluted	$	0.77		$	0.63
Weighted-average shares used in calculating net earnings per share attributable to Skechers U.S.A., Inc.
Basic		155,996			154,818
Diluted		157,448			155,936

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 March 31,
(in thousands)	2022		2021
Net earnings	$	136,166	$	114,509
Other comprehensive income, net of tax
Net unrealized gain on derivative contract		5,843		1,752
Gain (loss) on foreign currency translation adjustment		1,489		(12,505	)
Comprehensive income		143,498		103,756
Less: Comprehensive income attributable to noncontrolling interests		20,021		14,247
Comprehensive income attributable to Skechers U.S.A., Inc.	$	123,477	$	89,509

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						Total
	Common			Common			Common			Common		paid-in			comprehensive			Retained		U.S.A., Inc.			Noncontrolling			stockholders'
(in thousands)	Stock			Stock			Stock			Stock		capital			loss			earnings		equity			interests			equity
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

Balance at December 31, 2020		133,618			21,016		$	134		$	21	$	372,165		$	(27,285	)	$	2,136,400	$	2,481,435		$	244,228		$	2,725,663
Net earnings		—			—			—			—		—			—			98,573		98,573			15,936			114,509
Foreign currency translation adjustment		—			—			—			—		—			(9,064	)		—		(9,064	)		(3,441	)		(12,505	)
Contribution from noncontrolling interests		—			—			—			—		—			—			—		—			14			14
Purchase of noncontrolling interests		—			—			—			—		(6,856	)		—			—		(6,856	)		(3,072	)		(9,928	)
Net unrealized gain on derivative contract		—			—			—			—		—			—			—		—			1,752			1,752
Stock compensation expense		—			—			—			—		12,041			—			—		12,041			—			12,041
Shares issued under the incentive award plan		487			—			—			—		—			—			—		—			—			—
Conversion of Class B Common Stock into Class A Common Stock		67			(67	)		—			—		—			—			—		—			—			—
Balance at March 31, 2021		134,172			20,949		$	134		$	21	$	377,350		$	(36,349	)	$	2,234,973	$	2,576,129		$	255,417		$	2,831,546

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
(in thousands)	2022			2021
Cash flows from operating activities
Net earnings	$	136,166		$	114,509
Adjustments to reconcile net earnings to net cash used in operating activities
Depreciation and amortization		36,516			33,008
Provision for bad debts and returns		14,024			7,348
Stock compensation		17,967			12,041
Deferred income taxes		5,365			(446	)
Net foreign currency adjustments		2,281			6,015
Changes in operating assets and liabilities
Receivables		(280,334	)		(196,331	)
Inventory		24,012			(57,392	)
Other assets		3,515			29,705
Accounts payable		(65,404	)		69,184
Other liabilities		(28,871	)		(31,415	)
Net cash used in operating activities		(134,763	)		(13,774	)
Cash flows from investing activities
Capital expenditures		(89,398	)		(84,237	)
Purchases of investments		(17,992	)		(71,132	)
Proceeds from sales and maturities of investments		32,178			49,905
Net cash used in investing activities		(75,212	)		(105,464	)
Cash flows from financing activities
Repayments on long-term borrowings		(18,642	)		(46	)
Proceeds from long-term borrowings		2,247			46,918
Net proceeds from (repayments on) short-term borrowings		49,050			(2,159	)
Payments for employee taxes related to stock compensation		(7,971	)		—
Repurchases of common stock		(25,000	)		—
Purchase of noncontrolling interests		—