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

Quarterly report pursuant to Section 13 or 15(d)

Stockholders Equity and Stock Compensation

Stockholders Equity and Stock Compensation

3 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

Stockholders Equity and Stock Compensation

(5)

Stockholders Equity and Stock Compensation

SHARE REPURCHASE PROGRAM

On January 31, 2022, the Company’s Board of Directors authorized a share repurchase program (the “Share Repurchase Program”), pursuant to which the Company may, from time to time, purchase shares of its Class A common stock, for an aggregate repurchase price not to exceed $500 million. The Share Repurchase Program expires on January 31, 2025 and does not obligate the Company to acquire any particular amount of shares. At March 31, 2024, there was $205.7 million remaining to repurchase shares under the Share Repurchase Program.

The following table provides a summary the Company’s stock repurchase activities:


	Three Months Ended March 31,
	2024		2023
Shares repurchased		994,215		676,190
Average cost per share	$	60.37	$	44.39
Total cost of shares repurchased (in thousands)	$	60,020	$	30,014

INCENTIVE AWARD PLAN

In the three months ended March 31, 2024, the Company granted restricted stock with time-based vesting as well as performance-based awards. The performance-based awards include a market condition tied to the Company’s total shareholder return (“TSR”) in relation to its peer companies as well as a financial performance condition tied to annual earnings per share (“EPS”) growth. The vesting and ultimate payout of performance awards is determined at the end of the three-year performance period and can vary from zero to 200% based on actual results. At March 31, 2024, there were 5,457,960 shares available for grant as equity awards under the 2023 Incentive Award Plan if target levels are achieved for performance-based awards and 4,873,510 if maximum levels are achieved.

The Company issued the following stock-based instruments:


	Three Months Ended March 31,
	2024				2023
	Granted		Weighted-Average Grant-Date Fair Value		Granted		Weighted-Average Grant-Date Fair Value
Restricted stock		1,136,710	$	58.56		300,970	$	43.77
Performance-based restricted stock		93,500	$	60.64		121,225	$	43.34
Market-based restricted stock		93,500	$	78.80		121,225	$	59.71

The Company determines the fair value of restricted stock awards and any performance-related components based on the closing market price of the Company’s common stock on the date of grant. For share-based awards with a performance-based vesting requirement, the Company evaluates the probability of achieving the performance criteria throughout the performance period and will adjust stock compensation expense up or down based on its estimated probable outcome. Certain performance-based awards contain market condition components which are valued on the date of grant using a Monte Carlo simulation model.

A summary of the status and changes of the Company’s unvested shares is presented below:


	Shares			Weighted-Average Grant-Date Fair Value
Unvested at December 31, 2023		3,462,705		$	43.54
Granted		1,323,710			60.14
Vested		(960,016	)		44.35
Cancelled		(11,600	)		44.42
Performance Adjustment		224,809			46.87
Unvested at March 31, 2024		4,039,608		$	48.97

For the three months ended March 31, 2024, shares were issued based on achievement of certain EPS and TSR metrics.

A summary of the payout for EPS and TSR grants is presented below:


	Three Months Ended March 31, 2024
	Target Shares		Payout Factor			Performance Adjustment
December 2020 EPS Grant		125,000		133	%		41,665
December 2020 TSR Grant		125,000		162	%		77,250
March 2021 EPS Grant		108,750		133	%		36,250
March 2021 TSR Grant		108,750		164	%		69,644
Total Performance Adjustments							224,809

For the three months ended March 31, 2024 and 2023, the Company recognized $19.7 million and $13.5 million of incentive stock compensation expense. At March 31, 2024, the unamortized stock compensation of $142.4 million is expected to be recognized over a weighted-average period of 1.66 years.

STOCK PURCHASE PLAN

A total of 5,000,000 shares of Class A Common Stock are available for sale under the 2018 Employee Stock Purchase Plan (“2018 ESPP”). The 2018 ESPP provides eligible employees of the Company and its subsidiaries the opportunity to purchase shares of the Company’s Class A Common Stock at a purchase price equal to 85% of the fair market value on the first trading day or last trading day of each purchase period, whichever is lower. Eligible employees can invest up to 15% of their compensation through payroll deductions during each purchase period. The purchase price discount and the look-back feature cause the 2018 ESPP to be compensatory and the Company recognizes compensation expense, which is computed using the Black-Scholes valuation model.

For the three months ended March 31, 2024 and 2023, the Company recognized $1.0 million and $0.7 million ESPP stock compensation expense. At March 31, 2024, there were 3,573,580 shares available for sale under the 2018 ESPP.