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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

or

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

 

 

 

 

2


 

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.

 

3


 

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.

 

4


 

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.

 

5


 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,479

)

 

 

(20,479

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,555

 

 

 

 

 

 

 

 

 

10,555

 

 

 

 

 

 

10,555

 

Proceeds from issuance of common stock under the

   employee stock purchase plan

 

 

134

 

 

 

 

 

 

 

 

 

 

 

 

3,177

 

 

 

 

 

 

 

 

 

3,177

 

 

 

 

 

 

3,177

 

Shares issued under the Incentive Award Plan

 

 

658

 

 

 

 

 

 

1

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares redeemed for employee tax withholdings

 

 

(248

)

 

 

 

 

 

 

 

 

 

 

 

(7,767

)

 

 

 

 

 

 

 

 

(7,767

)

 

 

 

 

 

(7,767

)

Repurchases of common stock

 

 

(511

)

 

 

 

 

 

(1

)

 

 

 

 

 

(15,009

)

 

 

 

 

 

 

 

 

(15,010

)

 

 

 

 

 

(15,010

)

Balance at June 30, 2019

 

 

130,275

 

 

 

23,016

 

 

$

130

 

 

$

23

 

 

$

282,822

 

 

$

(25,282

)

 

$

1,875,214

 

 

$

2,132,907

 

 

$

190,766

 

 

$

2,323,673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

6


 

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

 

 

INTERESTS

 

 

EQUITY

 

Balance at December 31, 2019

 

 

131,071

 

 

 

22,408

 

 

$

131

 

 

$

22

 

 

$

306,669

 

 

$

(29,993

)

 

$

2,037,836

 

 

$

2,314,665

 

 

$

221,442

 

 

$

2,536,107

 

Net earnings / (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,996

)

 

 

(18,996

)

 

 

4,939

 

 

 

(14,057

)

Foreign currency translation adjustment