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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, 2021

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 30, 2021, 134,893,597 shares of the registrant’s Class A Common Stock, $0.001 par value per share, were outstanding.

As of July 30, 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 (Loss) (Unaudited)

4

 

Condensed Consolidated Statements of Comprehensive Income (Loss) (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

23

 

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

26

 

Item 3.

Defaults Upon Senior Securities

26

 

Item 4.

Mine Safety Disclosures

26

 

Item 5.

Other Information

26

Item 6.

Exhibits

27

 

Signatures

28

 

 

 

 

2


 

 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

As of June 30,

 

 

As of December 31,

 

(in thousands, except par values)

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,091,355

 

 

$

1,370,826

 

Short-term investments

 

 

107,626

 

 

 

100,767

 

Trade accounts receivable, less allowances of $50,912 and $48,562

 

 

778,216

 

 

 

619,800

 

Other receivables

 

 

66,298

 

 

 

69,222

 

Total receivables

 

 

844,514

 

 

 

689,022

 

Inventory

 

 

1,057,284

 

 

 

1,016,774

 

Prepaid expenses and other current assets

 

 

145,256

 

 

 

166,962

 

Total current assets ($963,352 and $862,954 related to VIEs)

 

 

3,246,035

 

 

 

3,344,351

 

Property, plant and equipment, net

 

 

1,026,777

 

 

 

935,441

 

Operating lease right-of-use assets

 

 

1,134,145

 

 

 

1,171,521

 

Deferred tax assets

 

 

61,276

 

 

 

63,884

 

Long-term investments

 

 

122,542

 

 

 

108,412

 

Goodwill

 

 

93,497

 

 

 

93,497

 

Other assets, net

 

 

80,459

 

 

 

95,263

 

Total non-current assets ($687,307 and $682,068 related to VIEs)

 

 

2,518,696

 

 

 

2,468,018

 

TOTAL ASSETS

 

$

5,764,731

 

 

$

5,812,369

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

831,910

 

 

$

744,077

 

Operating lease liabilities

 

 

214,271

 

 

 

204,370

 

Accrued expenses

 

 

248,996

 

 

 

208,712

 

Current installments of long-term borrowings

 

 

42,547

 

 

 

52,250

 

Short-term borrowings

 

 

575

 

 

 

3,297

 

Total current liabilities ($532,980 and $526,466 related to VIEs)

 

 

1,338,299

 

 

 

1,212,706

 

Long-term borrowings, excluding current installments

 

 

268,913

 

 

 

679,415

 

Long-term operating lease liabilities

 

 

1,015,754

 

 

 

1,065,069

 

Deferred tax liabilities

 

 

10,421

 

 

 

11,439

 

Other long-term liabilities

 

 

117,240

 

 

 

118,077

 

Total non-current liabilities ($383,826 and $365,235 related to VIEs)

 

 

1,412,328

 

 

 

1,874,000

 

Total liabilities

 

 

2,750,627

 

 

 

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;

   134,884 and 133,618 shares issued and outstanding

 

 

135

 

 

 

134

 

Class B Common Stock, $0.001 par value; 75,000 shares authorized;

   20,949 and 21,016 shares issued and outstanding

 

 

21

 

 

 

21

 

Additional paid-in capital

 

 

395,951

 

 

 

372,165

 

Accumulated other comprehensive loss

 

 

(34,990

)

 

 

(27,285

)

Retained earnings

 

 

2,372,342

 

 

 

2,136,400

 

Skechers U.S.A., Inc. equity

 

 

2,733,459

 

 

 

2,481,435

 

Noncontrolling interests

 

 

280,645

 

 

 

244,228

 

Total stockholders' equity

 

 

3,014,104

 

 

 

2,725,663

 

TOTAL LIABILITIES AND EQUITY

 

$

5,764,731

 

 

$

5,812,369

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

3


 

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

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands, except per share data)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Sales

 

$

1,657,773

 

 

$

729,472

 

 

$

3,086,191

 

 

$

1,971,817

 

Cost of sales

 

 

808,280

 

 

 

360,906

 

 

 

1,557,075

 

 

 

1,055,583

 

Gross profit

 

 

849,493

 

 

 

368,566

 

 

 

1,529,116

 

 

 

916,234

 

Royalty income

 

 

4,098

 

 

 

2,596

 

 

 

10,135

 

 

 

7,844

 

 

 

 

853,591

 

 

 

371,162

 

 

 

1,539,251

 

 

 

924,078

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling

 

 

132,448

 

 

 

60,240

 

 

 

217,744

 

 

 

134,295

 

General and administrative

 

 

519,934

 

 

 

371,893

 

 

 

962,629

 

 

 

805,944

 

Selling, general and administrative

 

 

652,382

 

 

 

432,133

 

 

 

1,180,373

 

 

 

940,239

 

Earnings (loss) from operations

 

 

201,209

 

 

 

(60,971

)

 

 

358,878

 

 

 

(16,161

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

909

 

 

 

1,547

 

 

 

1,704

 

 

 

3,854

 

Interest expense

 

 

(3,417

)

 

 

(4,804

)

 

 

(7,530

)

 

 

(6,785

)

Other, net

 

 

4,666

 

 

 

4,704

 

 

 

(6,190

)

 

 

8,157

 

Total other income (expense)

 

 

2,158

 

 

 

1,447

 

 

 

(12,016

)

 

 

5,226

 

Earnings (loss) before income taxes

 

 

203,367

 

 

 

(59,524

)

 

 

346,862

 

 

 

(10,935

)

Income tax expense (benefit)

 

 

41,544

 

 

 

(4,307

)

 

 

70,530

 

 

 

3,122

 

Net earnings (loss)

 

 

161,823

 

 

 

(55,217

)

 

 

276,332

 

 

 

(14,057

)

Less: Net earnings attributable to noncontrolling interest

 

 

24,454

 

 

 

12,880

 

 

 

40,390

 

 

 

4,939

 

Net earnings (loss) attributable to Skechers U.S.A. Inc.

 

$

137,369

 

 

$

(68,097

)

 

$

235,942

 

 

$

(18,996

)

Net earnings (loss) per share attributable to Skechers U.S.A. Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.88

 

 

$

(0.44

)

 

$

1.52

 

 

$

(0.12

)

Diluted

 

$

0.88

 

 

$

(0.44

)

 

$

1.51

 

 

$

(0.12

)

Weighted-average shares used in calculating net earnings (loss) per share attributable to Skechers U.S.A. Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

155,561

 

 

 

154,138

 

 

 

155,196

 

 

 

153,849

 

Diluted

 

 

156,674

 

 

 

154,138

 

 

 

156,321

 

 

 

153,849

 

 

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)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

2021

 

 

2020

 

 

2021

 

 

2020

 

Net earnings (loss)

 

$

161,823

 

 

$

(55,217

)

 

$

276,332

 

 

$

(14,057

)

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on foreign currency translation adjustment

 

 

3,012

 

 

 

(94,265

)

 

 

(9,493

)

 

 

(124,028

)

Comprehensive income (loss)

 

 

164,835

 

 

 

(149,482

)

 

 

266,839

 

 

 

(138,085

)

Less: Comprehensive income (loss) attributable to noncontrolling interests

 

 

26,107

 

 

 

(9,966

)

 

 

38,602

 

 

 

(24,845

)

Comprehensive income (loss) attributable to Skechers U.S.A., Inc.

 

$

138,728

 

 

$

(139,516

)

 

$

228,237

 

 

$

(113,240

)

 

See accompanying notes to unaudited condensed consolidated financial statements.

5


 

 

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

 

 

LOSS

 

 

EARNINGS

 

 

EQUITY

 

 

INTEREST

 

 

EQUITY

 

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

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

137,369

 

 

 

137,369

 

 

 

24,454

 

 

 

161,823

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,359

 

 

 

 

 

 

1,359

 

 

 

1,653

 

 

 

3,012

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(750

)

 

 

(750

)

Net unrealized loss on derivative contract

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(129

)

 

 

(129

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,645

 

 

 

 

 

 

 

 

 

14,645

 

 

 

 

 

 

14,645

 

Proceeds from the employee stock purchase plan

 

 

141

 

 

 

 

 

 

 

 

 

 

 

 

4,027

 

 

 

 

 

 

 

 

 

4,027

 

 

 

 

 

 

4,027

 

Shares issued under the incentive award plan

 

 

572

 

 

 

 

 

 

1

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares redeemed for employee tax withholdings

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

(70

)

 

 

 

 

 

 

 

 

(70

)

 

 

 

 

 

(70

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

)

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6


 

 

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

 

 

LOSS

 

 

EARNINGS

 

 

EQUITY

 

 

INTERESTS

 

 

EQUITY

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

235,942

 

 

 

235,942

 

 

 

40,390

 

 

 

276,332

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,705

)

 

 

 

 

 

(7,705

)

 

 

(1,788

)

 

 

(9,493

)

Contributions from noncontrolling interests