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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 September 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 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

 

 

 

2


 

 

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.

3


 

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.

4


 

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.

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

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

111

 

 

 

111

 

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,720

 

 

 

 

 

 

 

 

 

29,720

 

 

 

 

 

 

29,720

 

Shares issued under the incentive award plan

 

 

30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Class B Common Stock into Class A

   Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2020

 

 

132,912

 

 

 

21,570

 

 

$

133

 

 

$

22

 

 

$

359,678

 

 

$

(40,549

)

 

$

2,083,118

 

 

$

2,402,402

 

 

$

238,709

 

 

$

2,641,111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

339,081

 

 

 

339,081

 

 

 

53,952

 

 

 

393,033

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,225

)

 

 

 

 

 

(17,225

)

 

 

(5,295

)

 

 

(22,520

)

Contributions from noncontrolling interests