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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 March 31, 2022

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 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

 

 

 

2


 

 

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.

3


 

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.

4


 

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.

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

 

 

 

 

 

 

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.

6


 

 

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

)