10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from            to            

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)

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

THE NUMBER OF SHARES OF CLASS A COMMON STOCK OUTSTANDING AS OF AUGUST 1, 2012: 38,823,851.

THE NUMBER OF SHARES OF CLASS B COMMON STOCK OUTSTANDING AS OF AUGUST 1, 2012: 11,274,090.

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 Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	39
Item 6.	Exhibits	41
	Signatures	42

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PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par values)

	June 30, 2012			December 31, 2011
ASSETS
Current Assets:
Cash and cash equivalents	$	374,189		$	351,144
Trade accounts receivable, net		237,666			176,018
Other receivables		4,231			6,636
Total receivables		241,897			182,654
Inventories		258,125			226,407
Prepaid expenses and other current assets		31,494			88,005
Deferred tax assets		39,141			39,141
Total current assets		944,846			887,351
Property, plant and equipment, at cost, less accumulated depreciation and amortization		373,809			376,446
Goodwill and other intangible assets, less accumulated amortization		3,695			4,148
Deferred tax assets		4,945			530
Other assets, at cost		13,371			13,413
Total non-current assets		395,820			394,537
TOTAL ASSETS	$	1,340,666		$	1,281,888
LIABILITIES AND EQUITY
Current Liabilities:
Current installments of long-term borrowings	$	10,229		$	10,059
Short-term borrowings		60,238			50,413
Accounts payable		285,402			231,000
Accrued expenses		19,391			16,994
Total current liabilities		375,260			308,466
Long-term borrowings, excluding current installments		71,285			76,531
Deferred tax liabilities		32			4,364
Total non-current liabilities		71,317			80,895
Total liabilities		446,577			389,361
Commitments and contingencies
Stockholders’ equity:
Preferred Stock, $.001 par value; 10,000 authorized; none issued and outstanding		0			0
Class A Common Stock, $.001 par value; 100,000 shares authorized; 38,143 and 37,959 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively		38			38
Class B Common Stock, $.001 par value; 60,000 shares authorized; 11,274 and 11,297 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively		11			11
Additional paid-in capital		328,796			320,877
Accumulated other comprehensive loss		(2,580	)		(894	)
Retained earnings		527,081			532,529
Skechers U.S.A., Inc. equity		853,346			852,561
Non-controlling interests		40,743			39,966
Total equity		894,089			892,527
TOTAL LIABILITIES AND EQUITY	$	1,340,666		$	1,281,888

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

	Three-Months Ended June 30,						Six-Months Ended June 30,
	2012			2011			2012			2011
Net sales	$	384,001		$	434,351		$	735,275		$	910,585
Cost of sales		212,659			291,021			408,237			574,645
Gross profit		171,342			143,330			327,038			335,940
Royalty income, net		1,609			1,376			2,745			3,024
		172,951			144,706			329,783			338,964
Operating expenses:
Selling		39,100			53,099			69,449			90,659
General and administrative		135,382			139,781			266,259			281,208
		174,482			192,880			335,708			371,867
Loss from operations		(1,531	)		(48,174	)		(5,925	)		(32,903	)
Other income (expense):
Interest income		121			756			366			1,343
Interest expense		(3,377	)		(2,352	)		(6,343	)		(4,317	)
Other, net		556			(1,128	)		416			(1,335	)
		(2,700	)		(2,724	)		(5,561	)		(4,309	)
Loss before income tax benefit		(4,231	)		(50,898	)		(11,486	)		(37,212	)
Income tax benefit		(2,887	)		(20,846	)		(6,732	)		(19,313	)
Net loss		(1,344	)		(30,052	)		(4,754	)		(17,899	)
Less: Net earnings (loss) attributable to non-controlling interests		438			(136	)		694			209
Net loss attributable to Skechers U.S.A., Inc.	$	(1,782	)	$	(29,916	)	$	(5,448	)	$	(18,108	)
Net loss per share attributable to Skechers U.S.A., Inc.:
Basic	$	(0.04	)	$	(0.62	)	$	(0.11	)	$	(0.38	)
Diluted	$	(0.04	)	$	(0.62	)	$	(0.11	)	$	(0.38	)
Weighted average shares used in calculating net loss per share attributable to Skechers U.S.A., Inc.:
Basic		49,296			48,341			49,281			48,292
Diluted		49,296			48,341			49,281			48,292

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share data)

	Three-Months Ended June 30,						Six-Months Ended June 30,
	2012			2011			2012			2011
Net loss attributable to Skechers U.S.A. Inc.	$	(1,782	)	$	(29,916	)	$	(5,448	)	$	(18,108	)
Other comprehensive loss: Gain (loss) on foreign currency translation adjustment, net of tax		(6,229	)		4,671			(1,686	)		8,943
Total comprehensive loss attributable to Skechers U.S.A Inc.	$	(8,011	)	$	(25,245	)	$	(7,134	)	$	(9,165	)

See accompanying notes to unaudited condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Six-Months Ended June 30,
	2012			2011
Cash flows from operating activities:
Net loss	$	(5,448	)	$	(18,108	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Non-controlling interest in subsidiaries		694			209
Depreciation of property and equipment		20,769			15,088
Amortization of deferred financing costs		475			652
Amortization of intangible assets		453			790
Provision for bad debts and returns		1,707			5,748
Tax benefits from share-based compensation		(79	)		0
Non-cash share-based compensation		6,650			7,242
Loss on disposal of equipment		7			232
Deferred income taxes		(8,748	)		75
(Increase) decrease in assets:
Receivables		(58,258	)		(8,271	)
Inventories		(31,375	)		73,875
Prepaid expenses and other current assets		56,563			(15,973	)
Other assets		(538	)		65
Increase (decrease) in liabilities:
Accounts payable		54,255			1,871
Accrued expenses		2,731			(11,428	)
Net cash provided by operating activities		39,858			52,067
Cash flows from investing activities:
Capital expenditures		(22,588	)		(92,881	)
Net cash used in investing activities		(22,588	)		(92,881	)
Cash flows from financing activities:
Net proceeds from the issuances of stock through employee stock purchase plan and the exercise of stock options		1,349			2,042
Increase in long-term borrowings		0			36,751
Payments on long-term debt		(5,030	)		(9,390	)
Increase in short-term borrowings		9,805			27,705
Contribution from non-controlling interest of consolidated entity		0			115
Excess tax benefits from stock-based compensation		0			219
Net cash provided by financing activities		6,124			57,442
Net increase in cash and cash equivalents		23,394			16,628
Effect of exchange rates on cash and cash equivalents		(349	)		596
Cash and cash equivalents at beginning of the period		351,144			233,558
Cash and cash equivalents at end of the period	$	374,189		$	250,782
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest	$	5,749		$	2,439
Income taxes		(50,572	)		7,588

See accompanying notes to unaudited condensed consolidated financial statements.

6

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012 and 2011

(Unaudited)

(1) GENERAL

Basis of Presentation

The accompanying condensed consolidated financial statements of Skechers U.S.A., Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include certain footnotes and financial presentations normally required under accounting principles generally accepted in the United States of America for complete financial reporting. The interim financial information is unaudited, but reflects all normal adjustments and accruals which are, in the opinion of management, considered necessary to provide a fair presentation for the interim periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

The results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2012. During the quarter ended June 30, 2012 the Company recorded an adjustment to rent expense of $3.2 million, or $1.9 million net of tax relating to percentage and deferred rent.

Use of Estimates

The preparation of the condensed consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Non-controlling interests

The Company has interests in certain joint ventures which are consolidated into its financial statements. Non-controlling interests resulted in income of $0.4 million and a loss of $0.1 million for the three months ended June 30, 2012 and 2011, respectively, which represents the share of net earnings or loss that is attributable to our joint venture partners. Non-controlling interests resulted in income of $0.7 million and $0.2 million for the six months ended June 30, 2012 and 2011, respectively.

The Company has determined that its joint venture with HF Logistics I, LLC (“HF”) is a variable interest entity (“VIE”) and that the Company is the primary beneficiary. Accordingly, HF is consolidated into the condensed consolidated financial statements and the carrying amounts, and classification of assets and liabilities was as follows (in thousands):

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	June 30, 2012		December 31, 2011
Current assets	$	14,547	$	11,287
Noncurrent assets		131,428		132,925
Total assets	$	145,975	$	144,212
Current liabilities	$	66,749	$	65,608
Noncurrent liabilities		18,211		18,341
Total liabilities	$	84,960	$	83,949

The assets of these joint ventures are restricted in that they are not available for our general business use outside the context of the joint venture. The holders of the liabilities of each joint venture have no recourse to the Company. The Company does not have a significant variable interest in any unconsolidated VIE’s.

(2) REVENUE RECOGNITION

The Company recognizes revenue on wholesale sales when products are shipped and the customer takes title and assumes risk of loss, collection of the relevant receivable is reasonably assured, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. This generally occurs at time of shipment. Wholesale and e-commerce sales are recognized on a net sales basis, which reflects allowances for estimated returns, sales allowances, discounts, chargebacks and amounts billed for shipping and handling costs. The Company recognizes revenue from retail sales at the point of sale. Allowances for estimated returns, discounts, doubtful accounts and chargebacks are provided for when related revenue is recorded. Related costs paid to third-party shipping companies are recorded as a cost of sales.

Royalty income is earned from licensing arrangements. Upon signing a new licensing agreement, the Company receives up-front fees, which are generally characterized as prepaid royalties. These fees are initially deferred and recognized as revenue as earned (i.e., as licensed sales are reported to the Company or on a straight-line basis over the term of the agreement). The first calculated royalty payment is based on actual sales of the licensed product. Typically, at each quarter-end we receive correspondence from our licensees indicating the actual sales for the period. This information is used to calculate and accrue the related royalties based on the terms of the agreement.

(3) OTHER COMPREHENSIVE LOSS

In addition to net loss, other comprehensive loss includes changes in foreign currency translation adjustments and loss attributable to non-controlling interests. The Company operates internationally through several foreign subsidiaries. Assets and liabilities of the foreign operations denominated in local currencies are translated at the rate of exchange at the balance sheet date. Revenues and expenses are translated at the weighted average rate of exchange during the period of translation. The resulting translation adjustments along with translation adjustments related to intercompany loans of a long-term nature are included in the translation adjustment in other comprehensive loss.

The activity in other comprehensive loss, net of income taxes, was as follows (in thousands):

	Three-Months Ended June 30,						Six-Months Ended June 30,
Comprehensive loss	2012			2011			2012			2011
Net loss	$	(1,344	)	$	(30,052	)	$	(4,754	)	$	(17,899	)
Gain (loss) on foreign currency translation adjustment, net of tax		(6,299	)		4,781			(1,603	)		9,324
Comprehensive loss		(7,643	)		(25,271	)		(6,357	)		(8,575	)
Comprehensive income (loss) attributable to non-controlling interest		368			26			777			(590	)
Comprehensive loss attributable to parent	$	(8,011	)	$	(25,245	)	$	(7,134	)	$	(9,165	)

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(4) SHARE-BASED COMPENSATION

For stock-based awards we have recognized compensation expense based on the grant date fair value. Share-based compensation expense was $3.2 million and $3.5 million for the three months ended June 30, 2012 and 2011, respectively. Share-based compensation expense was $6.7 million and $7.2 million for the six months ended June 30, 2012 and 2011, respectively.

Stock options granted pursuant to the 1998 Stock Option, Deferred Stock and Restricted Stock Plan and the 2007 Incentive Award Plan (the “Equity Incentive Plans”) were as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2011		206,400		$	7.62
Granted		0			0
Exercised		(25,042	)		6.95
Cancelled		(208	)		6.95
Outstanding at June 30, 2012		181,150			7.71	1.0 years	$	2,293,725
Exercisable at June 30, 2012		181,150			7.71	1.0 years	$	2,293,725

A summary of the status and changes of our nonvested shares related to our Equity Incentive Plans as of and for the six months ended June 30, 2012 is presented below:

	Shares			Weighted Average Grant-Date Fair Value
Nonvested at December 31, 2011		740,493		$	19.02
Granted		0			0
Vested		(26,667	)		30.55
Cancelled		(33,000	)		27.60
Nonvested at June 30, 2012		680,826			18.15

As of June 30, 2012, there was $4.2 million of unrecognized compensation cost related to nonvested common shares. The cost is expected to be amortized over a weighted average period of 0.3 years.

(5) LOSS PER SHARE

Basic loss per share represents net loss divided by the weighted average number of common shares outstanding for the period. Diluted loss per share, in addition to the weighted average determined for basic loss per share, includes potential common shares, if dilutive, that would arise from the exercise of stock options and nonvested shares using the treasury stock method.

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The following is a reconciliation of net loss and weighted average common shares outstanding for purposes of calculating basic loss per share (in thousands, except per share amounts):

	Three-Months Ended June 30,						Six-Months Ended June 30,
Basic loss per share	2012			2011			2012			2011
Net loss attributable to Skechers U.S.A., Inc.	$	(1,782	)	$	(29,916	)	$	(5,448	)	$	(18,108	)
Weighted average common shares outstanding		49,296			48,341			49,281			48,292
Basic loss per share attributable to Skechers U.S.A., Inc.	$	(0.04	)	$	(0.62	)	$	(0.11	)	$	(0.38	)

The following is a reconciliation of net loss and weighted average common shares outstanding for purposes of calculating diluted loss per share (in thousands, except per share amounts):

	Three-Months Ended June 30,						Six-Months Ended June 30,
Diluted loss per share	2012			2011			2012			2011
Net loss attributable to Skechers U.S.A., Inc.	$	(1,782	)	$	(29,916	)	$	(5,448	)	$	(18,108	)
Weighted average common shares outstanding		49,296			48,341			49,281			48,292
Dilutive effect of stock options		0			0			0			0
Weighted average common shares outstanding		49,296			48,341			49,281			48,292
Diluted loss per share attributable to Skechers U.S.A., Inc.	$	(0.04	)	$	(0.62	)	$	(0.11	)	$	(0.38	)

There were no options included in the computation of diluted earnings per share for the three months and six months ended June 30, 2012 or 2011 because their effect would have been anti-dilutive.

(6) INCOME TAXES

The Company’s effective tax rates for the three and six months ended June 30, 2012 were 68.2% and 58.6%, respectively, compared to the effective tax rates of 41.0% and 51.9% for the three and six months ended June 30, 2011, respectively. Income tax benefit for the three months ended June 30, 2012 was $2.9 million compared to $20.8 million for the same period in 2011. Income tax benefit for the six months ended June 30, 2012 was $6.7 million compared to $19.3 million for the same period in 2011.

Estimating a reliable annual effective tax rate for the Company for the year has become increasingly difficult due to the uncertainty in forecasting taxable income or loss for the remainder of the year for each of our domestic and international operations. Such forecasts may vary significantly from quarter to quarter and even small changes in forecasts or actual results for either the Company’s domestic or international operations can result in significant changes in the Company’s estimated annual effective tax rate. Since forecasting an annual effective tax rate under these circumstances would not provide a meaningful estimate, the Company believes that the actual year-to-date effective tax rate is the best estimate of the annual tax rate in accordance with ASC 740-270. The Company’s income tax benefit has been calculated utilizing our actual effective tax rate for the three-month and six-month periods ended June 30, 2012.

(7) LINE OF CREDIT, SHORT-TERM AND LONG-TERM BORROWINGS

The Company and its subsidiaries had $4.1 million of outstanding letters of credit and short-term borrowings of $60.2 million as of June 30, 2012.

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Long-term debt is as follows (in thousands):

	June 30, 2012		December 31, 2011
Note payable to bank, due in monthly installments of $531.4 (includes principal and interest), fixed rate interest at 3.54%, secured by property, balloon payment of $12,635 due December 2015	$	31,658	$	34,259
Note payable to bank, due in monthly installments of $483.9 (includes principal and interest), fixed rate interest at 3.19%, secured by property, balloon payment of $11,670 due June 2016		31,628		34,005
Loan from HF Logistics I, LLC		18,210		18,297
Capital lease obligations		18		29
Subtotal		81,514		86,590
Less current installments		10,229		10,059
Total long-term debt	$	71,285	$	76,531

(8) LITIGATION

The Company recognizes legal expense in connection with loss contingencies as incurred.

The Company’s claims and advertising for its toning products including for its Shape-ups are subject to the requirements of, and routinely come under review by regulators including pending inquiries from the U.S. Federal Trade Commission (“FTC”), states’ Attorneys General and government and quasi-government regulators in foreign countries. The Company is currently responding to requests for information regarding its claims and advertising from regulatory and quasi-regulatory agencies in several countries and is fully cooperating with those requests. While the Company believes that its claims and advertising with respect to its core toning shoe products are supported by scientific tests, expert opinions and other relevant data, and while the Company has been successful in defending its claims and advertising in several different countries, it has discontinued using certain test results and periodically reviews and updates its claims and advertising. The regulatory inquiries may conclude in a variety of outcomes, including the closing of the inquiry with no further regulatory action, settlement of any issues through changes in our claims and advertising, settlement of any issues through payment to the regulatory entity, or litigation.

In accordance with U.S. generally accepted accounting principles, the Company records a liability in its consolidated financial statements for loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. Estimates of probable losses resulting from litigation and governmental proceedings are inherently difficult to predict, particularly when the matters are in the procedural stages or with unspecified or indeterminate claims for damages, potential penalties, or fines. During the fourth quarter ended December 31, 2011, the Company reserved $45 million for costs and potential exposure relating to existing litigation and regulatory matters. Additionally, the Company recorded a pre-tax expense of $5 million in legal and professional fees related to the aforementioned matters, which was included in general and administrative expense in our consolidated statement of operations for the year ended December 31, 2011. On May 16, 2012, the Company announced that it had settled all domestic legal proceedings relating to advertising claims made in connection with marketing its toning shoe products, including Shape-ups. Under the terms of the global settlement – without admitting any fault or liability, with no findings being made that the Company had violated any law, and with no fines or penalties being imposed – it made payments in the aggregate amount of $45 million and expect to pay a maximum of $5 million in class action attorneys’ fees to settle the domestic advertising lawsuits and related claims brought by the FTC and states’ Attorneys General for 44 states and the District of Columbia (“SAG”). The FTC Stipulated Final Judgment was approved by the United States District Court for the Northern District of Ohio on July 12, 2012, consent judgments have been approved and entered by state courts in 44 of the 45 SAG actions, and the Company is waiting for preliminary approval of the consumer class action settlement agreement by the United States District Court for the Western District of Kentucky. Although the Company believes the $50 million global settlement reflects the current estimated range of loss, the consumer class action settlement has not obtained Court approval and therefore it is not possible to predict the final outcome of the related proceedings or any other pending legal proceedings. Consequently, the final exposure and costs associated with pending legal proceedings could have a further material adverse impact on the Company’s result of operations or financial position.

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(9) STOCKHOLDERS’ EQUITY

During the three months ended June 30, 2012, no shares of Class B common stock were converted into shares of Class A common stock. During the six months ended June 30, 2012, 22,880 shares of Class B common stock were converted into shares of Class A common stock. During the three months and six months ended June 30, 2011, 13,640 shares of Class B common stock were converted into shares of Class A common stock, respectively.

The following table reconciles equity attributable to non-controlling interest (in thousands):

	Six-Months Ended June 30,
	2012		2011
Non-controlling interest, January 1	$	39,966	$	37,631
Net earnings attributable to non-controlling interest		694		209
Foreign currency translation adjustment		83		381
Capital contribution by non-controlling interest		0		115
Non-controlling interest, June 30	$	40,743	$	38,336

(10) SEGMENT AND GEOGRAPHIC REPORTING INFORMATION

The Company has four reportable segments – domestic wholesale sales, international wholesale sales, retail sales, which includes domestic and international retail sales, and e-commerce sales. Management evaluates segment performance based primarily on net sales and gross profit. All other costs and expenses of the Company are analyzed on an aggregate basis, and these costs are not allocated to the Company’s segments. Net sales, gross profit and identifiable assets and additions to property, plant and equipment for the domestic wholesale segment, international wholesale, retail, and the e-commerce segment on a combined basis were as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Net sales
Domestic wholesale	$	177,994	$	217,241	$	311,709	$	428,775
International wholesale		88,590		105,002		206,093		274,413
Retail		112,265		106,573		207,404		196,363
E-commerce		5,152		5,535		10,069		11,034
Total	$	384,001	$	434,351	$	735,275	$	910,585

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Gross margins
Domestic wholesale	$	69,003	$	37,608	$	120,874	$	103,855
International wholesale		33,368		39,826		80,990		112,643
Retail		66,552		63,120		120,615		113,859
E-commerce		2,419		2,776		4,559		5,583
Total	$	171,342	$	143,330	$	327,038	$	335,940

	June 30, 2012		December 31, 2011
Identifiable assets
Domestic wholesale	$	880,163	$	844,383
International wholesale		316,884		304,025
Retail		143,148		133,081
E-commerce		471		399
Total	$	1,340,666	$	1,281,888

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	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Additions to property, plant and equipment
Domestic wholesale	$	7,503	$	42,993	$	11,636	$	78,784
International wholesale		1,395		851		1,954		1,824
Retail		2,101		5,658		8,998		12,273
Total	$	10,999	$	49,502	$	22,588	$	92,881

Geographic Information:

The following summarizes our operations in different geographic areas for the period indicated (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Net Sales (1)
United States	$	278,923	$	313,345	$	500,100	$	607,398
Canada		11,808		11,715		24,099		27,517
Other international (2)		93,270		109,291		211,076		275,670
Total	$	384,001	$	434,351	$	735,275	$	910,585

	June 30, 2012		December 31, 2011
Property, plant and equipment
United States	$	356,277	$	358,405
Canada		1,472		1,179
Other international (2)		16,060		16,862
Total	$	373,809	$	376,446

(1) The Company has subsidiaries in Canada, United Kingdom, Germany, France, Spain, Portugal, Italy, Netherlands, Brazil and Chile that generate net sales within those respective countries and in some cases the neighboring regions. The Company has joint ventures in China, Hong Kong, Malaysia, Singapore and Thailand that generate net sales from those countries. The Company also has a subsidiary in Switzerland that generates net sales from that country in addition to net sales to our distributors located in numerous non-European countries. Net sales are attributable to geographic regions based on the location of the Company subsidiary.

(2) Other international consists of Switzerland, United Kingdom, Germany, Austria, France, Spain, Portugal, Italy, Netherlands, China, Hong Kong, Malaysia, Singapore, Thailand, Brazil, Chile, Vietnam and Japan.

(11) BUSINESS AND CREDIT CONCENTRATIONS

The Company generates the majority of its sales in the United States; however, several of its products are sold into various foreign countries, which subjects the Company to the risks of doing business abroad. In addition, the Company operates in the footwear industry, which is impacted by the general economy, and its business depends on the general economic environment and levels of consumer spending. Changes in the marketplace may significantly affect management’s estimates and the Company’s performance. Management performs regular evaluations concerning the ability of customers to satisfy their obligations and provides for estimated doubtful accounts. Domestic accounts receivable, which generally do not require collateral from customers, were equal to $143.3 million and $90.9 million before allowances for bad debts, sales returns and chargebacks at June 30, 2012 and December 31, 2011, respectively. Foreign accounts receivable, which in some cases are collateralized by letters of credit, were equal to $94.4 million and $105.5 million before allowance for bad debts, sales returns and chargebacks at June 30, 2012 and December 31, 2011, respectively. The Company’s credit losses attributable to write-offs for the three months ended June 30, 2012 and 2011 were $1.5 million and $1.8 million, respectively. The Company’s

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credit losses attributable to write-offs for the six months ended June 30, 2012 and 2011 were $1.2 million and $2.5 million, respectively.

Assets located outside the U.S. consist primarily of cash, accounts receivable, inventory, property, plant and equipment, and other assets. Net assets held outside the United States were $338.4 million and $325.3 million at June 30, 2012 and December 31, 2011, respectively.

The Company’s net sales to its five largest customers accounted for approximately 23.0% and 25.2% of total net sales for the three months ended June 30, 2012 and 2011, respectively. The Company’s net sales to its five largest customers accounted for approximately 20.4% and 20.1% of total net sales for the six months ended June 30, 2012 and 2011, respectively. No customer accounted for more than 10% of our net sales during the three months ended June 30, 2012 and 2011, respectively. No customer accounted for more than 10% of our net sales during the six months ended June 30, 2012 and 2011, respectively. No customer accounted for more than 10% of net trade receivables at June 30, 2012. One customer accounted for 12.5% and another accounted for 10% of net trade receivables at December 31, 2011.

The Company’s top five manufacturers produced the following, as a percentage of total production, for the three and six months ended June 30, 2012 and 2011, respectively:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Manufacturer #1		34.6	%		31.7	%		34.7	%		30.8	%
Manufacturer #2		9.3	%		11.2	%		9.1	%		11.4	%
Manufacturer #3		8.0	%		7.6	%		6.7	%		8.6	%
Manufacturer #4		6.4	%		6.8	%		6.4	%		6.7	%
Manufacturer #5		6.3	%		6.3	%		5.6	%		6.3	%
		64.6	%		63.6	%		62.5	%		63.8	%

The majority of the Company’s products are produced in China. The Company’s operations are subject to the customary risks of doing business abroad, including, but not limited to, currency fluctuations and revaluations, custom duties and related fees, various import controls and other monetary barriers, restrictions on the transfer of funds, labor unrest and strikes and, in certain parts of the world, political instability. The Company believes it has acted to reduce these risks by diversifying manufacturing among various factories. To date, these business risks have not had a material adverse impact on the Company’s operations.

(12) RELATED PARTY TRANSACTIONS

On July 29, 2010, the Company formed Skechers Foundation (the “Foundation”), which is a 501(c)(3) non-profit entity that does not have any shareholders or members. The Foundation is not a subsidiary of and is not otherwise affiliated with the Company, and the Company does not have a financial interest in the Foundation. However, two officers and directors of the Company, Michael Greenberg who is its President and David Weinberg who is its Chief Operating Officer and Chief Financial Officer, are also officers and directors of the Foundation. The Company contributed $0.3 million to the Foundation to use for various charitable causes during each of the three months ended June 30, 2012 and 2011. The Company contributed $0.5 million and $0.8 million to the Foundation to use for various charitable causes during the six months ended June 30, 2012 and 2011, respectively.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our Condensed Consolidated Financial Statements and Notes thereto in Item 1 of this report and our company’s annual report on Form 10-K for the year ended December 31, 2011.

We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. The discussion also provides information about the financial results of the various segments of our business to provide a better understanding of how those segments and their results affect the financial condition and results of operations of our company as a whole.

This quarterly report on Form 10-Q may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which can be identified by the use of forward-looking language such as “intend,” “may,” “will,” “believe,” “expect,” “anticipate” or other comparable terms. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements, and reported results shall not be considered an indication of our future performance. Factors that might cause or contribute to such differences include:

• international, national and local general economic, political and market conditions including the recent global economic recession and the uncertain pace of recovery in our markets;

• our ability to maintain our brand image and to anticipate, forecast, identify, and respond to changes in fashion trends, consumer demand for the products and other market factors;

• our ability to remain competitive among sellers of footwear for consumers, including in the highly competitive performance footwear market;

• our ability to sustain, manage and forecast our costs and proper inventory levels;

• the loss of any significant customers, decreased demand by industry retailers and the cancellation of order commitments;

• the continued negative impact from reduced sales of our toning products;

• our ability to continue to manufacture and ship our products that are sourced in China, which could be adversely affected by various economic, political or trade conditions, or a natural disaster in China;

• our ability to predict our quarterly revenues, which have varied significantly in the past and can be expected to fluctuate in the future due to a number of reasons, many of which are beyond our control; and

• other factors referenced or incorporated by reference in our annual report on Form 10-K for the year ended December 31, 2011 under the captions “Item 1A: Risk Factors” and “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The risks included here are not exhaustive. Other sections of this report may include additional factors that could adversely impact our business, financial condition and results of operations. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and we cannot predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements, which reflect our opinions only as of the date of this quarterly report, as a prediction of actual results. We undertake no obligation to publicly release any revisions to the forward-looking statements after the date of this document, except as otherwise required by reporting requirements of applicable federal and states securities laws.

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FINANCIAL OVERVIEW

Our net loss for the first six months of 2012 was primarily due to the negative impact of significantly reduced demand for our toning products as well as reduced demand for our non-Skechers branded fashion footwear. We believe that new styles and lines of footwear that are currently being launched may help offset the decline in the demand for our toning products and fashion brands. Gross margins improved to 44.5% for the six months ended June 30, 2012 from 36.9% for the same period in the prior year due to sales of more full-price product.

The results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2012 due to consumer acceptance of our new products as well as the macro economic slowdown across Europe.

We have four reportable segments – domestic wholesale sales, international wholesale sales, retail sales, which includes domestic and international retail sales, and e-commerce sales. We evaluate segment performance based primarily on net sales and gross margins. The largest portion of our revenue is derived from the domestic wholesale segment. Net loss for the three months ended June 30, 2012 was $1.8 million, or $0.04 per diluted share.

Revenue as a percentage of net sales was as follows:

	Three-Months Ended June 30,
	2012			2011
Percentage of revenues by segment
Domestic wholesale		46.4	%		50.0	%
International wholesale		23.1	%		24.2	%
Retail		29.2	%		24.5	%
E-commerce		1.3	%		1.3	%
Total		100	%		100	%

As of June 30, 2012, we owned 294 domestic retail stores and 50 international retail stores, and we have established our presence in most of, what we believe to be, the major domestic retail markets. During the first six months of 2012, we opened four domestic concept stores, six domestic outlet stores, seven domestic warehouse stores, and one international concept store and we closed three domestic concept stores. We review all of our stores for impairment annually, or more frequently if triggering events occur that may be an indicator of impairment, and we carefully review our under-performing stores and consider the potential for non-renewal of leases upon completion of the current term of the applicable lease.

During the remainder of 2012, we intend to focus on: (i) continuing to manage our inventory and expense structure to be in line with expected sales levels, (ii) growing our international business, (iii) strategically expanding our retail distribution channel by opening another five to seven stores, and (iv) increasing the product count for all customers by delivering trend-right styles at reasonable prices.

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RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, selected information from our results of operations (in thousands) and as a percentage of net sales:

	Three-Months Ended June 30,										Six-Months Ended June 30,
	2012					2011					2012					2011
Net sales	$	384,001		100.0	%	$	434,351		100.0	%	$	735,275		100.0	%	$	910,585		100.0	%
Cost of sales		212,659		55.4			291,021		67.0			408,237		55.5			574,645		63.1
Gross profit		171,342		44.6			143,330		33.0			327,038		44.5			335,940		36.9
Royalty income		1,609		0.4			1,376		0.3			2,745		0.4			3,024		0.3
		172,951		45.0			144,706		33.3			329,783		44.9			338,964		37.2
Operating expenses:
Selling		39,100		10.2			53,099		12.2			69,449		9.4			90,659		10.0
General and administrative		135,382		35.3			139,781		32.2			266,259		36.2			281,207		30.9
		174,482		45.5			192,880		44.4			335,708		45.6			371,866		40.9
Loss from operations		(1,531	)	(0.5	)		(48,174	)	(11.1	)		(5,925	)	(0.7	)		(32,902	)	(3.7	)
Interest income		121		0			756		0.1			366		0.0			1,343		0.2
Interest expense		(3,377	)	(0.9	)		(2,352	)	(0.5	)		(6,343	)	(0.9	)		(4,317	)	(0.5	)
Other, net		556		0.2			(1,128	)	(0.2	)		416		0.0			(1,335	)	(0.1	)
Loss before income taxes		(4,231	)	(1.2	)		(50,898	)	(11.7	)		(11,486	)	(1.6	)		(37,212	)	(4.1	)
Income tax benefit		(2,887	)	(0.8	)		(20,846	)	(4.8	)		(6,732	)	(0.9	)		(19,313	)	(2.1	)
Net loss		(1,344	)	(0.4	)		(30,052	)	(6.9	)		(4,754	)	(0.7	)		(17,899	)	(2.0	)
Less: Net earnings (loss) attributable to non-controlling interests		438		0.1			(136	)	0			694		0			209		0
Net loss attributable to Skechers U.S.A., Inc.	$	(1,782	)	(0.5	)%	$	(29,916	)	(6.9	)%	$	(5,448	)	(0.7	)%	$	(18,108	)	(2.0	)%

THREE MONTHS ENDED JUNE 30, 2012 COMPARED TO THREE MONTHS ENDED JUNE 30, 2011

Net sales

Net sales for the three months ended June 30, 2012 were $384.0 million, a decrease of $50.4 million, or 11.6%, as compared to net sales of $434.4 million for the three months ended June 30, 2011. The decrease in net sales was primarily attributable to lower sales in our domestic and international wholesale segments, which was partially offset by increased domestic retail sales.

Our domestic wholesale net sales decreased $39.2 million, or 18.1%, to $178.0 million for the three months ended June 30, 2012 from $217.2 million for the three months ended June 30, 2011. The largest decreases in our domestic wholesale segment were in our women’s and men’s toning divisions compared to last year when we were clearing our toning inventory at discounted prices as well as from reduced sales of our non-Skechers branded fashion products. In addition, we experienced reductions in sales in our kids’ and men’s divisions from the prior period due to reduced demand for our Twinkle Toes and men’s USA divisions. These decreases were partially offset by increases in our Women’s Sport, Women’s Go and Bob’s divisions. The average selling price per pair within the domestic wholesale segment increased to $20.83 per pair for the three months ended June 30, 2012 from $19.22 per pair for the same period last year. The decrease in the domestic wholesale segment’s net sales came on a 24.4% unit sales volume decrease to 8.5 million pairs for the three months ended June 30, 2012 from 11.3 million pairs for the same period in 2011.

Our international wholesale segment sales decreased $16.4 million, or 15.6%, to $88.6 million for the three months ended June 30, 2012 compared to sales of $105.0 million for the three months ended June 30, 2011. Our international wholesale sales consist of direct subsidiary sales – those we make to department stores and specialty retailers – and sales to our distributors, who in turn sell to retailers in various international regions where we do not sell directly. Direct subsidiary sales decreased $14.6 million, or 21.2%, to $54.2 million for the three months ended June 30, 2012 compared to net sales of $68.8 million for the three months ended June 30, 2011. The largest sales

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decreases during the quarter came from our subsidiaries in Brazil, Italy, Spain and Germany due to reduced demand for our toning products, the challenging economic environment in Europe, and the reorganization of our business in Brazil with new management and a re-launch of our products in Brazil. Our distributor sales decreased $1.8 million to $34.4 million for the three months ended June 30, 2012, a 5.1% decrease from sales of $36.2 million for the three months ended June 30, 2011. This was primarily attributable to the transition of our distributor-operated business in Japan to a wholly-owned subsidiary and decreased sales to our distributor in Russia due to a difficult economic environment.

Our retail segment sales increased $5.7 million to $112.3 million for the three months ended June 30, 2012, a 5.3% increase over sales of $106.6 million for the three months ended June 30, 2011. The increase in retail sales was primarily attributable to a net increase of 39 stores compared to the same period in 2011. For the three months ended June 30, 2012, we realized negative comparable store sales of 3.4% in our domestic retail stores and 6.7% in our international retail stores. The decrease was primarily due to a difficult retail environment both in the United States and several European countries. During the three months ended June 30, 2012, we opened four new domestic concept stores, one domestic outlet store, one domestic warehouse store, one international concept store, and we closed two underperforming domestic concept stores. Our domestic retail sales increased 5.8% for the three months ended June 30, 2012 compared to the same period in 2011 as the result of a net increase of 33 domestic stores partially offset by negative comparable store sales. Our international retail sales increased 3% for the three months ended June 30, 2012 compared to the same period in 2011, which was attributable to a net increase of six international stores partially offset by negative comparable store sales.

Our e-commerce sales decreased $0.3 million, or 6.9%, to $5.2 million for the three months ended June 30, 2012 compared to $5.5 million for the three months ended June 30, 2011. Our e-commerce sales made up approximately 1% of our consolidated net sales for each of the three-month periods ended June 30, 2012 and 2011.

Gross profit

Gross profit for the three months ended June 30, 2012 increased $28.0 million to $171.3 million as compared to $143.3 million for the three months ended June 30, 2011. Gross profit as a percentage of net sales, or gross margin, increased to 44.6% for the three months ended June 30, 2012 from 33.0% for the same period in the prior year. Our domestic wholesale segment gross profit increased $31.4 million, or 83.5%, to $69.0 million for the three months ended June 30, 2012 compared to $37.6 million for the three months ended June 30, 2011. Domestic wholesale margins increased to 38.8% in the three months ended June 30, 2012 from 17.3% for the same period in the prior year. The increase in domestic wholesale margins was attributable to sales of more full price product due to our clearing of toning inventory during the second quarter of 2011.

Gross profit for our international wholesale segment decreased $6.4 million, or 16.2%, to $33.4 million for the three months ended June 30, 2012 compared to $39.8 million for the three months ended June 30, 2011. Gross margins were 37.7% for the three months ended June 30, 2012 compared to 37.9% for the three months ended June 30, 2011. The decrease in gross margins for the international wholesale segment was attributable to decreased subsidiary sales. Gross margins for our direct subsidiary sales were 44.4% for the three months ended June 30, 2012 as compared to 45.4% for the three months ended June 30, 2011. Gross margins for our distributor sales were 27.1% for the three months ended June 30, 2012 as compared to 23.8% for the three months ended June 30, 2011.

Gross profit for our retail segment increased $3.5 million, or 5.4%, to $66.6 million for the three months ended June 30, 2012 as compared to $63.1 million for the three months ended June 30, 2011. Gross margins for all stores were 59.3% for the three months ended June 30, 2012 as compared to 59.2% for the three months ended June 30, 2011. Gross margins for our domestic stores were 60.2% for the three months ended June 30, 2012 as compared to 59.5% for the three months ended June 30, 2011. Gross margins for our international stores were 54.0% for the three months ended June 30, 2012 as compared to 57.7% for the three months ended June 30, 2011. The decrease in international retail margins was primarily due to the difficult retail environment in Europe.

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Our cost of sales includes the cost of footwear purchased from our manufacturers, royalties, duties, quota costs, inbound freight (including ocean, air and freight from the dock to our distribution centers), broker fees and storage costs. Because we include expenses related to our distribution network in general and administrative expenses while some of our competitors may include expenses of this type in cost of sales, our gross margins may not be comparable, and we may report higher gross margins than some of our competitors in part for this reason.

Selling expenses

Selling expenses decreased by $14.0 million, or 26.4%, to $39.1 million for the three months ended June 30, 2012 from $53.1 million for the three months ended June 30, 2011. As a percentage of net sales, selling expenses were 10.2% and 12.2% for the three months ended June 30, 2012 and 2011, respectively. The decrease in selling expenses was primarily attributable to lower advertising expenses of $15.9 million partially offset by higher trade show costs for the three months ended June 30, 2012.

Selling expenses consist primarily of the following: sales representative sample costs, sales commissions, trade shows, advertising and promotional costs, which may include television, print ads, ad production costs and point-of-purchase (POP) costs.

General and administrative expenses

General and administrative expenses decreased by $4.4 million, or 3.1%, to $135.4 million for the three months ended June 30, 2012 from $139.8 million for the three months ended June 30, 2011. As a percentage of sales, general and administrative expenses were 35.3% and 32.2% for the three months ended June 30, 2012 and 2011, respectively. The $4.4 million decrease in general and administrative expenses was primarily attributable to reduced warehouse and distribution costs at our distribution center, which included reduced temporary help costs of $3.0 million and lower professional service fees of $3.5 million, that was offset by $3.2 million of additional depreciation expense due to operating an additional 39 retail stores and our distribution center and distribution center equipment. Rent expense increased by $5.0 million, primarily from 39 additional stores, and a $3.2 million adjustment related to percentage and deferred rent. In addition, the expenses related to our distribution network, including purchasing, receiving, inspecting, allocating, warehousing and packaging of our products, totaled $25.1 million and $30.2 million for the three months ended June 30, 2012 and 2011, respectively.

General and administrative expenses consist primarily of the following: salaries, wages and related taxes and various overhead costs associated with our corporate staff, stock-based compensation, domestic and international retail operations, non-selling related costs of our international operations, costs associated with our domestic and European distribution centers, professional fees related to legal, consulting and accounting, insurance, depreciation and amortization, and expenses related to our distribution network, which includes the functions of purchasing, receiving, inspecting, allocating, warehousing and packaging our products. These costs are included in general and administrative expenses and are not allocated to segments.

Interest income

Interest income was $0.1 million for the three months ended June 30, 2012 compared to $0.8 million for the same period in 2011. The decrease in interest income resulted from lower cash balances for the three months ended June 30, 2012 as compared to the same period in 2011.

19

Interest expense

Interest expense was $3.4 million for the three months ended June 30, 2012 compared to $2.4 million for the same period in 2011. The increase was primarily due to increased interest paid on loans for our domestic distribution center and domestic warehouse equipment. Interest expense was incurred on our loans for our domestic distribution center and equipment and amounts owed to our foreign manufacturers.

Income taxes

Our effective tax rate was 68.2% and 41.0% for the three months ended June 30, 2012 and 2011, respectively. Income tax benefit for the three months ended June 30, 2012 was $2.9 million compared to $20.8 million for the same period in 2011. The increase in the effective tax rate was primarily due to a change in the relative mix of domestic and international taxable income and loss as well as our use of actual results, instead of projected full-year results, to calculate the effective tax rate during the quarter ended June 30, 2012.

Estimating a reliable annual effective tax rate for our company for the year has become increasingly difficult due to the uncertainty in forecasting taxable income or loss for the remainder of the year for each of our domestic and international operations. Such forecasts may vary significantly from quarter to quarter and even small changes in forecasts or actual results for either our domestic or international operations can result in significant changes in our estimated annual effective tax rate. Since forecasting an annual effective tax rate under these circumstances would not provide a meaningful estimate, we believe that the actual year-to-date effective tax rate is the best estimate of the annual tax rate in accordance with ASC 740-270. Our income tax benefit has been calculated utilizing our actual effective tax rate for the three-month period ended June 30, 2012.

Non-controlling interest in net income and loss of consolidated subsidiaries

Non-controlling interest for the three months ended June 30, 2012 increased $0.5 million to $0.4 million as compared to a loss of $0.1 million for the same period in 2011. Non-controlling interest represents the share of net earnings (loss) that is attributable to our joint venture partners.

SIX MONTHS ENDED JUNE 30, 2012 COMPARED TO SIX MONTHS ENDED JUNE 30, 2011

Net sales

Net sales for the six months ended June 30, 2012 were $735.3 million, a decrease of $175.3 million, or 19.3%, as compared to net sales of $910.6 million for the six months ended June 30, 2011. The decrease in net sales was primarily attributable to lower sales in our domestic and international wholesale segments, which was partially offset by increased domestic retail sales.

Our domestic wholesale net sales decreased $117.1 million, or 27.3%, to $311.7 million for the six months ended June 30, 2012 from $428.8 million for the six months ended June 30, 2011. The largest decreases in our domestic wholesale segment were in our women’s and men’s toning divisions compared to last year when we were clearing our toning inventory at discounted prices as well as from reduced sales of our non-Skechers branded fashion products. In addition, we experienced reductions in sales in our kids’ and men’s divisions from the prior period due to reduced demand for our Twinkle Toes and men’s USA divisions. These decreases were partially offset by increases in our Women’s Sport, Women’s Go and Bob’s divisions. The average selling price per pair within the domestic wholesale segment increased to $20.90 per pair for the six months ended June 30, 2012 from $19.52 per pair for the same period last year. The decrease in the domestic wholesale segment’s net sales came on a 32.1% unit sales volume decrease to 14.9 million pairs for the six months ended June 30, 2012 from 22.0 million pairs for the same period in 2011.

Our international wholesale segment sales decreased $68.3 million, or 24.9%, to $206.1 million for the six months ended June 30, 2012 compared to sales of $274.4 million for the six months ended June 30, 2011. Direct

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subsidiary sales decreased $53.1 million, or 26.7%, to $146.2 million for the six months ended June 30, 2012 compared to net sales of $199.3 million for the six months ended June 30, 2011. The largest sales decreases during the period came from our subsidiaries in Brazil, Germany, Italy, and the United Kingdom due to reduced demand for our toning products, challenging economic environment in Europe, and the reorganization of our business in Brazil with new management and a re-launch of our products in Brazil. Our distributor sales decreased $15.2 million to $59.9 million for the six months ended June 30, 2012, a 20.3% decrease from sales of $75.1 million for the six months ended June 30, 2011. This was primarily attributable to the transition of our distributor-operated business in Japan to a wholly-owned subsidiary and decreased sales to our distributor in Russia due to a difficult economic environment.

Our retail segment sales increased $11.0 million to $207.4 million for the six months ended June 30, 2012, a 5.6% increase over sales of $196.4 million for the six months ended June 30, 2011. The increase in retail sales was primarily attributable to a net increase of 39 stores as compared to the same period in 2011. For the six months ended June 30, 2012, we realized negative comparable store sales of 3.5% in our domestic retail stores and 8.3% in our international retail stores due to our newer products not yet being available in all of our store formats. During the six months ended June 30, 2012, we opened four new domestic concept stores, six domestic outlet stores, seven domestic warehouse stores, and one international concept store, and we closed three underperforming domestic concept stores. Our domestic retail sales increased 6.4% for the six months ended June 30, 2012 compared to the same period in 2011 as the result of a net increase of 33 domestic stores which was offset by negative comparable store sales. Our international retail sales increased 1.1% for the six months ended June 30, 2012 compared to the same period in 2011, as the result of a net increase of six international stores which was offset by negative comparable store sales and unfavorable currency translations.

Our e-commerce sales decreased $0.9 million, or 8.7%, to $10.1 million for the six months ended June 30, 2012 as compared to $11.0 million for the six months ended June 30, 2011. Our e-commerce sales made up approximately 1% of our consolidated net sales for each of the six-month periods ended June 30, 2012 and 2011.

Gross profit

Gross profit for the six months ended June 30, 2012 decreased $8.9 million to $327.0 million as compared to $335.9 million for the six months ended June 30, 2011. Gross profit as a percentage of net sales, or gross margin, increased to 44.5% for the six months ended June 30, 2012 from 36.9% for the same period in the prior year. Our domestic wholesale segment gross profit increased $17.0 million, or 16.4%, to $120.9 million for the six months ended June 30, 2012 compared to $103.9 million for the six months ended June 30, 2011. Domestic wholesale margins increased to 38.8% in the six months ended June 30, 2012 from 24.2% for the same period in the prior year. The increase in domestic wholesale margins was primarily attributable to sales of more full price product due to our clearing of toning inventory during the prior year period.

Gross profit for our international wholesale segment decreased $31.7 million, or 28.1%, to $80.9 million for the six months ended June 30, 2012 compared to $112.6 million for the six months ended June 30, 2011. Gross margins were 39.3% for the six months ended June 30, 2012 compared to 41.1% for the six months ended June 30, 2011. The decrease in gross margins for the international wholesale segment was attributable to a decrease in subsidiary sales, which achieved higher gross margins than our international wholesale sales through our foreign distributors. Gross margins for our direct subsidiary sales were 44.5% for the six months ended June 30, 2012 as compared to 46.9% for the six months ended June 30, 2011. Gross margins for our distributor sales were 26.6% for the six months ended June 30, 2012 as compared to 25.5% for the six months ended June 30, 2011.

Gross profit for our retail segment increased $6.7 million, or 5.9%, to $120.6 million for the six months ended June 30, 2012 as compared to $113.9 million for the six months ended June 30, 2011. Gross margins for all stores were 58.2% for the six months ended June 30, 2012 as compared to 58.0% for the six months ended June 30, 2011. Gross margins for our domestic stores were 58.9% for the six months ended June 30, 2012 as compared to 58.5% for the six months ended June 30, 2011. Gross margins for our international stores were 53.6% for the six months

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ended June 30, 2012 as compared to 54.9% for the six months ended June 30, 2011. The decrease in international retail margins was primarily due to the difficult retail environment in Europe.

Selling expenses

Selling expenses decreased by $21.2 million, or 23.4%, to $69.5 million for the six months ended June 30, 2012 from $90.7 million for the six months ended June 30, 2011. As a percentage of net sales, selling expenses were 9.4% and 10.0% for the six months ended June 30, 2012 and 2011, respectively. The decrease in selling expenses was primarily attributable to lower advertising expenses of $20.9 million for the six months ended June 30, 2012.

General and administrative expenses

General and administrative expenses decreased by $14.9 million, or 5.3%, to $266.3 million for the six months ended June 30, 2012 from $281.2 million for the six months ended June 30, 2011. As a percentage of sales, general and administrative expenses were 36.2% and 30.9% for the six months ended June 30, 2012 and 2011, respectively. The $14.9 million decrease in general and administrative expenses was primarily attributable to reduced warehouse and distribution costs at our distribution center, which included reduced temporary help costs of $8.8 million and lower outside service fees of $2.3 million, that were offset by $5.6 million of additional depreciation expense due to operating an additional 39 retail stores and our distribution center and distribution center equipment. Rent expense increased by $4.8 million, primarily from 39 additional stores, and a $3.2 million adjustment related to percentage and deferred rent. In addition, the expenses related to our distribution network, including purchasing, receiving, inspecting, allocating, warehousing and packaging of our products, totaled $53.8 million and $66.8 million for the six months ended June 30, 2012 and 2011, respectively.

Interest income

Interest income was $0.4 million for the six months ended June 30, 2012 compared to $1.3 million for the same period in 2011. The decrease in interest income resulted from lower cash balances for the six months ended June 30, 2012 as compared to the same period in 2011.

Interest expense

Interest expense was $6.3 million for the six months ended June 30, 2012 compared to $4.3 million for the same period in 2011. The increase was primarily due to increased interest paid on loans for our domestic distribution center and domestic warehouse equipment. Interest expense was incurred on our loans for our domestic distribution center and equipment and amounts owed to our foreign manufacturers.

Income taxes

Our effective tax rate was 58.6% and 51.9% for the six months ended June 30, 2012 and 2011, respectively. Income tax benefit for the six months ended June 30, 2012 was $6.7 million compared to $19.3 million for the same period in 2011. The reduction in income tax benefit was primarily due to lower net operating losses during the six months ended June 30, 2012 as compared to the same period in 2011.

Estimating a reliable annual effective tax rate for our company for the year has become increasingly difficult due to the uncertainty in forecasting taxable income or loss for the remainder of the year for each of our domestic and international operations. Such forecasts may vary significantly from quarter to quarter and even small changes in forecasts or actual results for either our domestic or international operations can result in significant changes in our estimated annual effective tax rate. Since forecasting an annual effective tax rate under these circumstances would not provide a meaningful estimate, we believe that the actual year-to-date effective tax rate is the best estimate of the annual tax rate in accordance with ASC 740-270. Our income tax benefit has been calculated utilizing our actual effective tax rate for the six-month period ended June 30, 2012.

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Non-controlling interest in net income of consolidated subsidiaries

Non-controlling interest for the six months ended June 30, 2012 increased $0.5 million to $0.7 million as compared to $0.2 million for the same period in 2011. Non-controlling interest represents the share of net earnings that is attributable to our joint venture partners.

LIQUIDITY AND CAPITAL RESOURCES

Our working capital at June 30, 2012 was $569.6 million, a decrease of $9.3 million from working capital of $578.9 million at December 31, 2011. Our cash at June 30, 2012 was $374.2 million compared to $351.1 million at December 31, 2011. The increase in cash and cash equivalents of $23.1 million was primarily the result of net tax refunds received of $50.6 million and increased payables of $54.3 million partially offset by increased receivables of $58.3 million.

For the six months ended June 30, 2012, net cash provided by operating activities was $39.9 million as compared to $52.1 million for the six months ended June 30, 2011. The decrease in net cash provided by operating activities in the six months ended June 30, 2012 as compared to the same period in the prior year was primarily the result of decreased prepaid expenses and increased accounts payable offset by increased receivables due to higher sales and increased inventories due to the introduction of new products.

Net cash used in investing activities was $22.6 million for the six months ended June 30, 2012 as compared to $92.9 million for the six months ended June 30, 2011. The decrease in net cash used in investing activities for the six months ended June 30, 2012 as compared to the same period in the prior year was the result of lower capital expenditures. Capital expenditures for the six months ended June 30, 2012 consisted of $9.0 million for new store openings and remodels with the remainder primarily spent on development costs for our new distribution center and warehouse equipment. Capital expenditures for the six months ended June 30, 2011, primarily consisted of new store openings and remodels and development costs for our distribution center and warehouse equipment. We expect our ongoing capital expenditures for the remainder of 2012 to be approximately $7 million to $10 million, which includes opening an additional five to seven retail stores, along with store remodels. We believe our operating cash flows, current cash, available lines of credit and current financing arrangements should be adequate to fund these capital expenditures, although we may seek additional funding for all or a portion of these expenditures.

Net cash provided by financing activities was $6.1 million during the six months ended June 30, 2012 compared to $57.4 million during the six months ended June 30, 2011. The decrease in cash provided by financing activities in the six months ended June 30, 2012 as compared to the same period in the prior year was primarily due to a smaller increase in borrowings as compared to the prior year period.

On December 29, 2010, we entered into a master loan and security agreement (the “Master Agreement”), by and between us and Banc of America Leasing & Capital, LLC, and an Equipment Security Note (together with the Master Agreement, the “Loan Documents”), by and among us, Banc of America Leasing & Capital, LLC, and Bank of Utah, as agent (“Agent”). We used the proceeds to refinance certain equipment already purchased and to purchase new equipment for use in our Rancho Belago distribution facility. Borrowings made pursuant to the Master Agreement may be in the form of one or more equipment security notes (each a “Note,” and, collectively, the “Notes”) up to a maximum limit of $80.0 million and each for a term of 60 months. The Note entered into on the same date as the Master Agreement represents a borrowing of approximately $39.3 million. Interest will accrue at a fixed rate of 3.54% per annum. On June 30, 2011, we entered into another Note agreement for approximately $36.3 million. Interest will accrue at a fixed rate of 3.19% per annum. As of June 30, 2012, the total outstanding amount on these Notes was $63.3 million. We paid commitment fees of $825,000 on this loan, which are being amortized over the five-year life of the facility.

On April 30, 2010, we entered into a construction loan agreement (the “Loan Agreement”), by and between HF Logistics-SKX, LLC and Bank of America, N.A. as administrative agent and as lender (“Bank of America” or the

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“Administrative Agent”) and Raymond James Bank, FSB. The proceeds from the Loan Agreement have been used to construct our domestic distribution facility in Rancho Belago, California. Borrowings made pursuant to the Loan Agreement may be made up to a maximum limit of $55.0 million. The underlying loan initially matured on April 30, 2012; however, the Loan Agreement was extended by six months, and the underlying loan will now mature on October 30, 2012. We expect to refinance the underlying loan before October 30, 2012. The Company was in compliance with all debt covenant provisions related to the Loan Agreement as of the date of this quarterly report. Borrowings bear interest based on LIBOR. We had $54.7 million outstanding under this facility, which is included in short-term borrowings on June 30, 2012. We have paid commitment fees of $737,500 on the underlying loan, which are being amortized over the life of the Loan Agreement.

On June 30, 2009, we entered into a $250.0 million secured credit agreement, (the “Credit Agreement”) with a syndicate of seven banks that replaced the previous $150 million credit agreement. On November 5, 2009, March 4, 2010 and May 3, 2011, we entered into three successive amendments to the Credit Agreement (collectively, the “Amended Credit Agreement”). The Amended Credit Agreement matures in June 2015. The Amended Credit Agreement permits us and certain of our subsidiaries to borrow up to $250.0 million based upon a borrowing base of eligible accounts receivable and inventory, which amount can be increased to $300.0 million at our request and upon satisfaction of certain conditions including obtaining the commitment of existing or prospective lenders willing to provide the incremental amount. Borrowings bear interest at our election based on LIBOR or a Base Rate (defined as the greatest of the base LIBOR plus 1.00%, the Federal Funds Rate plus 0.5% or one of the lenders’ prime rate), in each case, plus an applicable margin based on the average daily principal balance of revolving loans under the credit agreement (1.00%, 1.25% or 1.50% for Base Rate loans and 2.00%, 2.25% or 2.50% for LIBOR loans). We pay a monthly unused line of credit fee of 0.375% or 0.5% per annum, which varies based on the average daily principal balance of outstanding revolving loans and undrawn amounts of letters of credit outstanding during such month. The Amended Credit Agreement further provides for a limit on the issuance of letters of credit to a maximum of $50.0 million. The Amended Credit Agreement contains customary affirmative and negative covenants for secured credit facilities of this type, including a fixed charge coverage ratio that applies when excess availability is less than $40.0 million. In addition, the Amended Credit Agreement places limits on additional indebtedness that we are permitted to incur as well as other restrictions on certain transactions. We paid syndication and commitment fees of $6.7 million on this facility, which are being amortized over the four-year life of the facility.

We had outstanding short-term and long-term borrowings of $141.8 million as of June 30, 2012, of which $63.3 million relates to notes payable for warehouse equipment for our distribution center that are secured by the equipment, $56.8 million relates to our construction loans for our distribution center, and $18.2 million relates to a note for development costs paid by and due to HF for our new distribution center, and the remaining balance relates to our joint venture in China.

We believe that anticipated cash flows from operations, available borrowings under our secured line of credit, existing cash balances and current financing arrangements will be sufficient to provide us with the liquidity necessary to fund our anticipated working capital and capital requirements through June 30, 2013 and for the foreseeable future. However, in connection with our current strategies, we will incur significant working capital requirements and capital expenditures. Our future capital requirements will depend on many factors, including, but not limited to, the global recession and the pace of recovery in our markets, the levels at which we maintain inventory, sale of excess inventory at discounted prices, the market acceptance of our footwear, the success of our international operations, the levels of advertising and marketing required to promote our footwear, the extent to which we invest in new product design and improvements to our existing product design, any potential acquisitions of other brands or companies, and the number and timing of new store openings. To the extent that available funds are insufficient to fund our future activities, we may need to raise additional funds through public or private financing of debt or equity. Recently, we have been successful in raising additional funds through financing activities; however, we cannot be assured that additional financing will be available to us or that, if available, it can be obtained on past terms which have been favorable to our stockholders and us. Failure to obtain such financing could delay or prevent our current business plans, which could adversely affect our business, financial condition and

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results of operations. In addition, if additional capital is raised through the sale of additional equity or convertible securities, dilution to our stockholders could occur.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For a detailed discussion of the our critical accounting policies, please refer to our annual report on Form 10-K for the year ended December 31, 2011 filed with the U.S. Securities and Exchange Commission (“SEC”) on February 29, 2012. Our critical accounting policies and estimates did not change materially during the quarter ended June 30, 2012.

QUARTERLY RESULTS AND SEASONALITY

While sales of footwear products have historically been seasonal in nature with the strongest sales generally occurring in the second and third quarters, we believe that changes in our product offerings have somewhat mitigated the effect of this seasonality.

We have experienced, and expect to continue to experience, variability in our net sales and operating results on a quarterly basis. Our domestic customers generally assume responsibility for scheduling pickup and delivery of purchased products. Any delay in scheduling or pickup which is beyond our control could materially negatively impact our net sales and results of operations for any given quarter. We believe the factors which influence this variability include (i) the timing of our introduction of new footwear products, (ii) the level of consumer acceptance of new and existing products, (iii) general economic and industry conditions that affect consumer spending and retail purchasing, (iv) the timing of the placement, cancellation or pickup of customer orders, (v) increases in the number of employees and overhead to support growth, (vi) the timing of expenditures in anticipation of increased sales and customer delivery requirements, (vii) the number and timing of our new retail store openings and (viii) actions by competitors. Because of these and other factors, the operating results for any particular quarter are not necessarily indicative of the results for the full year.

INFLATION

We do not believe that the rates of inflation experienced in the United States over the last three years have had a significant effect on our sales or profitability. However, we cannot accurately predict the effect of inflation on future operating results. Although higher rates of inflation have been experienced in a number of foreign countries in which our products are manufactured, we do not believe that inflation has had a material effect on our sales or profitability. While we have been able to offset our foreign product cost increases by increasing prices or changing suppliers in the past, we cannot assure you that we will be able to continue to make such increases or changes in the future.

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EXCHANGE RATES

Although we currently invoice most of our customers in U.S. dollars, changes in the value of the U.S. dollar versus the local currency in which our products are sold, along with economic and political conditions of such foreign countries, could adversely affect our business, financial condition and results of operations. Purchase prices for our products may be impacted by fluctuations in the exchange rate between the U.S. dollar and the local currencies of the contract manufacturers, which may have the effect of increasing our cost of goods in the future. In addition, the weakening of an international customer’s local currency and banking market may negatively impact such customer’s ability to meet their payment obligations to us. We regularly monitor the creditworthiness of our international customers and make credit decisions based on both prior sales experience with such customers and their current financial performance, as well as overall economic conditions. While we currently believe that our international customers have the ability to meet all of their obligations to us, there can be no assurance that they will continue to be able to meet such obligations. During 2011 and the first six months of 2012, exchange rate fluctuations did not have a material impact on our inventory costs. We do not engage in hedging activities with respect to such exchange rate risk.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not hold any derivative securities that require fair value presentation per ASC 815-25.

Market risk is the potential loss arising from the adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates. Changes in interest rates and changes in foreign currency exchange rates have and will have an impact on our results of operations.

Interest rate fluctuations. The interest rate charged on our secured line of credit facility is based on the prime rate of interest, and changes in the prime rate of interest will have an effect on the interest charged on outstanding balances. No amounts relating to this secured line of credit facility are currently outstanding at June 30, 2012. We had $60.2 million of outstanding short-term borrowings subject to changes in interest rates; however, we do not expect any changes will have a material impact on our financial condition or results of operations.

Foreign exchange rate fluctuations. We face market risk to the extent that changes in foreign currency exchange rates affect our non-U.S. dollar functional currency foreign subsidiaries’ revenues, expenses, assets and liabilities. In addition, changes in foreign exchange rates may affect the value of our inventory commitments. Also, inventory purchases of our products may be impacted by fluctuations in the exchange rates between the U.S. dollar and the local currencies of the contract manufacturers, which could have the effect of increasing the cost of goods sold in the future. We manage these risks by primarily denominating these purchases and commitments in U.S. dollars. We do not engage in hedging activities with respect to such exchange rate risks.

Assets and liabilities outside the United States are located in the United Kingdom, France, Germany, Spain, Portugal, Switzerland, Italy, Canada, Belgium, the Netherlands, Brazil, Chile, China, Hong Kong, Singapore, Malaysia, Thailand, Vietnam, and Japan. Our investments in foreign subsidiaries with a functional currency other than the U.S. dollar are generally considered long-term. Accordingly, we do not hedge these net investments. The fluctuation of foreign currencies resulted in a cumulative foreign currency translation loss of $1.7 million and a gain of $8.9 million for the six months ended June 30, 2012 and 2011, respectively, that are deferred and recorded as a component of accumulated other comprehensive income in stockholders’ equity. A 200 basis point reduction in each of these exchange rates at June 30, 2012 would have reduced the values of our net investments by approximately $6.8 million.

ITEM 4. CONTROLS AND PROCEDURES

Attached as exhibits to this quarterly report on Form 10-Q are certifications of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), which are required in accordance with Rule 13a-14 of the Securities

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Exchange Act of 1934, as amended (the “Exchange Act”). This Controls and Procedures section includes information concerning the controls and controls evaluation referred to in the certifications.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The term “disclosure controls and procedures” refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods. We have established disclosure controls and procedures to ensure that material information relating to Skechers and its consolidated subsidiaries is made known to the officers who certify our financial reports as well as other members of senior management and the Board of Directors to allow timely decisions regarding required disclosures. As of the end of the period covered by this quarterly report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective in timely alerting them as of such time.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting during the three months ended June 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS

Our management, including our CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements as a result of error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls’ effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements as a result of error or fraud may occur and not be detected.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Our claims and advertising for our toning products including for our Shape-ups are subject to the requirements of, and routinely come under review by regulators including the U.S. Federal Trade Commission (“FTC”), states’ Attorneys General and government and quasi-government regulators in foreign countries. We are currently responding to requests for information regarding our claims and advertising from regulatory and quasi-regulatory agencies in several countries and are fully cooperating with those requests. While we believe that our claims and advertising with respect to our core toning products are supported by scientific tests, expert opinions and other relevant data, and while we have been successful in defending our claims and advertising in several different countries, we have discontinued using certain test results and we periodically review and update our claims and advertising. The regulatory inquiries may conclude in a variety of outcomes, including the closing of the inquiry with no further regulatory action, settlement of any issues through changes in its claims and advertising, settlement of any issues through payment to the regulatory entity, or litigation.

As we disclosed in previous periodic SEC filings, the FTC and Attorneys General for 44 states and the District of Columbia (“SAGs”) had been reviewing the claims and advertising for Shape-ups and our other toning shoe products. We also disclosed that we have been named as a defendant in multiple consumer class actions challenging our claims and advertising for our toning shoe products, including Shape-ups, actions which are described below. As we disclosed in our annual report on Form 10-K for the year ended December 31, 2011 and in our quarterly report on Form 10-Q for the quarter ended March 31, 2012, we recorded a charge of $50 million during the fourth quarter ended December 31, 2011 to reserve for costs and potential other exposures relating to the existing litigation and regulatory matters.

On May 16, 2012, we announced that we had settled all domestic legal proceedings relating to advertising claims made in connection with the marketing of our toning shoe products. Under the terms of the global settlement – without admitting any fault or liability, with no findings being made that our company had violated any law, and with no fines or penalties being imposed – we made payments in the aggregate amount of $45 million and expects to pay up to $5 million in class action attorneys’ fees to settle the domestic advertising class lawsuits and related claims brought by the FTC and the SAGs. The FTC Stipulated Final Judgment was approved by the United States District Court for the Northern District of Ohio on July 12, 2012. Consent judgments in 44 of the 45 SAG actions have been approved and entered by courts in those jurisdictions. We are currently awaiting preliminary approval of the nationwide consumer class action settlement by the United States District Court for the Western District of Kentucky.

The toning footwear category, including our Shape-ups products, has also been the subject of some media attention arising from a number of consumer complaints and allegations of injury while wearing Shape-ups. We believe our products are safe and are defending ourselves from these media stories and injury allegations. It is too early, however, to predict the outcome of the ongoing inquiries relating to safety and whether such an

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outcome will have a material effect on our advertising, promotional claims, business, results of operations or financial position.

Asics Corporation and Asics America Corporation v. Skechers U.S.A., Inc. – On May 11, 2010, Asics Corporation and Asics America Corporation (collectively, “Asics”) filed an action against our company in the United States District Court for the Central District of California, SACV 10-00636 CJC/MLG, alleging trademark infringement, unfair competition, and trademark dilution under both federal and California law and false advertising under California law arising out of our alleged use of stripe designs similar to Asics trademarks. The complaint seeks, among other things, permanent and preliminary injunctive relief, compensatory damages, profits, treble and punitive damages, and attorneys’ fees. The matter is in the discovery phase. We believe we have meritorious defenses and counterclaims, vehemently deny the allegations and intend to defend the case vigorously. A settlement has been reached and the settlement did not have a material adverse impact on our operations or financial position or result in a material loss in excess of a recorded accrual.

Tamara Grabowski v. Skechers U.S.A., Inc. – On June 18, 2010, Tamara Grabowski filed an action against our company in the United States District Court for the Southern District of California, Case No. 10 CV 1300 JM (MDD), on her behalf and on behalf of all others similarly situated. The complaint, as subsequently amended, alleges that our advertising for Shape-ups violates California’s Unfair Competition Law and the California Consumers Legal Remedies Act, and constitutes a breach of express warranty (the “Grabowski action”). The complaint seeks certification of a nationwide class, damages, restitution and disgorgement of profits, declaratory and injunctive relief, corrective advertising, and attorneys’ fees and costs. On March 7, 2011, the Court stayed the action on the ground that the outcomes in pending appeals in two unrelated actions will significantly affect whether a class should be certified. On January 13, 2012, the plaintiff filed a motion to lift the stay, which we opposed. On April 16, 2012, this action was transferred to the multidistrict litigation proceeding pending in the United States District Court for the Western District of Kentucky, entitled In re Skechers Toning Shoe Products Liability Litigation, MDL No. 2308. On May 16, 2012, the plaintiff in Grabowski, her counsel, and counsel for the plaintiff in Morga filed a motion for preliminary approval of the class action settlement reached as part of the global settlement of advertising-related claims described above. The Court held hearings on the motion for preliminary approval of the class action settlement on July 24 and August 3, 2012, and a further hearing has been scheduled for August 10, 2012. If the Court grants preliminary and final approval of the class action settlement, and the Court’s decision is affirmed in the event of an appeal, the settlement will resolve all domestic civil claims concerning our advertising of our toning shoes that were or could have been brought by the class of consumers, as defined in the settlement agreement, including the class claims asserted in the Stalker, Morga, Tomlinson, Lovston, Hochberg, Loss, Boatright and Scovil actions described below. While we expect the Court to grant preliminary and final approval of the class action settlement, there are multiple class actions in several jurisdictions and we cannot predict the final outcome of the approval motions. If the motions to grant preliminary and final approval of the class action settlement are denied or approval is reversed on appeal, we cannot predict the outcome of the remaining advertising class actions or a reasonable range of potential losses or whether the outcome of the remaining advertising class actions would have a material adverse impact on our results of operations or financial position in excess of the existing $50 million settlement.

Sonia Stalker v. Skechers U.S.A., Inc. – On July 2, 2010, Sonia Stalker filed an action against our company in the Superior Court of the State of California for the County of Los Angeles, on her behalf and on behalf of all others similarly situated, alleging that our advertising for Shape-ups violates California’s Unfair Competition Law and the California Consumer Legal Remedies Act. The complaint seeks certification of a nationwide class, actual and punitive damages, restitution, declaratory and injunctive relief, corrective advertising, and attorneys’ fees and costs. On July 23, 2010, we removed the case to the United States District Court for the Central District of California, and it is now pending as Sonia Stalker v. Skechers USA, Inc., CV 10-5460 JAK (JEM). On August 23, 2010, we filed a motion to dismiss the action or transfer it to the United States District Court for the Southern District of California, in view of the prior pending Grabowski action. On August 27, 2010, the plaintiff moved to certify the class, which motion we opposed. On January 21, 2011, the Court stayed the action for the separate reasons that the Grabowski action was filed first and takes priority under the first-to-file doctrine and that the outcomes in pending appeals in two unrelated actions will significantly affect the outcome of plaintiff’s

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motion for class certification and the resolution of this action. On May 21, 2012, this action was transferred to the multidistrict litigation proceeding pending in the United States District Court for the Western District of Kentucky, entitled In re Skechers Toning Shoe Products Liability Litigation, MDL No. 2308. On June 7, 2012, the plaintiff and her counsel filed an opposition to the motion for preliminary approval of the Grabowski/Morga class actions settlement. The Court held hearings on the motion for preliminary approval of the class action settlement on July 24 and August 3, 2012, and a further hearing has been scheduled for August 10, 2012 The settlement in the Grabowski/Morga class actions (described above), if finally approved by the Court and affirmed on appeal in the event an appeal is taken, is expected entirely to resolve the class claims brought by the plaintiff in Stalker. If the motions to grant preliminary and final approval of the class action settlement in the Grabowski/Morga class actions are denied or approval is reversed on appeal, we cannot predict the outcome of the Stalker action or a reasonable range of potential losses or whether the outcome of the Stalker action would have a material adverse impact on our results of operations or financial position in excess of the existing $50 million settlement.

Venus Morga v. Skechers U.S.A., Inc. – On August 25, 2010, Venus Morga filed an action against our company in the United States District Court for the Southern District of California, Case No. 10 CV 1780 JM (MDD), on her behalf and on behalf of all others similarly situated. The complaint, as subsequently amended, alleges that our advertising for Shape-ups violates California’s Unfair Competition Law and the California Consumer Legal Remedies Act, and constitutes a breach of express warranty. The complaint seeks certification of a nationwide class, damages, restitution and disgorgement of profits, declaratory and injunctive relief, corrective advertising, and attorneys’ fees and costs. On March 7, 2011, the Court stayed the action on the ground that the outcomes in pending appeals in two unrelated actions will significantly affect whether a class should be certified. On January 13, 2012, the plaintiff filed a motion to lift the stay, which we opposed. On April 16, 2012, this action was transferred to the multidistrict litigation proceeding pending in the Western District of Kentucky, entitled In re Skechers Toning Shoe Products Liability Litigation, MDL No. 2308. On May 16, 2012, the plaintiff in Grabowski, her counsel, and counsel for the plaintiff in Morga filed a motion for preliminary approval of the class action settlement reached as part of the global settlement of advertising-related claims described above. The Court held a hearing on the motion for preliminary approval of the class action settlement on July 24, 2012 and August 3, 2012, and a further hearing has been scheduled for August 10, 2012. If the Court grants preliminary and final approval of the class action settlement, and the Court’s decision is affirmed in the event of an appeal, the settlement will resolve all domestic civil claims concerning our advertising of our toning shoes that were or could have been brought by the class of consumers, as defined in the settlement agreement, including the class claims asserted in the Grabowski, Stalker, Tomlinson, Lovston, Hochberg, Loss, Boatright and Scovil actions described above and below. While we expect the Court to grant preliminary and final approval of the class action settlement, there are multiple class actions in several jurisdictions and we cannot predict the outcome of the approval motions. If the motions to grant preliminary and final approval of the class action settlement are denied or approval is reversed on appeal, we cannot predict the outcome of the remaining advertising class actions or a reasonable range of potential losses or whether the outcome of the remaining advertising class actions would have a material adverse impact on our results of operations or financial position in excess of the existing $50 million settlement.

Charles Davis, Angela Meng, Paisley McCollum, Daniel Liu, Chanel Celaya, Kathy Gardiner, Samantha Rex, Tracy Long Stover, Talesha Byrd, Sean Myrie, and Marielle Jaffe v. Skechers U.S.A., Inc. and Skechers U.S.A., Inc. II – On August 12, 2011, Charles Davis, Angela Meng, Paisley McCollum, Daniel Liu, Chanel Celaya, Kathy Gardiner, Samantha Rex, Tracy Long Stover, Talesha Byrd, Sean Myrie, and Marielle Jaffe (collectively, the “Plaintiffs”) filed a lawsuit against our company in the Superior Court of the State of California for the County of Los Angeles, Case No. SC113783. The complaint alleges, among other things, that we have intentionally and knowingly misappropriated the Plaintiffs’ common law and statutory law rights of publicity by using their images and likenesses in certain unauthorized forms of media. The Plaintiffs are seeking compensatory, punitive and exemplary damages, injunctive relief, interest, attorneys’ fees and costs. A settlement has been reached and the settlement did not have a material adverse impact on our operations or financial position or result in a material loss in excess of a recorded accrual.

Patty Tomlinson v. Skechers U.S.A., Inc. – On January 13, 2011, Patty Tomlinson filed a lawsuit against our company in Circuit Court in Washington County, Arkansas, Case No. CV11-121-7. The complaint alleges, on her

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behalf and on behalf of all others similarly situated, that our company’s advertising for Shape-ups violates Arkansas’ Deceptive Trade Practices Act, constitutes a breach of certain express and implied warranties, and is resulting in unjust enrichment (the “Tomlinson action”). The complaint seeks certification of a statewide class, compensatory damages, prejudgment interest, and attorneys’ fees and costs. On February 18, 2011, we removed the case to the United States District Court for the Western District of Arkansas, and it is now pending as Patty Tomlinson v. Skechers U.S.A., Inc., CV 11-05042 JLH. On March 16, 2011, we filed a motion to dismiss the action or transfer it to the United States District Court for the Southern District of California, in view of the then-prior pending Grabowski action. On March 21, 2011, Ms. Tomlinson moved to remand the action back to Arkansas state court, which motion we opposed. On May 25, 2011, the Court ordered the case remanded to Arkansas state court and denied our motion to dismiss or transfer as moot, but stayed the remand pending completion of appellate review. On September 2, 2011, we filed a petition in the United States Supreme Court seeking a writ of certiorari relating to the propriety of remand, and on November 7, 2011, the Supreme Court denied our petition. The district court has yet to lift the stay and formally remand the case to state court. The settlement in the Grabowski/Morga class actions (described above), if finally approved by the Court and affirmed on appeal in the event an appeal is taken, is expected entirely to resolve the class claims brought by the plaintiff in Tomlinson. If the motions to grant preliminary and final approval of the class action settlement in the Grabowski/Morga class actions are denied or approval is reversed on appeal, we cannot predict the outcome of the Tomlinson action or a reasonable range of potential losses or whether the outcome of the Tomlinson action would have a material adverse impact on our results of operations or financial position in excess of the existing $50 million settlement.

Terena Lovston v. Skechers U.S.A., Inc. – On May 13, 2011, Terena Lovston filed a lawsuit against our company in Circuit Court in Lonoke County, Arkansas, Case No. CV-11-321. The complaint alleges, on her behalf and on behalf of all others similarly situated, that our advertising for our toning footwear products violates Arkansas’ Deceptive Trade Practices Act, and is resulting in unjust enrichment. The complaint seeks certification of a statewide class and compensatory damages. On June 3, 2011, we removed the case to the United States District Court for the Eastern District of Arkansas. On June 6, 2011, we filed a motion to dismiss the action or transfer it to the United States District Court for the Southern District of California, in view of the then-prior pending Grabowski action. On July 19, 2011, the Court indicated its intent to remand the case to Arkansas state court but stayed remand pending further briefing by the parties. On August 5, 2011, the Court issued an order staying the case pending completion of the appellate process in the Tomlinson action. On November 7, 2011, the United States Supreme Court denied our petition for a writ of certiorari in the Tomlinson action. On July 12, 2012, the district court ordered the Lovston case remanded to Arkansas state court, and on or about July 26, 2012, the plaintiff filed a renewed motion for certification of a class of Arkansas residents who purchased our toning footwear products. The settlement in the Grabowski/Morga class actions (described above), if finally approved by the Court and affirmed on appeal in the event an appeal is taken, is expected entirely to resolve the class claims brought by the plaintiff in Lovston. If the motions to grant preliminary and final approval of the class action settlement in the Grabowski/Morga class actions are denied or approval is reversed on appeal, we cannot predict the outcome of the Lovston action or a reasonable range of potential losses or whether the outcome of the Lovston action would have a material adverse impact on our results of operations or financial position in excess of the existing $50 million settlement.

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Skechers U.S.A., Inc. and Skechers U.S.A., Inc. II v. Elon A. Pollack, Elon A. Pollack, a Professional Corporation dba Law Offices of Elon A. Pollock, and Stein, Shostak, Shostak, Pollack & O’Hara, LLP – On March 3, 2011, we filed a complaint against Elon A. Pollack, Elon A. Pollack, a Professional Corporation dba Law Offices of Elon A. Pollock, and Stein, Shostak, Shostak, Pollack & O’Hara, LLP (collectively, the “Defendants”) in Superior Court of the State of California in Los Angeles County, Case No. YC064333. In our current amended complaint, we allege, among other things, that the Defendants have breached their duties of care, loyalty and fidelity to our company by negligently and carelessly providing legal representation, and that the Defendants have engaged in self-dealing and breaches of their fiduciary duties to our company. We are seeking actual and consequential damages, declaratory relief, interest, punitive damages, and attorneys’ fees and costs. On August 3, 2011, the Defendants filed a first amended cross complaint against our company, which alleges breach of written contract for failure to pay certain contingency fees, entitlement to contingency fees based on the principal of quantum meruit, breach of implied covenant of good faith and fair dealing, and fraud and intentional misrepresentation. On March 5, 2012, the Defendants dismissed their cause of action for fraud and intentional misrepresentation. The Defendants seek damages under a retainer agreement, the reasonable value of their services, as well as consequential and incidental damages, interest, and costs, but they are no longer seeking punitive damages. A settlement has been reached and the settlement did not have a material adverse impact on our operations or financial position or result in a material loss in excess of a recorded accrual.

Wendie Hochberg and Brenda Baum v. Skechers U.S.A., Inc. – On November 23, 2011, Wendie Hochberg and Brenda Baum filed a lawsuit against our company in the United States District Court for the Eastern District of New York, Case No. CV11-5751. The complaint alleges, on their behalf and on behalf of all others similarly situated, that our advertising for Shape-ups violates the New York Consumer Protection Act, and is resulting in unjust enrichment. The complaint seeks certification of a statewide class, damages, restitution, disgorgement, injunctive relief, and attorneys’ fees and costs. On July 5, 2012, this action was transferred to the multidistrict litigation proceeding pending in the United States District Court for the Western District of Kentucky, entitled In re Skechers Toning Shoe Products Liability Litigation, MDL No. 2308. The settlement in the Grabowski/Morga class actions (described above), if finally approved by the Court and affirmed on appeal in the event an appeal is taken, is expected entirely to resolve the class claims brought by the plaintiff in Hochberg. If the motions to grant preliminary and final approval of the class action settlement in the Grabowski/Morga class actions are denied or approval is reversed on appeal, we cannot predict the outcome of the Hochberg action or a reasonable range of potential losses or whether the outcome of the Hochberg action would have a material adverse impact on our results of operations or financial position in excess of the existing $50 million settlement.

Shannon Loss, Kayla Hedges and Donald Horner v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group – On February 12, 2012, Shannon Loss, Kayla Hedges and Donald Horner filed a lawsuit against our company in the United States District Court for the Western District of Kentucky, Case No. 3:12-cv-78-H. The complaint alleges, on behalf of the named plaintiffs and all others similarly situated, that our advertising for Shape-ups is false and misleading, thereby constituting a breach of contract, breach of implied and express warranties, and resulting in unjust enrichment. The complaint seeks certification of a nationwide class, compensatory damages, and attorneys’ fees and costs. On March 9, 2012, the named plaintiffs filed a motion to consolidate this action with In re Skechers Toning Shoe Products Liability Litigation, case no. 11-md-02308-TBR. On April 10, 2012, we filed a motion to dismiss the action or transfer it to the United States District Court for the Southern District of California, in view of the prior pending Grabowski action. On May 1, 2012, the Court issued an order staying the action until the next status conference, which was held on July 3, 2012. At the July 3 status conference, the Court granted plaintiffs’ motion to consolidate the Loss and Boatright actions, and accordingly denied our motion to dismiss or transfer the Loss action as moot. The settlement in the Grabowski/Morga class actions (described above), if finally approved by the Court and affirmed on appeal in the event an appeal is taken, is expected entirely to resolve the class claims brought by the plaintiff in Loss. If the motions to grant preliminary and final approval of the class action settlement in the Grabowski/Morga class actions are denied or approval is reversed on appeal, we cannot predict the outcome of the Loss action or a reasonable range of potential losses or whether the outcome of the Loss action would have a material adverse impact on our results of operations or financial position in excess of the existing $50 million settlement.

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Elma Boatright and Sharon White v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group – On February 15, 2012, Elma Boatright and Sharon White filed a lawsuit against our company in the United States District Court for the Western District of Kentucky, Case No. 3:12-cv-87-S. The complaint alleges, on behalf of the named plaintiffs and all others similarly situated, that our advertising for Shape-ups is false and misleading, thereby constituting a breach of contract, breach of implied and express warranties, fraud, and resulting in unjust enrichment. The complaint seeks certification of a nationwide class, compensatory damages, and attorneys’ fees and costs. On March 6, 2012, the named plaintiffs filed a motion to consolidate this action with In re Skechers Toning Shoe Products Liability Litigation, case no. 11-md-02308-TBR. On March 12, 2012, we filed a motion to dismiss the action or transfer it to the United States District Court for the Southern District of California, in view of the prior pending Grabowski action. On May 1, 2012, the Court issued an order staying the action until the next conference, which was held on July 3, 2012. At the July 3 status conference, the Court granted plaintiffs’ motion to consolidate the Loss and Boatright actions, and accordingly denied our motion to dismiss or transfer the Boatright action as moot. The settlement in the Grabowski/Morga class actions (described above), if finally approved by the Court and affirmed on appeal in the event an appeal is taken, is expected entirely to resolve the class claims brought by the plaintiff in Boatright. If the motions to grant preliminary and final approval of the class action settlement in the Grabowski/Morga class actions are denied or approval is reversed on appeal, we cannot predict the outcome of the Boatright action or a reasonable range of potential losses or whether the outcome of the Boatright action would have a material adverse impact on our results of operations or financial position in excess of the existing $50 million settlement.

Jason Angell v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers U.S.A. Canada, Inc. – On April 12, 2012, Jason Angell filed a motion to authorize the bringing of a class action in the Superior Court of Québec, District of Montréal. Petitioner Angell seeks to bring a class action on behalf of all residents of Canada (or in the alternative, all residents of Québec) who purchased Skechers Shape-ups footwear. Petitioner’s motion alleges that we have marketed Shape-ups through the use of false and misleading advertisements and representations about the products’ ability to provide health benefits to users. The motion requests the Court’s authorization to institute a class action seeking damages, punitive damages, and injunctive relief. Petitioner’s motion was formally presented to the Court on June 29, 2012. A presiding judge has not yet been assigned to the case. While it is too early to predict the outcome of the litigation or a reasonable range of potential losses and whether an adverse result would have a material adverse impact on our results of operations or financial position, we believe we have meritorious defenses, vehemently deny the allegations, believe that authorization of a class action is not warranted and intend to defend the case vigorously.

Michele Scovil v. Skechers U.S.A., Inc. – On April 25, 2012, Michele Scovil filed a lawsuit against our company in the District Court for Clark County, Nevada, Case No. A-12660756-C. Plaintiff alleges that she suffered physical injuries that she attributes to the allegedly defective design of Shape-ups, and plaintiff asserts, in her individual capacity, claims for negligence, products liability, strict liability, and breach of warranty. In addition, plaintiff also purports to bring a class action on behalf of all persons in Nevada who purchased Shape-ups shoes at retail, and seeks class certification on her claims for alleged violations of the Nevada Unfair and Deceptive Trade Practices Act. Plaintiff’s complaint seeks damages, restitution, punitive damages, and attorneys’ fees and costs. On July 12, 2012, this action was transferred to the multidistrict litigation proceeding pending in the United States District Court for the Western District of Kentucky, entitled In re Skechers Toning Shoe Products Liability Litigation, MDL No. 2308. The settlement in the Grabowski/Morga class actions (described above), if finally approved by the Court and affirmed on appeal in the event an appeal is taken, is expected entirely to resolve the class claims brought by the plaintiff in Scovil. While it is too early to predict the outcome of the remaining claims asserted in this litigation or a reasonable range of potential losses and whether an adverse result would have a material adverse impact on its results of operations or financial position, we believe we have meritorious defenses, vehemently deny the allegations, believe that class certification is not warranted and intend to defend the case vigorously. If the motions to grant preliminary and final approval of the class action settlement in the Grabowski/Morga class actions are denied or approval is reversed on appeal, we cannot predict the outcome of the Scovil action or a reasonable range of potential losses or whether the outcome of the Scovil action would have a material adverse impact on our results of operations or financial position in excess of the existing $50 million settlement.

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Ralph Maynard v. Skechers USA, Inc. – On February 17, 2012, Ralph Maynard, a former employee in our corporate credit department, filed an action against our company in the Superior Court of the State of California for the County of Los Angeles, Case No. BC479260, alleging disability discrimination and wrongful discharge in connection with termination of his employment. The complaint seeks general, special and punitive damages, attorneys’ fees, costs and penalties. While it is too early to predict the outcome of the litigation or a reasonable range of potential losses and whether an adverse result would have a material adverse impact on our results of operations or financial position, we believe we have meritorious defenses, vehemently deny the allegations, and intend to defend the case vigorously.

Personal Injury Lawsuits Involving Shape-ups. – As previously reported, on February 20, 2011, Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group were named as defendants in a lawsuit that alleged, among other things, that Shape-ups are defective and unreasonably dangerous, negligently designed and/or manufactured, and do not conform to representations made by our company, and that we failed to provide adequate warnings of alleged risks associated with Shape-ups. Since then, we have been named in an additional 68 currently pending cases that assert further varying injuries but employ similar legal theories and assert similar claims to the first case and adding claims for breach of express and implied warranties, loss of consortium, and fraud. In each of the following cases, except as noted below, the plaintiffs seek compensatory and/or economic damages, exemplary and/or punitive damages, and attorneys’ fees and costs.

Case Name	Original Case Number	Court
Holly and Timothy Ward v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group (No exemplary or punitive damages sought)	1:11-cv-00080-MRB	United States District Court, Southern District of Ohio
Allison Drury v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:11-cv-00201-CRS	United States District Court, Western District of Kentucky, Louisville Division
Melissa and Richard Kearnely v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	6:11-cv-00139-GFVT	United States District Court, Eastern District of Kentucky, London Division
Lynn P. Orsine and Raymond J. Orsine v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	1:11-cv-01654-DCN	United States District Court, Northern District of Ohio, Eastern Division, Cleveland
Theresa Croak and Neill Croak v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	1:11-cv-01458-TFH	United States District Court, District of Columbia
Helen Simpson v. Sketchers [sic.] U.S.A., Inc. (No exemplary or punitive damages sought)	136479-C	26th Judicial District Court, Bossier Parish, Louisiana
Jessica Wilson v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	5:11-cv-02008-DDD	United States District Court, Northern District of Ohio, Akron
Susan Reno-Gilliland and Frederick Gilliland IV v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	4:11-cv-00241-HLM	United States District Court, Northern District of Georgia, Rome Division

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Mai L. Moore v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	2:11-cv-02849-CGC	United States District Court, Western District of Tennessee, Western Division
Linda Nell v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	4:11-cv-02050-BYP	United States District Court, Northern District of Ohio, Eastern Division, Youngstown
Denise Hagvall v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	1:11-cv-02805-CCB	United States District Court, District of Maryland (Baltimore)
Karen McClain v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	1:11-cv-02807-CCB	United States District Court, District of Maryland (Baltimore)
Lisa Fuller and Terry Fuller v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	1:11-cv-00084-BRW	United States District Court, Eastern District of Arkansas, Northern Division
Mark Stanley and Rebecca Stanley v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	11-CI-00494	Circuit Court in Graves County, Kentucky
Corin Hall and Robert Hall v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	2:11-cv-00921-SA	United States District Court, District of Utah
Gale Leiter v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:11-cv-00351-TMR	United States District Court, Southern District of Ohio, Western Division, Dayton
Lisa Delzoppo-Patel v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	1:11-cv-02129	United States District Court, Northern District of Ohio, Eastern Division, Cleveland
Karita Pierson v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:11-cv-00352-WHR	United States District Court, Southern District of Ohio, Western Division, Dayton
Peggy Stults v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	2:11-cv-1036-BCW	United States District Court, District of Utah, Central Division
Lisa Peniston v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	4:11-cv-889-A	United States District Court, Northern District of Texas
Kathy Bartek, et al. v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	BC476903	Superior Court for the State of California, Los Angeles

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Evelyn Rice v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	1:12-cv-181-PAG	United States District Court, Northern District of Ohio, Eastern Division
Jewel Trsek v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-183-LW	United States District Court, Northern District of Ohio, Eastern Division
Tammy Santarosa v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-182-JZ	United States District Court for the Northern District of Ohio, Northern Division
Sharon Schinder v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	2:11-cv-00408-WOB	United States District Court, Eastern District of Kentucky
Virginia Phillips v. Skechers U.S.A., Inc. and The Sports Authority Inc.	37-2012-00092016	Superior Court for the State of California, San Diego
Richard Raskopf and Cynthia Raskopf v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00070-JVB	United States District Court, Northern District of Indiana
Roxann Romano and Paul Romano v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	2:12-cv-00370-DRH	United States District Court, Eastern District of New York
Gina Williams-Lowe v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	8:12-cv-603-DKC	United States District Court, District of Maryland
Leo Morin v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	1:12-cv-301-LMB	United States District Court, Eastern District of Virginia
Donette Hall v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	2:12-cv-653-EW	United States District Court, Southern District of Texas
Orietta Jeanene Thomas v. Skechers U.S.A., Inc. (No exemplary or punitive damages sought.)	LC096517	Superior Court for the State of California, Los Angeles
Sandra Hank v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	1:12-cv-217-SSB	United States District Court, Southern District of Ohio
Beth Freshwater and Douglas P. Moore v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	BC481315	Superior Court for the State of California, Los Angeles
Cathy Bollinger et al. v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	BC481316	Superior Court for the State of California, Los Angeles

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Marty Modlin v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00326-C	United States District Court, Middle District Tennessee
Monita Worthington v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-184-S	United States District Court, Western District of Kentucky
Deborah Johnson v. Skechers U.S.A., Inc. (No exemplary or punitive damages sought.)	003014-12	Superior Court of the District of Columbia, Civil Division
Michele Scovil v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	A-12-660756-C	District Court for Clark County, Nevada
Jimmy Bennett and Linda Bennett v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	1:12-59-JHM	United States District Court, Western District of Kentucky
Helen Kent v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00499	United States District Court, Middle District Tennessee
Sishma Barner and Antonio Barner v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00289-JGH	United States District Court, Western District of Kentucky
Sandra McDonald and William McDonald v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	BC485643	Superior Court for the State of California, Los Angeles
Anthony Ortega v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00299-TBR	United States District Court, Western District of Kentucky
Irene Vogt and John Vogt v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00293-TBR	United States District Court, Western District of Kentucky
Cathy Francis and Mark Francis v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00308-TBR	United States District Court, Western District of Kentucky
Debra Ambush and Alan Ambush v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00309-TBR	United States District Court, Western District of Kentucky
Jacqueline Smith v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00310-TBR	United States District Court, Western District of Kentucky
Janet Motsiff v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00311-TBR	United States District Court, Western District of Kentucky
Deanne D’Amato and Gary D’Amato v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers	3:12-cv-00314-TBR	United States District Court, Western District

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Fitness Group		of Kentucky
Deborah Owens and William Owens v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-315-TBR	United States District Court, Western District of Kentucky
Jennifer Williams and Charles Williams v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00316-TBR	United States District Court, Western District of Kentucky
Gary Tinsley and Martha Tinsley v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00318-TBR	United States District Court, Western District of Kentucky
Felisha Bagsby v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00325-TBR	United States District Court, Western District of Kentucky
Rosemary Alex v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00335-TBR	United States District Court, Western District of Kentucky
Julie Lane v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00342-TBR	United States District Court, Western District of Kentucky
Barbara McGrath v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00346-TBR	United States District Court, Western District of Kentucky
Susan Owens v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00355-TBR	United States District Court, Western District of Kentucky
Cindy Storm v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-356-TBR	United States District Court, Western District of Kentucky
Phyllis Harrison v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-357-TBR	United States District Court, Western District of Kentucky
Emily Zack et al. v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	BC487709	Superior Court for the State of California, Los Angeles
Howard Russell v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00371-TBR	United States District Court, Western District of Kentucky
Diana Willbanks v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00382-TBR	United States District Court, Western District of Kentucky
Diane Lopez v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	1:12-cv-113-TBR	United States District Court, Western District of Kentucky

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Wendy Gilyard v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-398-TBR	United States District Court, Western District of Kentucky
Rita Chorzelewski v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00418-TBR	United States District Court, Western District of Kentucky
Victor Bolo et al. v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	BC 488392	Superior Court for the State of California, Los Angeles
Geraldine Berry and Odell Berry v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-423-TBR	United States District Court, Western District of Kentucky
Barbara Walker and Thomas Walker v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12CV-530-TBR	United States District Court, Western District of Kentucky
Linda Hess v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group	3:12-cv-00439-TBR	United States District Court, Western District of Kentucky

On December 19, 2011, the Judicial Panel on Multidistrict Litigation issued an order establishing a multidistrict litigation proceeding in the United States District Court for the Western District of Kentucky entitled In re Skechers Toning Shoe Products Liability Litigation, case no. 11-md-02308-TBR, that currently encompasses 60 personal injury cases that were initiated in various federal courts. In addition, we were named as a defendant in six multi-plaintiff personal injury actions filed in the Los Angeles Superior Court brought on behalf of a total of 90 individual plaintiffs (the Bartek, Bollinger, Freshwater, McDonald, Zack, and Bolo matters identified above). While it is too early to predict the outcome of any of the personal injury cases and whether an adverse result would have a material adverse impact on our operations or financial position, we believe we have meritorious defenses, vehemently deny the allegations and intend to defend each of these cases vigorously.

As discussed above, during the fourth quarter ended December 31, 2011, we reserved $45 million for costs and potential exposure relating to existing litigation and regulatory matters and recorded a pre-tax expense of $5 million in additional legal and professional fees. In addition to the matters included in its reserve for loss contingencies, we occasionally become involved in litigation arising from the normal course of business, and we are unable to determine the extent of any liability that may arise from any such unanticipated future litigation. We have no reason to believe that there is a reasonable possibility or a probability that we may incur a material loss, or a material loss in excess of a recorded accrual, with respect to any other such loss contingencies. However, the outcome of litigation is inherently uncertain and assessments and decisions on defense and settlement can change significantly in a short period of time. Therefore, although we consider the likelihood of such an outcome to be remote with respect to those matters for which we have not reserved an amount for loss contingencies, if one or more of these legal matters were resolved against our company in the same reporting period for amounts in excess of our expectations, our consolidated financial statements of a particular reporting period could be materially adversely affected.

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ITEM 1A. RISK FACTORS

The information presented below updates the risk factors disclosed in our annual report on Form 10-K for the year ended December 31, 2011 and should be read in conjunction with the risk factors and other information disclosed in our 2011 annual report that could have a material effect on our business, financial condition and results of operations.

We Depend Upon A Relatively Small Group Of Customers For A Large Portion Of Our Sales.

During the six months ended June 30, 2012 and 2011, our net sales to our five largest customers accounted for approximately 20.4% and 20.1% of total net sales, respectively. No customer accounted for more than 10% of our net sales during the six months ended June 30, 2012 or 2011. No customer accounted for more than 10% of outstanding accounts receivable balance at June 30, 2012 or 2011. Although we have long-term relationships with many of our customers, our customers do not have a contractual obligation to purchase our products and we cannot be certain that we will be able to retain our existing major customers. Furthermore, the retail industry regularly experiences consolidation, contractions and closings which may result in our loss of customers or our inability to collect accounts receivable of major customers. If we lose a major customer, experience a significant decrease in sales to a major customer or are unable to collect the accounts receivable of a major customer, our business could be harmed.

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We Rely On Independent Contract Manufacturers And, As A Result, Are Exposed To Potential Disruptions In Product Supply.

Our footwear products are currently manufactured by independent contract manufacturers. During the six months ended June 30, 2012 and 2011, the top five manufacturers of our manufactured products produced approximately 62.5% and 63.8% of our total purchases, respectively. One manufacturer accounted for 34.7% of total purchases for the six months ended June 30, 2012, and the same manufacturer accounted for 30.8% of total purchases for the same period in 2011. Another manufacturer accounted for 11.4% of total purchases for the six months ended June 30, 2011. We do not have long-term contracts with manufacturers and we compete with other footwear companies for production facilities. We could experience difficulties with these manufacturers, including reductions in the availability of production capacity, failure to meet our quality control standards, failure to meet production deadlines or increased manufacturing costs. This could result in our customers canceling orders, refusing to accept deliveries or demanding reductions in purchase prices, any of which could have a negative impact on our cash flow and harm our business.

If our current manufacturers cease doing business with us, we could experience an interruption in the manufacture of our products. Although we believe that we could find alternative manufacturers, we may be unable to establish relationships with alternative manufacturers that will be as favorable as the relationships we have now. For example, new manufacturers may have higher prices, less favorable payment terms, lower manufacturing capacity, lower quality standards or higher lead times for delivery. If we are unable to provide products consistent with our standards or the manufacture of our footwear is delayed or becomes more expensive, our business would be harmed.

One Principal Stockholder Is Able To Control Substantially All Matters Requiring Approval By Our Stockholders And Another Stockholder Is Able To Exert Significant Influence Over All Matters Requiring A Vote Of Our Stockholders, And Their Interests May Differ From The Interests Of Our Other Stockholders.

As of June 30, 2012, our Chairman of the Board and CEO, Robert Greenberg, beneficially owned 42.6% of our outstanding Class B common shares, members of Mr. Greenberg’s immediate family beneficially owned an additional 15.6% of our outstanding Class B common shares, and Gil Schwartzberg, trustee of several trusts formed by Mr. Greenberg and his wife for estate planning purposes, beneficially owned 41.2% of our outstanding Class B common shares. The holders of Class A common shares and Class B common shares have identical rights except that holders of Class A common shares are entitled to one vote per share while holders of Class B common shares are entitled to ten votes per share on all matters submitted to a vote of our stockholders. As a result, as of June 30, 2012, Mr. Greenberg beneficially owned 31.7% of the aggregate number of votes eligible to be cast by our stockholders, and together with shares beneficially owned by other members of his immediate family, Mr. Greenberg and his immediate family beneficially owned 44.2% of the aggregate number of votes eligible to be cast by our stockholders, and Mr. Schwartzberg beneficially owned 30.6% of the aggregate number of votes eligible to be cast by our stockholders. Therefore, Mr. Greenberg and Mr. Schwartzberg are each able to exert significant influence over all matters requiring approval by our stockholders. Matters that require the approval of our stockholders include the election of directors and the approval of mergers or other business combination transactions. Mr. Greenberg also has significant influence over our management and operations. As a result of such influence, certain transactions are not likely without the approval of Messrs. Greenberg and Schwartzberg, including proxy contests, tender offers, open market purchase programs or other transactions that can give our stockholders the opportunity to realize a premium over the then-prevailing market prices for their shares of our Class A common shares. Because Messrs. Greenberg’s and Schwartzberg’s interests may differ from the interests of the other stockholders, their ability to significantly influence or substantially control, respectively, actions requiring stockholder approval may result in our company taking action that is not in the interests of all stockholders. The differential in the voting rights may also adversely affect the value of our Class A common shares to the extent that investors or any potential future purchaser view the superior voting rights of our Class B common shares to have value.

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ITEM 6. EXHIBITS

Exhibit Number	Description
10.1	Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief dated July 12, 2012, between the Registrant and the Federal Trade Commission.
10.2	Agreed Final Consent Judgment dated May 16, 2012, between the Registrant and the State of Tennessee, with a schedule of the additional states, including the District of Columbia, in which such consent judgments have been approved that are substantially identical in all material respects, except as noted on the schedule.
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance Document.
101.SCH**	XBRL Taxonomy Extension Schema Document.
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**	Taxonomy Extension Label Linkbase Document.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document.

* In accordance with Item 601(b)(32)(ii) of Regulation S-K, this exhibit shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.

** Furnished, not filed, herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 9, 2012	SKECHERS U.S.A., INC.
	By:	/S/ DAVID WEINBERG
		David Weinberg
		Chief Financial Officer

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EX-10.1

Exhibit 10.1

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF OHIO

EASTERN DIVISION

FEDERAL TRADE COMMISSION,
	Plaintiff,                      Docket No.
v.
SKECHERS U.S.A., INC., d/b/a SKECHERS,	Judge
	Defendant.

STIPULATED FINAL JUDGMENT AND ORDER

FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF

Plaintiff, the Federal Trade Commission (Commission or FTC), filed a Complaint for Permanent Injunction and Other Equitable Relief against Skechers U.S.A., Inc., pursuant to Section 13(b) of the Federal Trade Commission Act (FTC Act), 15 U.S.C. § 53(b), alleging deceptive acts or practices and false advertisements in violation of Sections 5(a) and 12 of the FTC Act, 15 U.S.C. §§ 45(a) and 52.

The Commission and Defendant have stipulated to the entry of this Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief (Order) in settlement

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of the Commission’s allegations against Defendant. The Court, having been presented with this Order, finds as follows:

FINDINGS

1. This Court has jurisdiction over the subject matter of this case and over all parties. Venue in the United States District Court for the Northern District of Ohio is proper.

2. The Complaint states a claim upon which relief can be granted, and the Commission has the authority to seek the relief it has requested.

3. The activities of the Defendant, for purposes of this Order, are in or affecting “commerce,” as defined in Section 4 of the FTC Act, 15 U.S.C. § 44.

4. This Order is for settlement purposes only, and does not constitute and shall not be interpreted to constitute an admission by Defendant or a finding that the law has been violated as alleged in the Complaint, or that the facts alleged in the Complaint, other than jurisdictional facts, are true.

5. Defendant waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendant also waives any claim that it may have held under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order.

6. This action and the relief awarded herein are in addition to, and not in lieu of, other remedies as may be provided by law.

7. This Order reflects the negotiated agreement of the parties.

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8. The parties shall jointly be deemed the drafters of this Order; the rule that any ambiguity in a contract shall be construed against the drafter of the contract shall not apply to this Order.

9. Nothing in this Order obviates the obligation of Defendant to comply with Sections 5 and 12 of the FTC Act, 15 U.S.C. §§ 45 and 52.

10. The Commission’s action against Defendant is an exercise of the Commission’s police or regulatory power as a governmental unit.

11. The paragraphs of this Order shall be read as the necessary requirements of compliance and not as alternatives for compliance, and no paragraph serves to modify another paragraph unless expressly so stated.

12. Each party shall bear its own costs and attorneys’ fees.

13. Entry of this Order is in the public interest.

ORDER

DEFINITIONS

Unless otherwise specified,

1. “Defendant” means Skechers U.S.A., Inc., doing business as Skechers, and its successors and assigns.

2. “Skechers Toning Footwear” means, collectively, Shape-ups, Resistance Runner, Shape-ups Toners, and Tone-ups.

3. “Commerce” is as defined in Section 4 of the FTC Act, 15 U.S.C. § 44.

4. “Adequate and well-controlled human clinical study” means a clinical study that is randomized, controlled (including but not limited to controlled for dietary intake if testing

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for weight loss or a reduction in body fat), blinded to the maximum extent practicable, uses an appropriate measurement tool or tools, and is conducted by persons qualified by training and experience to conduct and measure compliance with such a study.

5. “Covered Product” means Skechers Toning Footwear, and any other footwear that purports to improve or increase muscle tone, muscle strength, muscle activation, overall circulation, or aerobic conditioning, and/or that purports to result in increased calorie burn, weight loss, loss of body fat or improvement or reduction in body composition.

6. “Class Action Notice” means notice to consumers of a class action settlement.

7. “Class Action Settlement Administrator” means a third-party agent or administrator appointed by a court in a class action to implement the claims and settlement process of a class action settlement.

8. “Consumer Claim Form” means a form that consumers who purchased any Covered Product use to seek payment in a class action settlement.

9. “Notice Administrator” means a third-party agent or administrator appointed by a court in a class action to implement the Class Action Notice and related requirements of a class action settlement.

10. “Notice Plan” means the plan for providing Class Action Notice.

11. “Settlement Claim Procedures and Claim Calculation Protocol” means an agreement in a class action settlement, used by a Class Action Settlement Administrator (1) to review, address, implement, and process claims for payment submitted pursuant to a class action settlement, and (2) to otherwise implement the terms of the claims process in a class action settlement.

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12. “Endorsement” is as defined in 16 C.F.R. § 255.0(b).

13. The term “including” in this Order means “including without limitation.”

14. The terms “and” and “or” in this Order shall be construed conjunctively or disjunctively as necessary, to make the applicable phrase or sentence inclusive rather than exclusive.

I.

PROHIBITED REPRESENTATIONS:

STRENGTHENING CLAIMS

IT IS ORDERED that Defendant, directly or through any corporation, partnership, subsidiary, division, trade name, or other device, and its officers, agents, servants, representatives, employees, and all persons or entities in active concert or participation with them who receive actual notice of this Order, by personal service or otherwise, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Covered Product in or affecting commerce, is hereby permanently restrained and enjoined from making, or assisting others in making, directly or by implication, including through the use of a product name, endorsement, depiction, or illustration, any representation that such product is effective in strengthening muscles unless the representation is non-misleading and, at the time of making such representation, Defendant possesses and relies upon competent and reliable scientific evidence that substantiates that the representation is true. For purposes of this Section, competent and reliable scientific evidence shall consist of at least one adequate and well-controlled human clinical study of the Covered Product that conforms to acceptable designs and protocols, is of at least six-weeks duration, and the result of which, when considered in light of

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the entire body of relevant and reliable scientific evidence, is sufficient to substantiate that the representation is true.

II.

PROHIBITED REPRESENTATIONS: WEIGHT LOSS CLAIMS

IT IS FURTHER ORDERED that Defendant, directly or through any corporation, partnership, subsidiary, division, trade name, or other device, and its officers, agents, servants, representatives, employees, and all persons or entities in active concert or participation with them who receive actual notice of this Order, by personal service or otherwise, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Covered Product, in or affecting commerce, is hereby permanently restrained and enjoined from making, or assisting others in making, directly or by implication, including through the use of a product name, endorsement, depiction, or illustration, any representation that such product causes weight loss unless the representation is non-misleading and, at the time of making such representation, Defendant possesses and relies upon competent and reliable scientific evidence that substantiates that the representation is true. For purposes of this Section, competent and reliable scientific evidence shall consist of at least two adequate and well-controlled human clinical studies of the Covered Product, conducted by different researchers, independently of each other, that conform to acceptable designs and protocols and whose results, when considered in light of the entire body of relevant and reliable scientific evidence, are sufficient to substantiate that the representation is true.

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III.

PROHIBITED REPRESENTATIONS:

OTHER HEALTH OR FITNESS-RELATED CLAIMS

IT IS FURTHER ORDERED that Defendant, directly or through any corporation, partnership, subsidiary, division, trade name, or other device, and its officers, agents, servants, representatives, employees, and all persons or entities in active concert or participation with them who receive actual notice of this Order, by personal service or otherwise, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Covered Product in or affecting commerce, is hereby permanently restrained and enjoined from making, or assisting others in making, directly or by implication, including through the use of a product name, endorsement, depiction, or illustration, any representation, other than representations covered under Section I and/or Section II of this Order, about the health or fitness benefits of any Covered Product, including but not limited to, representations regarding caloric expenditure, calorie burn, blood circulation, aerobic conditioning, muscle tone, and muscle activation, unless the representation is non-misleading and, at the time of making such representation, Defendant possesses and relies upon competent and reliable scientific evidence that is sufficient in quality and quantity based on standards generally accepted in the relevant scientific fields, when considered in light of the entire body of relevant and reliable scientific evidence, to substantiate that the representation is true. For purposes of this Section, competent and reliable scientific evidence means tests, analyses, research, or studies that have been conducted and evaluated in an objective manner by qualified persons and are generally accepted in the profession to yield accurate and reliable results.

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IV.

PROHIBITED REPRESENTATIONS

REGARDING TESTS OR STUDIES

IT IS FURTHER ORDERED that Defendant, directly or through any corporation, partnership, subsidiary, division, trade name, or other device, and its officers, agents, servants, representatives, employees, and all persons or entities in active concert or participation with them who receive actual notice of this Order, by personal service or otherwise, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Covered Product in or affecting commerce, is hereby permanently restrained and enjoined from misrepresenting, or assisting others in misrepresenting, in any manner, directly or by implication, including through the use of any product name, endorsement, depiction, or illustration, the existence, contents, validity, results, conclusions, or interpretations of any test, study, or research, including but not limited to misrepresenting that wearing any Covered Product will result in a quantified percentage or an amount of muscle activation, toning, or strengthening.

V.

MONETARY JUDGMENT AND CONSUMER REDRESS

IT IS FURTHER ORDERED that:

A. Judgment is hereby entered in favor of the Commission and against Defendant in the amount of Forty Million Dollars ($40,000,000).

B. Defendant is ordered to pay this judgment by depositing Forty Million Dollars ($40,000,000) into an interest-bearing escrow account (“Escrow Account”) no later than fifteen (15) days after entry of this Order. A representative of the Commission and Defendant shall execute an Escrow Agreement no later than

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seven (7) days after entry of the Order, which shall provide instructions to the Escrow Agent consistent with the terms of this Order. The money deposited into the Escrow Account and all interest thereon (collectively, “Escrow Funds”) shall be administered by BMC Group (“Escrow Agent”) in accordance with the terms of this Order and the Escrow Agreement.

1. The Escrow Agent’s acceptance of the deposited judgment amount into the Escrow Account shall constitute the Escrow Agent’s agreement to comply with the terms of this Order and consent to the jurisdiction of this Court.

2. All reasonable expenses incurred by the Escrow Agent to administer the Escrow Account and disburse Escrow Funds shall be paid from the Escrow Funds upon approval of a representative of the Commission, and such approval shall not be unreasonably withheld. Such payments shall be based on invoices, and shall be paid timely and on a rolling basis as they become due.

C. Defendant relinquishes all dominion, control, and title to the Escrow Funds to the fullest extent permitted by law. Defendant shall make no claim to or demand for return of the Escrow Funds, directly or indirectly, through counsel or otherwise.

D. All Escrow Funds shall be used for equitable relief including, but not limited to, consumer redress and attendant expenses for administration of the Escrow Account, and for administration of consumer redress, as set forth herein, including in Subparagraphs E and F below. If direct redress to consumers is wholly or partially impracticable or if Escrow Funds remain after redress is completed, the

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Commission may apply all remaining Escrow Funds for such other equitable relief (including consumer information remedies) as it determines to be reasonably related to Defendant’s practices alleged in the Complaint. Any Escrow Funds not used for such equitable relief, as set forth herein, including in Subparagraphs E and F below, shall be deposited to the U.S. Treasury as disgorgement. No portion of any payment under the judgment herein shall be deemed a payment of any fine, penalty, or punitive assessment.

E. Consumer redress that would otherwise be conducted by the Commission using the Escrow Funds pursuant to Subparagraph D may be instead conducted through prompt, court-approved resolution of one or more private class action lawsuits against the Defendant, provided however, that a representative of the Commission must approve of each of the following components of any such class action resolution:

1. the Class Action Settlement Administrator submitted for court approval in the class action(s), with the Class Action Settlement Administrator being required to handle consumer information in a manner that is consistent with the Commission’s privacy and data security policies and practices;

2. the Notice Administrator submitted for court approval in the class action(s);

3. The Class Action Notice and the Notice Plan submitted for court approval in the class action(s);

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4. The Consumer Claim Form submitted for court approval in the class action(s); and

5. The Settlement Claim Procedures and Claim Calculation Protocol initially submitted and any changes subsequently submitted for court approval in the class action(s).

Where approval is required by a representative of the Commission, such approval shall not be unreasonably withheld and shall be timely provided.

F. If the conditions in Subparagraph E are met and no Termination Events occur, as defined in Subparagraph G, and pursuant to the instructions of the Escrow Agreement, the Escrow Agent shall release Escrow Funds in accordance with the Settlement Claim Procedures and Claim Calculation Protocol to pay the reasonable expenses necessary to provide notice to potential claimants in the class action(s); reasonable administrative expenses, including the costs of and expenses incurred by the Class Action Settlement Administrator and Notice Administrator; and disbursements to valid claimants. Such payments shall be based on invoices and shall be paid timely and on a rolling basis as they become due. Escrow Funds shall not be used to pay any other fees, costs, or expenses associated with resolution of the class action(s), including but not limited to attorneys’ fees, litigation expenses, or incentive payments to the class representatives.

G. The Commission may, at its sole discretion, terminate the obligations under Subparagraphs E and F, if:

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1. A settlement agreement and preliminary approval order containing the terms outlined in Subparagraph E is not submitted to the court within thirty (30) days after entry of this Order; or

2. The Notice Administrator has not completed publication notice pursuant to the Notice Plan within eight (8) months after entry of this Order; or

3. The Class Action Settlement Administrator has not begun accepting claims from eligible claimants within eight (8) months after entry of this Order; or

4. The disbursement of Escrow Funds to eligible claimants has not begun within one (1) year after entry of this Order; or

5. The court fails to approve or approves something that is materially different in Subparagraphs E.1-5 than what is approved by a representative of the Commission; or

6. The Class Action Settlement Administrator is, for any reason, replaced, and a representative of the Commission does not approve the next Class Action Settlement Administrator agreed to by the Parties to the class action(s) and recommended for approval to the court in the class action(s), with such approval by a representative of the Commission to be timely provided and not to be unreasonably withheld; or

7. The Notice Administrator is, for any reason, replaced, and a representative of the Commission does not approve the next Notice Administrator agreed to by the Parties to the class action(s) and recommended for approval to

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the court in the class action(s), with such approval by a representative of the Commission to be timely provided and not to be unreasonably withheld (collectively, “Termination Events”). A representative of the Commission shall, consistent with Subparagraph F, authorize the Escrow Agent to use Escrow Funds to pay all valid costs and expenses incurred up to the date of the Termination Event.

H. If a Termination Event occurs and the Commission elects, at its sole discretion, to terminate the obligations under Subparagraphs E and F, then:

1. The Commission shall have sole discretion regarding the use of the remaining Escrow Funds in accordance with Subparagraph D, and the Escrow Agent shall only release Escrow Funds in accordance with instructions from a representative of the Commission;

2. The Commission may, at its sole discretion, continue to work with the Class Action Settlement Administrator and Notice Administrator; and

3. Within fourteen (14) days of receipt of a written request from a representative of the Commission, Defendant shall provide the following information in accordance with instructions provided by a representative of the Commission:

a) A list of all consumers who purchased any Covered Product directly from Defendant during the relevant time period, provided such information is kept in the regular course of business; and

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b) Subject to court approval in the class action(s), any information that Defendant, its agents, or the Class Action Settlement Administrator have regarding the class action claims.

c) Defendant, its agents, or the Class Action Settlement Administrator shall confer with a representative of the Commission concerning the manner, format, and production of the list and information transmitted.

I. If Escrow Funds remain after payment of all claims and expenses as part of redress conducted in accordance with resolution of the class action(s) as provided in Subparagraphs E and F, then the Commission shall have sole discretion regarding the use of the remaining Escrow Funds in accordance with Subparagraph D, and the Escrow Agent shall only release Escrow Funds in accordance with instructions from a representative of the Commission.

J. The total amount of all payment obligations incurred herein shall not exceed the total amount of Escrow Funds.

K. Defendant shall have no right to challenge any actions the Commission or its representatives may take pursuant to Subparagraphs D, G, H, and I.

L. Defendant agrees that the facts as alleged in the Complaint filed in this action, and only for purposes of this Order, shall be taken as true without further proof in any bankruptcy case or subsequent civil litigation pursued by the Commission to enforce its rights to any payment or money judgment pursuant to this Order, including, but not limited to, a nondischargeability complaint in any bankruptcy

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case. Defendant further stipulates and agrees, for purposes of this Order, that the facts alleged in the Complaint establish all elements necessary to sustain an action pursuant to Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and that this Order shall have collateral estoppel effect for such purposes.

M. In accordance with 31 U.S.C. § 7701, Defendant is hereby required, unless it has done so already, to furnish to the Commission its taxpayer identifying number, which shall be used for the purposes of collecting and reporting on any delinquent amount arising out of Defendant’s relationship with the government.

N. In the event of default on Defendant’s obligation to make payment under this Order, interest, computed pursuant to 28 U.S.C. § 1961(a), shall accrue from the date of default to the date of payment.

VI.

COMPLIANCE MONITORING

IT IS FURTHER ORDERED that, for the purpose of monitoring and investigating compliance with any provision of this Order:

A. Within fourteen (14) days of receipt of written notice from a representative of the Commission, Defendant shall submit additional written reports, which are true and accurate and sworn to under penalty of perjury; produce documents for inspection and copying; appear for deposition; and provide entry during normal business hours to any business location in Defendant’s possession or direct or indirect control to inspect the business operation.

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B. In addition, the Commission is authorized to use all other lawful means, including, but not limited to:

1. Obtaining discovery from any person, without further leave of the court, using the procedures prescribed by Fed. R. Civ. P. 30, 31, 33, 34, 36, 45 and 69; and

2. Having its representatives pose as consumers and suppliers to Defendant, its employees, or any other entity managed or controlled in whole or in part by Defendant, without the necessity of identification or prior notice.

C. Defendant shall permit representatives of the Commission to interview any employer, consultant, independent contractor, representative, agent, or employee who has agreed to such an interview, relating in any way to any conduct subject to this Order. The person interviewed may have counsel present.

Provided however, that nothing in this Order shall limit the Commission’s lawful use of compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49, 57b-l, to obtain any documentary material, tangible things, testimony, or information relevant to unfair or deceptive acts or practices in or affecting commerce (within the meaning of 15 U.S.C. § 45(a)(1)).

VII.

COMPLIANCE REPORTING

IT IS FURTHER ORDERED that, in order that compliance with the provisions of this

Order may be monitored:

Page 16 of 27

A. For a period of three (3) years from the date of entry of this Order, Defendant shall notify the Commission of any changes in the corporate structure of Defendant or any business entity that Defendant directly or indirectly controls, or has an ownership interest in, that may affect compliance obligations arising under this Order, including but not limited to: incorporation or other organization; a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; or a change in the business name or address, at least thirty (30) days prior to such change, provided that, with respect to any such change in the business entity about which Defendant learns less than thirty (30) days prior to the date such action is to take place, Defendant shall notify the Commission as soon as is practicable after obtaining such knowledge.

B. One hundred eighty (180) days after the date of entry of this Order, Defendant shall provide a written report to the FTC, which is true and accurate and sworn to under penalty of perjury, setting forth in detail the manner and form in which it has complied and is complying with this Order. This report shall include, but not be limited to:

1. A copy of each acknowledgment of receipt of this Order, obtained pursuant to the Section titled “Distribution of Order”; and

2. Any other changes required to be reported under Subsection A of this Section.

Page 17 of 27

C. Defendant shall notify the Commission of the filing of a bankruptcy petition by Defendant within fifteen (15) days of filing.

D. For the purposes of this Order, Defendant shall, unless otherwise directed by the Commission’s authorized representatives, send by overnight courier (not the U.S. Postal Service) all reports and notifications required by this Order to the Commission, to the following address:

Associate Director for Enforcement

Federal Trade Commission

600 Pennsylvania Avenue, N.W.

Washington, D.C. 20580

Re: FTC v. Skechers, Matter No.                     

Provided that, in lieu of overnight courier, Defendant may send such reports or notifications by first-class mail, but only if Defendant contemporaneously sends an electronic version of such report or notification to the Commission at: DEBrief@ftc.gov.

E. For purposes of the compliance reporting and monitoring required by this Order, the Commission is authorized to communicate directly with Defendant unless or until Defendant directs the Commission to communicate with it through its outside legal counsel and identifies the name and contact information for said counsel. All communications to Defendant related to this Order should go to the General Counsel of Skechers at Defendant’s corporate headquarters, with a copy to Daniel Petrocelli, O’Melveny & Myers LLP, 1999 Avenue of the Stars, 7th Floor, Los Angeles, CA 90067.

Page 18 of 27

VIII.

RECORDKEEPING

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, Defendant is hereby restrained and enjoined from failing to create and retain the following records:

A. Accounting records that reflect the cost of the Covered Product, revenues generated for the Covered Product, and, to the extent such records are created and maintained in the ordinary course of business, the disbursement of such revenues;

B. Personnel records accurately reflecting: the name, address, and telephone number of each person employed in any capacity by such business, including as an independent contractor; that person’s job title or position; the date upon which the person commenced work; and the date and reason for the person’s termination, if applicable; provided however, that with respect to those persons covered by this Subsection whose employment has terminated, personnel records need only be retained for three (3) years from the date of termination;

C. Records accurately reflecting: the name, address, and telephone number of each reseller or retailer of the Covered Product; the dollar amounts paid; and the identification and quantity of items purchased;

D. Customer files containing the names, addresses, telephone numbers, dollar amounts paid, quantity of Covered Product purchased, and description of items or services purchased, to the extent such information is obtained in the ordinary course of business;

Page 19 of 27

E. Complaints and refund requests relating to any Covered Product (whether received directly or indirectly, such as through a third-party) and any responses to those complaints or requests;

F. Copies of all advertisements, promotional materials, sales scripts, training materials, Web sites, or other marketing materials utilized in the advertising, marketing, promotion, offering for sale, sale, or distribution of any Covered Product. For purposes of this provision, keeping one representative copy of all non-identical materials referenced in this provision is sufficient for compliance;

G. All materials that were relied upon in making any representations contained in the materials identified in Subsection F above, including all documents evidencing or referring to the accuracy of any claim therein or to the benefits, performance, or efficacy of any Covered Product, including, but not limited to, all tests, reports, studies, demonstrations, or other evidence that confirms, contradicts, qualifies, or calls into question the accuracy of any claim regarding the benefits, performance, or efficacy of any products covered by this Order, including complaints and other communications with consumers or with governmental or consumer protection agencies;

H. Records accurately reflecting the name, address, and telephone number of each laboratory engaged in the development or creation of any testing obtained for the purpose of advertising, marketing, promoting, offering for sale, selling, or distributing any Covered Product; and

Page 20 of 27

I. All records and documents necessary to demonstrate full compliance with each provision of this Order, including, but not limited to, copies of acknowledgments of receipt of this Order required by the Sections titled “Distribution of Order” and “Acknowledgment of Receipt of Order” and all reports submitted to the FTC pursuant to the Section titled “Compliance Reporting.”

IX.

DISTRIBUTION OF ORDER

IT IS FURTHER ORDERED that, for a period of three (3) years from the date of entry of this Order, Defendant shall deliver copies of the Order as directed below:

A. Defendant shall deliver a copy of this Order to: (1) each of its principals, officers, and directors having decision-making authority with respect to the subject matter of the Order; (2) all of its employees, agents, and representatives having primary responsibilities with respect to the subject matter of the Order; and (3) any business entity resulting from any change in structure set forth in Subsection A of the Section titled “Compliance Reporting.” For current personnel, delivery shall be within seven (7) days of entry of this Order. For new personnel, delivery shall occur prior to their assuming their responsibilities. For any business entity resulting from any change in structure set forth in Subsection A of the Section titled “Compliance Reporting,” delivery shall be at least fourteen (14) days prior to the change in structure.

Page 21 of 27

B. Defendant must secure a signed and dated statement acknowledging receipt of the Order, within thirty (30) days of delivery, from all persons receiving a copy of the Order pursuant to this Section.

X.

NOTIFICATION OF ORDER

IT IS FURTHER ORDERED that Defendant shall send no later than fifteen (15) days after entry of this Order, by first-class mail, postage paid and return receipt requested, or by courier service such as FedEx with signature proof of delivery, an exact copy of the notice attached hereto as Attachment A, showing the date of mailing, to each reseller and retailer who purchased or otherwise received any Covered Product directly from Defendant and who continues to market any Covered Product. The notice required by this Section shall not include any other document or enclosures and may be sent to the principal place of business of each such reseller or retailer.

XI.

ACKNOWLEDGMENT OF RECEIPT OF ORDER

IT IS FURTHER ORDERED that Defendant, within seven (7) business days of receipt of this Order as entered by the Court, shall submit to the Commission a truthful sworn statement acknowledging receipt of this Order.

XII.

RETENTION OF JURISDICTION

IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order.

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SO ORDERED:

Dated:	July 12, 2012	/s/ James S. Gwin
		United States District Judge

SO STIPULATED AND AGREED:

ATTORNEYS FOR PLAINTIFF

FEDERAL TRADE COMMISSION:

/s/ Larissa L. Bungo

LARISSA L. BUNGO

      (Ohio Bar 0066148)

DANA C. BARRAGATE

      (Ohio Bar 0065748)

MICHAEL MILGROM

      (Ohio Bar 0012959)

CHRISTOPHER D. PANEK

      (Ohio Bar 0080016)

Federal Trade Commission

East Central Region

1111 Superior Avenue, Suite 200

Cleveland, Ohio 44114

Phone (216) 263-3403 (Bungo)

Fax: (216) 263-3426

lbungo@ftc.gov

dbarragate@ftc.gov

mmilgrom@ftc.gov

cpanek@ftc.gov

Page 23 of 27

SO STIPULATED AND AGREED:

FOR DEFENDANT:

SKECHERS U.S.A., INC., d/b/a Skechers

/s/ David Weinberg

DAVID WEINBERG

Executive Vice President

SKECHERS U.S.A., INC., d/b/a Skechers

228 Manhattan Beach Boulevard

Manhattan Beach, CA 90266

Page 24 of 27

SO STIPULATED AND AGREED:

DEFENDANT’S OUTSIDE COUNSEL:

/s/ Jeffrey A. Barker

DANIEL M. PETROCELLI

JEFFREY A. BARKER

MARYANNE S. KANE

O’Melveny & Myers LLP

1999 Avenue of the Stars, 7th Floor

Los Angeles, CA 90067

Phone: (310) 553-6700

Fax: (310) 246-6779

dpetrocelli@omm.com

jbarker@omm.com

makane@omm.com

Page 25 of 27

SO STIPULATED AND AGREED:

DEFENDANT’S OUTSIDE COUNSEL:

/s/ Timothy J. Muris

TIMOTHY J. MURIS

Kirkland & Ellis LLP

655 Fifteenth Street, N.W.

Washington, D.C. 20005-5793

Phone: (202) 879-5000

Fax: (202) 879-5200

tim.muris@kirkland.com

Page 26 of 27

ATTACHMENT A

[On Skechers U.S.A., Inc., Letterhead]

[Insert Date]

[Addressee]

Dear Skechers U.S.A., Inc., Retail Business Partner:

In response to a lawsuit by the Federal Trade Commission (FTC) and separate lawsuits brought by a group of state attorneys general, Skechers has agreed to stop making certain claims for the following footwear products: Shape-ups, the Resistance Runner, Toners, and Tone-ups.

Although we dispute the charges, to settle the FTC’s and the states’ cases against us, Skechers has agreed to stop using advertising or promotional materials claiming that any of our footwear products can:

• Improve or increase muscle tone and muscle strength;

• Improve or increase overall circulation or aerobic conditioning;

• Result in increased weight loss or loss of body fat; and/or;

• Result in improvement or reduction in body composition.

In addition to the above, Skechers has agreed to stop using advertising or promotional materials claiming that the Resistance Runner improves or increases muscle activation.

Please take these three steps immediately:

(1) If you have materials on display (POS, posters, etc.) that include any of these claims, please remove them.

(2) Where these claims appear on boxes, please cover them with stickers that Skechers will provide.

(3) If inserts in boxes or footwear hangtags include any of these claims, please remove them.

We are actively pursuing additional studies in the marketplace. We look forward to sharing these details with you as they become available.

You can find out more about the settlement at www.ftc.gov. Please call [Insert name and telephone numbers of the responsible Skechers U.S.A., Inc., Attorney or Officer.] if you have any questions.

Skechers thanks you for your business and greatly appreciates your cooperation in this matter.

Sincerely,

Skechers U.S.A., Inc.

Page 27 of 27

EX-10.2

Exhibit 10.2

IN THE FIRST CIRCUIT COURT FOR DAVIDSON COUNTY

TWENTIETH JUDICIAL DISTRICT AT NASHVILLE

STATE OF TENNESSEE, ex rel. ROBERT E. COOPER, JR., ATTORNEY GENERAL and REPORTER,                            Plaintiff,   v.   SKECHERS USA, INC., d/b/a SKECHERS, a Delaware corporation,                           Defendant. ) ) ) ) ) ) ) ) ) ) ) ) )   No. 12C1966

AGREED FINAL JUDGMENT

INTRODUCTION

1. The Plaintiff, the State of Tennessee, by and through Robert E. Cooper, Jr., the Attorney General (“Plaintiff”), at the request of Gary Cordell, the Director of the Division of Consumer Affairs, and Skechers USA, Inc., (“Defendant”), as evidenced by the signatures below, do consent to the entry of this Judgment and its provisions. This Agreed Final Judgment (hereinafter also referred to as this “Judgment”) is part of a larger forty-five member multistate action¹ and is being filed in concert with consent judgments in those jurisdictions as well as a stipulated judgment reached with the Federal Trade Commission.

¹  The multistate action consists of Attorneys General from the states of Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Vermont, Virginia, Washington, West Virginia, and Wisconsin. The State of Hawaii is represented by the State of Hawaii Office of Consumer Protection and the State of Georgia is represented by the Georgia Governor’s Office of Consumer Protection.

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED:

2. After engaging in settlement discussions, the Defendant, without admitting any liability or wrongdoing, agrees to the entry of this Judgment. The Defendant states that it does so solely to avoid the time, further expense, inconvenience, and interference with its business operations associated with litigation. Nothing in this Judgment shall constitute an admission of the Defendant’s liability or be used as evidence of the Defendant’s liability.

3. The Defendant hereby accepts and expressly waives any defect in connection with the service of process of the Summons and Complaint in this matter. The Defendant expressly waives notice of the Plaintiff’s intention to file an action.

4. This Judgment is entered into by the Defendant as its own free and voluntary act and with full knowledge and understanding of the nature of the proceedings and the obligations and duties imposed upon it by this Judgment, and it consents to its entry without further notice, and avers that no offers, agreements or inducements of any nature whatsoever have been made to it by the Plaintiff or their attorneys or any State employee to procure this Judgment.

5. The Defendant has, by signature of counsel hereto, waived any right to add, alter, amend, appeal, petition for certiorari, or move to reargue or rehear or be heard in connection with any judicial proceeding concerning the entry of this Judgment and any and all challenges in law or equity to the entry of the Judgment by the courts. If the Court elects to hold any hearing on this Judgment, a representative of the Attorney General’s office will briefly summarize the settlement for the Court. The Defendant agrees to support the Judgment and its terms at any such hearing for approval.

6. In the event the Court shall not approve this Judgment, this Judgment shall be of no force and effect against either party, the parties will revert to their respective positions

2

immediately prior to reaching the settlement giving rise to this Judgment, and to the extent consistent with state law, no documents or communications related to the settlement shall have any effect or be admissible in evidence for any purpose in this litigation or in any other proceeding.

DEFINITIONS

7. Unless otherwise specified, the following definitions shall be used in this Judgment:

(A) “Adequate and well-controlled human clinical study” means a clinical study that is randomized, controlled (including, but not limited to, controlled for dietary intake if testing for weight loss or a reduction in body fat), blinded to the maximum extent practicable, uses an appropriate measurement tool or tools, and is conducted impartially by persons qualified by training and experience to conduct and measure compliance with such a study.

(B) “Consumer Law” means the Tennessee Consumer Protection Act of 1977, Tennessee Code Annotated § 47-18-101 et seq. and any of its amendments.

(C) “Covered Product” means Skechers Toning Footwear, and any other Skechers footwear product that purports to improve or increase muscle tone, muscle strength, muscle activation, overall circulation, or aerobic conditioning, and/or that purports to result in increased calorie burn, weight loss, loss of body fat, or improvement or reduction in body composition.

3

(D) “Covered Conduct” means the statements or representations made by Defendant, directly or through any third-party on behalf of Defendant, about the benefits, characteristics, or effects of Skechers Toning Footwear that are expressly subject to the Permanent Injunction provisions contained in Paragraph 16(C)-(G) of this Judgment.

(E) “Defendant” means Skechers USA, Inc., doing business as Skechers, and its successors and assigns.

(F) “Effective Date” means the date on which a copy of this Judgment, duly executed by Skechers USA, Inc. and by the Plaintiff is approved by, and becomes a judgment of the Court.

(G) “Family Member” or “Familial Relationship” means a spouse, mother, father, grandmother, grandfather, son, daughter, brother, sister, grandson, granddaughter, uncle, aunt, or a spouse’s mother, father, grandmother, grandfather, son (if different from above), daughter (if different from above), brother, sister, grandson (if different from above), granddaughter (if different from above), uncle (if different from above), and aunt (if different from above).

(H) “Including” in this Judgment means including without limitation.

(I) “Multistate Executive Committee” means the Attorney General Offices, and their representatives, from the States of Arizona, Illinois, Maryland, Ohio, South Carolina, Tennessee, Washington, and Wisconsin.

(J) “Multistate Working Group” means the Attorney General Offices, and their representatives, from the States of Alabama, Alaska, Arizona,

4

Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Vermont, Virginia, Washington, West Virginia, and Wisconsin.²

(K) “Skechers Toning Footwear” means, collectively, Shape-ups, Resistance Runner, Shape-ups Toners, and Tone-ups.

JURISDICTION

8. Jurisdiction of this Court over the subject matter and over the Defendant for the purpose of entering into and enforcing this Judgment is admitted. Jurisdiction is retained by this Court for the purpose of enabling the Plaintiff to apply to this Court for such further judgments and directions as may be necessary or appropriate for the construction, modification or execution of this Judgment, including the enforcement of compliance therewith and remedies, penalties and sanctions for violation thereof. The Defendant agrees to pay all applicable court costs and attorneys’ fees that are ordered by the Court in connection with any successful petition to enforce any provision of this Judgment against the Defendant.

²  The State of Hawaii is represented by the State of Hawaii Office of Consumer Protection and the State of Georgia is represented by the Georgia Governor’s Office of Consumer Protection.

5

VENUE

9. Pursuant to Tennessee Code Annotated § 47-18-108(a)(3), venue as to all matters between the parties relating hereto or arising out of this Judgment shall be in Davidson County, Tennessee.

DEFENDANT

10. The Defendant warrants and represents that it is the proper party to this Judgment.

11. The Defendant represents and warrants that signatories to this Judgment have authority to act for and bind the Defendant.

12. Beginning in 2008 and continuing into the present, the Defendant marketed and sold Skechers Toning Footwear nationwide including in Davidson County, Tennessee. At all times relevant hereto, the Defendant engaged in trade affecting consumers in the State of Tennessee including, but not limited to, Davidson County.

13. The Defendant acknowledges that it understands that the Plaintiff and this Court expressly rely upon all representations and warranties in this Judgment. The Defendant further acknowledges and understands that if the Defendant makes any false or deceptive representation or warranty, the Plaintiff has the right to move that the Defendant making such false, or deceptive representation(s) or warranty(ies) be held in contempt and to seek sanctions and remedies under any other law, regulation or rule, together with any and all such other sanctions, remedies or relief as may be available to the Plaintiff in law or equity, if the Plaintiff so elects.

PLAINTIFF

14. The Plaintiff has commenced this action pursuant to the Tennessee Consumer Protection Act. The Plaintiff is appearing by and through its attorneys Robert E. Cooper, Jr., and Brant Harrell.

6

APPLICATION OF JUDGMENT

15. Unless otherwise expressly stated, the Defendant agrees that the duties, responsibilities, burdens and obligations it is undertaking pursuant to this Judgment shall apply to the Defendant, as defined above.

PERMANENT INJUNCTION

16. The Defendant, directly or through any corporation, partnership, subsidiary, division, trade name, or other device, and its officers, agents, servants, representatives, employees, and all persons or entities in active concert or participation with them who receive actual notice of this Judgment, by personal service or otherwise, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Covered Product in or affecting trade or commerce:

Compliance with State Consumer Laws

(A) Shall be permanently restrained and enjoined from engaging, or assisting others in engaging, in any unfair or deceptive acts or practices in the conduct of trade or commerce or its business and shall fully abide by all provisions of the Consumer Law which prohibit any and all unfair and/or deceptive acts or practices.

(B) Shall be permanently restrained and enjoined from making, or assisting others in making, any statement or representation that goods or services have uses or benefits that they do not have.

Prohibited Representations: Strengthening Claims

(C) Shall be permanently restrained and enjoined from making, or assisting others in making, directly or by implication, including through the use of a

7

product name, endorsement, depiction, or illustration, any representation that such Covered Product is effective in strengthening muscles unless the representation is non-misleading and non-deceptive, and, at the time of making such representation, the Defendant possesses and relies upon competent and reliable scientific evidence that substantiates that the representation is true. For purposes of this Paragraph 16(C), competent and reliable scientific evidence shall consist of at least one adequate and well-controlled human clinical study of the Covered Product that conforms to acceptable designs and protocols, is of at least six-weeks duration, and the result of which, when considered in light of the entire body of relevant and reliable scientific evidence, is sufficient to substantiate that the representation is true.

Prohibited Representations: Weight Loss Claims

(D) Shall be permanently restrained and enjoined from making, or assisting others in making, directly or by implication, including through the use of a product name, endorsement, depiction, or illustration, any representation that such Covered Product causes weight loss unless the representation is non-misleading and non-deceptive, and, at the time of making such representation, Defendant possesses and relies upon competent and reliable scientific evidence that substantiates that the representation is true. For purposes of this Paragraph 16(D), competent and reliable scientific evidence shall consist of at least two adequate and well-controlled human clinical studies of the Covered Product, conducted by different

8

researchers, independently of each other, that conform to acceptable designs and protocols and whose results, when considered in light of the entire body of relevant and reliable scientific evidence, are sufficient to substantiate that the representation is true.

Prohibited Representations: Other Health or Fitness-Related Claims

(E) Shall be permanently restrained and enjoined from making, or assisting others in making, directly or by implication, including through the use of a product name, endorsement, depiction, or illustration, any representation, other than representations covered under Paragraph 16(C) and/or Paragraph 16(D) of this Judgment, about the health or fitness benefits of any Covered Product including, but not limited to, representations regarding caloric expenditure, calorie burn, blood circulation, aerobic conditioning, muscle tone, and muscle activation, unless the representation is non-misleading and non-deceptive and, at the time of making such representation, the Defendant possesses and relies upon competent and reliable scientific evidence that is sufficient in quality and quantity based on standards generally accepted in the relevant scientific fields, when considered in light of the entire body of relevant and reliable scientific evidence, to substantiate that the representation is true. For purposes of this Paragraph 16(E), competent and reliable scientific evidence means tests, analyses, research, or studies that have been conducted and evaluated in an objective manner by qualified persons and are generally accepted in the profession to yield accurate and reliable results.

9

Prohibited Representations: Tests or Studies

(F) Shall be permanently restrained and enjoined from misrepresenting, or assisting others in misrepresenting, in any manner, directly or by implication, including through the use of any product name, endorsement, depiction, or illustration, the existence, contents, validity, results, conclusions, or interpretations of any test, study, or research including, but not limited to, misrepresenting that wearing any Covered Product will result in a quantified percentage or an amount of muscle activation, toning, strengthening, calorie burn, caloric expenditure, or weight loss.

Disclosure of Material Connections to Studies in Advertisements

(G) Shall, whenever it refers to any study in advertisements, marketing materials, or elsewhere to promote its Covered Products, clearly and conspicuously disclose in such advertisements, marketing materials, or elsewhere to promote its Covered Products any material connections between the study’s authors or supervising researchers and the Defendant that consumers would find relevant in assessing the accuracy of a study such as any conflict of interest, including the fact that the author, supervising researcher, or a Family Member was compensated by or on behalf of the Defendant, or any Familial Relationship between a study’s author or supervising researcher and a director, officer, or an employee (but only if the employee has primary responsibility with respect to the Covered Product) of the Defendant. For purposes of this Paragraph 16(G), “clearly and conspicuously,” when referring to a statement or disclosure,

10

shall mean that such statement or disclosure is disclosed in such size, color, contrast, location, duration, and audibility that it is readily noticeable, readable and understandable. A statement may not contradict or be inconsistent with any other information with which it is presented. If a statement modifies, explains, or clarifies other information with which it is presented, it must be presented in proximity to the information it modifies, in a manner readily noticeable, readable, and understandable, and it must not be obscured in any manner. Audio disclosure shall be delivered in a volume and cadence sufficient for a consumer to hear and comprehend it. Visual disclosure shall be of a size and shade and appear on the screen for a duration sufficient for a consumer to read and comprehend it. In a print advertisement or promotional material, including, but without limitation, point of sale display or brochure materials directed to consumers, the disclosures shall be in a type size and location sufficiently noticeable for a consumer to read and comprehend it, in a print that contrasts with the background against which it appears.

17. Unless otherwise expressly stated, the preceding injunctive provisions (16(A)-(G)) shall take effect on the Effective Date. No cost bond shall be required for the injunction.

CONSUMER PAYMENTS

18. Consumer payments shall be made and distributed pursuant to the Federal Trade Commission’s Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief, which sets forth Forty Million Dollars ($40,000,000) in the aggregate for available funds for this purpose less administrative expenses associated with the claims

11

procedure. The Defendant shall include a requirement in the Class Action Settlement Agreement for the Class Action Settlement Administrator to provide to Plaintiff, within thirty (30) days of delivery of consumer payments pursuant to the consumer payments program by the Class Action Settlement Administrator, an electronically searchable alphabetical list of consumers who reside in this state who have made claims out of the proposed consumer payments fund, the consumer’s contact information, and the amount paid to those consumers.

COMPLIANCE REPORTING

19. For a period of three (3) years from the date of entry of this Judgment, the Defendant shall notify the Plaintiff of any changes in the corporate structure of the Defendant or any business entity that the Defendant directly or indirectly controls, or has an ownership interest in, that may affect compliance obligations arising under this Judgment, including but not limited to: incorporation or other organization; a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Judgment; or a change in the business name or address, at least thirty (30) days prior to such change, provided that, with respect to any such change in the business entity about which the Defendant learns less than thirty (30) days prior to the date such action is to take place, the Defendant shall notify the Plaintiff as soon as is practicable after obtaining such knowledge.

20. One hundred eighty (180) days after the date of entry of this Judgment, the Defendant shall provide a written report to the Plaintiff, which is true and accurate and sworn to under penalty of perjury, setting forth in detail the manner and form in which it has complied and is complying with this Judgment. This report shall include, but not be limited to: (1) a copy of each acknowledgment of receipt of this Judgment, obtained pursuant to the Section titled

12

“Distribution of Judgment;” and (2) any other changes required to be reported under Paragraph 19.

21. The Defendant shall notify the Plaintiff of the filing of a bankruptcy petition by Defendant within fifteen (15) days of filing.

22. For the purposes of this Judgment, the Defendant shall, unless otherwise directed by the Plaintiff’s authorized representatives, send by overnight courier all reports and notifications required by this Judgment to the Plaintiff, to the following address:

Office of the Attorney General of Tennessee

Consumer Advocate and Protection Division

c/o Deputy Attorney General

425 Fifth Avenue North, 2nd Floor Cordell Hull Building

Nashville, Tennessee 37243

or as subsequently directed by the Plaintiff. Provided that, in lieu of overnight courier, the Defendant may send such reports or notifications by first-class mail, but only if the Defendant contemporaneously sends an electronic version of such report or notification to the Plaintiff at:

brant.harrell@ag.tn.gov

or as subsequently directed by the Plaintiff.

23. For purposes of the compliance reporting and monitoring required by this Judgment, the Plaintiff is authorized to communicate directly with the Defendant unless or until the Defendant directs the Plaintiff to communicate with it through its outside legal counsel and identifies the name and contact information for said counsel. All communications to the Defendant related to this Judgment should go to the General Counsel of Skechers at the Defendant’s corporate headquarters, with a copy to Daniel Petrocelli, O’Melveny & Myers LLP, 1999 Avenue of the Stars, 7th Floor, Los Angeles, CA 90067.

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RECORDKEEPING

24. For a period of five (5) years from the date of entry of this Judgment, the Defendant is hereby restrained and enjoined from failing to create and retain the following records:

(A) Accounting records that reflect the cost of the Covered Product, revenues generated for the Covered Product, and, to the extent such records are created and maintained in the ordinary course of business, the disbursement of such revenues;

(B) Personnel records accurately reflecting: the name, address, and telephone number of each person employed in any capacity by such business, including as an independent contractor; that person’s job title or position; the date upon which the person commenced work; and the date and reason for the person’s termination, if applicable; provided however, that with respect to those persons covered by Paragraph 24(B) whose employment has terminated, personnel records need only be retained for three (3) years from the date of termination;

(C) Records accurately reflecting: the name, address and telephone number of each domestic distributor, domestic reseller, or domestic retailer of the Covered Product; the dollar amounts paid; and the identification and quantity of items purchased;

(D) Customer files containing the names, addresses, telephone numbers, dollar amounts paid, quantity of Covered Product purchased, and description of

14

items or services purchased, to the extent such information is obtained in the ordinary course of business;

(E) Complaints and refund requests relating to any Covered Product (whether received directly or indirectly, such as through a third-party) and any responses to those complaints or requests;

(F) Copies of all advertisements, promotional materials, sales scripts, training materials, web sites, or other marketing materials utilized in the advertising, marketing, promotion, offering for sale, sale, or distribution of any Covered Product. For purposes of this provision, keeping one representative copy of all non-identical materials referenced in this provision is sufficient for compliance;

(G) All materials that were relied upon in making any representations contained in the materials identified in (F) above, including all documents evidencing or referring to the accuracy of any claim therein or to the benefits, performance, or efficacy of any Covered Product, including, but not limited to, all tests, reports, studies, demonstrations, or other evidence that confirms, contradicts, qualifies, or calls into question the accuracy of any claim regarding the benefits, performance, or efficacy of any products covered by this Judgment, including complaints and other communications with consumers or with governmental or consumer protection agencies;

(H) Records accurately reflecting the name, address, and telephone number of each laboratory engaged in the testing or the development or creation of

15

any testing obtained for the purpose of advertising, marketing, promoting, offering for sale, selling, or distributing any Covered Product; and

(I) All records and documents necessary to demonstrate full compliance with each provision of this Judgment including, but not limited to, copies of acknowledgments of receipt of this Judgment required by the Sections titled “Distribution of Judgment” and “Acknowledgment of Receipt of Judgment” and all reports submitted to the Plaintiff pursuant to the Section titled “Compliance Reporting.”

DISTRIBUTION OF JUDGMENT

25. For a period of three (3) years from the date of entry of this Judgment, the Defendant shall deliver copies of this Judgment as directed below:

(A) To each of its principals, officers, and directors having decision-making authority with respect to the subject matter of the Judgment;

(B) To all of its employees, agents, and representatives having primary responsibilities with respect to the subject matter of the Judgment, including, but not limited to any individual and/or entity employed by the Defendant in conducting any tests, analyses, research, or studies to support any fitness benefit claims associated with Skechers Toning Footwear; and

(C) For current personnel of the Defendant, delivery shall be within seven (7) days of entry of this Judgment. For new personnel of the Defendant, delivery shall occur prior to their assuming their responsibilities. For any business entity resulting from any change in structure set forth in

16

Paragraph 19 titled “Compliance Reporting,” delivery shall be at least fourteen (14) days prior to the change in structure.

26. The Defendant shall secure a signed and dated statement acknowledging receipt of the Judgment, within thirty (30) days of delivery, from all persons receiving a copy of the Judgment pursuant to this Section.

NOTIFICATION OF JUDGMENT

27. The Defendant shall send no later than fifteen (15) days after entry of this Judgment, by first-class mail, postage paid and return receipt requested, or by courier service such as Federal Express with signature proof of delivery, an exact copy of the notice attached hereto as Attachment A, showing the date of mailing, to each domestic distributor, domestic reseller, and domestic retailer who purchased or otherwise received any Covered Product directly from the Defendant and who continues to market, sell or offer for sale any Covered Product. The notice required by this Paragraph 27 shall not include any other document or enclosures and may be sent to the principal place of business of each such domestic distributor, domestic reseller or domestic retailer.

ACKNOWLEDGMENT OF RECEIPT OF JUDGMENT

28. The Defendant shall, within seven (7) business days of receipt of this Judgment after entry by the Court, submit to the Plaintiff a truthful sworn statement acknowledging receipt of this Judgment.

PAYMENT TO THE STATES

29. No later than thirty (30) days after the Effective Date of this Judgment, the Defendant shall pay a total amount of Five Million Dollars ($5,000,000) to be divided and paid by the Defendant directly to each Signatory Attorney General of the Multistate Working Group

17

in an amount to be designated by, and in the sole discretion of, the Multistate Executive Committee. No portion of any payment under the Judgment shall be deemed a payment of any fine, penalty, or punitive assessment.

30. Tennessee’s portion of the $5,000,000, as co-lead state, totals $404,863. Of the $404,863, retained by the State of Tennessee, $200,000 shall be allocated to the State of Tennessee – Office of the Attorney General to be used for consumer protection purposes or any other purpose allowed by law at the sole discretion of the Attorney General. $104,863 shall be allocated to the State of Tennessee – General Fund to be used for any purpose allowed by law. The remaining $100,000 shall be allocated to the State of Tennessee – Division of Consumer Affairs for consumer protection purposes or any other purpose allowed by law at the sole discretion of the Director of the Division of Consumer Affairs. Without excusing the Defendant’s obligation to pay, if the entire monetary amount anticipated by the State of Tennessee is not received, any monies received shall first be attributed in full to the Attorney General’s office, next in full to the Division of Consumer Affairs, and then to the General Fund. Further, if the State of Tennessee receives any additional monies beyond the amount set forth herein, legitimately obtained and not allocated to be paid to other States, such as interest accrued or for any other reason, it shall be retained by the Attorney General and used for any lawful purpose at the Attorney General’s sole discretion.

GENERAL PROVISIONS

31. The acceptance of this Judgment by the Plaintiff shall not be deemed approval by the Plaintiff of any of the Defendant’s advertising or business practices. Further, neither the Defendant nor anyone acting on its behalf shall state or imply, or cause to be stated or implied,

18

that the Plaintiff or any other governmental unit of the State has approved, sanctioned or authorized any practice, act, advertisement or conduct of the Defendant.

32. This Judgment may only be enforced by the Plaintiff, the Defendant, and this Court.

33. The titles and headers to each section of this Judgment are for convenience purposes only and are not intended by the parties to lend meaning to the actual provisions of the Judgment.

34. Nothing in this Judgment shall limit the Plaintiff’s right to obtain information, documents or testimony from the Defendant pursuant to any state or federal law, regulation or rule.

35. Nothing in this Judgment shall be construed to limit the authority of the Attorney General to protect the interests of the State or consumers. This Judgment shall not bar the Plaintiff, or any other governmental entity from enforcing laws, regulations or rules against the Defendant.

36. No waiver, modification, or amendment of the terms of this Judgment shall be valid or binding unless made in writing, agreed to by both parties, and approved by this Court and then only to the extent specifically set forth in such written waiver, modification or amendment.

37. Any failure by any party to this Judgment to insist upon the strict performance by any other party of any of the provisions of this Judgment shall not be deemed a waiver of any of the provisions of this Judgment, and such party, notwithstanding such failure, shall have the right thereafter to insist upon the specific performance of any and all of the provisions of this Judgment. For the Plaintiff, this shall be without prejudice in the future to the imposition of any

19

applicable penalties, including but not limited to contempt, civil penalties as set forth in Tennessee Code Annotated § 47-18-108(c) and/or the payment of attorneys’ fees to the Plaintiff, and any other remedies under applicable state law.

38. If any clause, provision or section of this Judgment shall, for any reason, be held illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall not affect any other clause, provision or section of this Judgment and this Judgment shall be construed and enforced as if such illegal, invalid or unenforceable clause, section or other provision had not been contained herein.

39. Time shall be of the essence with respect to each provision of this Judgment that requires action to be taken by the Defendant within a stated time period or upon a specified date.

40. Nothing in this Judgment shall be construed to waive any claims of Sovereign Immunity the Plaintiff may have.

41. Aside from the consumer payments provision which refers to the Federal Trade Commission’s Stipulated Judgment amount for consumer payments, this Judgment sets forth the entire agreement between the parties, and there are no representations, agreements, arrangements, or understanding, oral or written, between the parties relating to the subject matter of this Judgment which are not fully expressed hereto or attached hereto.

42. The Defendant shall not participate, directly or indirectly, in any activity or form a separate entity or corporation for the purpose of engaging in acts or practices in whole or in part in the State which are prohibited in this Judgment or for any other purpose which would otherwise circumvent any part of this Judgment or the spirit or purposes of this Judgment.

43. If the Defendant has provided the Plaintiff with certain documents, advertisements, and contracts, the Defendant acknowledges and agrees that providing these

20

documents to the Plaintiff in no way constitutes the Plaintiff’s pre-approval, review for compliance with state or federal law, or with this Judgment, or a release of any issues relating to such documents.

44. The Defendant further agrees to execute and deliver all authorizations, documents and instruments which are necessary to carry out the terms and conditions of this Judgment.

45. This document may be executed in any number of counterparts and by different signatories on separate counterparts, each of which shall constitute an original counterpart hereof and all of which together shall constitute one and the same document. One or more counterparts of this Judgment may be delivered by facsimile or electronic transmission with the intent that it or they shall constitute an original counterpart thereof.

46. The terms of this Judgment shall be governed by the laws of the State of Tennessee.

MONITORING FOR COMPLIANCE

47. Upon request, the Defendant shall provide books, records or documents to the Plaintiff, and shall informally, or formally under oath, provide testimony or other information to the Plaintiff relating to compliance with this Judgment. The Defendant shall make any requested information available within fourteen (14) days of the request, at the Office of the applicable State Attorney General or at such other location within the State as is mutually agreed in writing by the Defendant and the applicable Attorney General. This shall in no way limit the Plaintiff’s right to obtain documents, records, testimony or other information pursuant to any law, regulation, or rule.

21

COMPLIANCE WITH ALL LAWS

48. Nothing in this Judgment shall be construed as relieving the Defendant of the obligation to comply with all state and federal laws, regulations, or rules, nor shall any of the provisions of this Judgment be deemed to be permission to engage in any acts or practices prohibited by such laws, regulations, or rules.

RELEASE

49. Nothing in this Judgment shall impair or limit the private right of action that any consumer, person, or entity may have against the Defendant.

50. By execution of this Judgment and following a full and complete payment to the States as required under Paragraph 29, as well as a full and complete payment to the Federal Trade Commission for consumer payments as required under Paragraph 18, the Attorney General of the State of Tennessee releases and forever discharges the Defendant, as defined above, from the following: all civil claims, causes of action, damages, consumer payments, fines, costs, and penalties that the Tennessee Attorney General could have asserted against the Defendant, as defined above, under the Tennessee Consumer Protection Act of 1977, as amended, resulting from the Covered Conduct up to and including the Effective Date that is the subject of this Judgment.

51. Notwithstanding any term of this Judgment, any and all of the following forms of liability are specifically reserved and excluded from the Release in Paragraph 50 as to any entity or person, including the Defendant:

(A) Any criminal liability that any person or entity, including the Defendant, has or may have to the State of Tennessee.

22

(B) Any civil or administrative liability that any person or entity, including the Defendant, has or may have to the State of Tennessee under any statute, regulation or rule not expressly covered by the Release in Paragraph 50 above, including but not limited to, any and all of the following claims:

(i) State or federal antitrust violations;

(ii) State or federal securities violations; or

(iii) State or federal tax claims.

COURT COSTS

52. All court costs associated with this action and any other incidental costs or expenses incurred in this action thereby shall be borne by the Defendant. No costs shall be taxed to the State. Further, no discretionary costs shall be taxed to the State.

PENALTY FOR FAILURE TO COMPLY

53. Pursuant to Tennessee Code Annotated § 47-18-108(c), any knowing violation of the terms of the injunction contained in this Judgment shall be punishable by a civil penalty of not more than two thousand dollars ($2,000), recoverable by the State for each violation, in addition to any other appropriate relief.

OTHER

54. This Consent Judgment is expressly contingent on court approval of the FTC’s Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief and complete payment of $40,000,000 under the FTC’s Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief. If the FTC’s Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief is not approved, this Consent Judgment shall be without force or effect on either party.

23

IT IS SO ORDERED, ADJUDGED, AND DECREED.

This the 16th day of May, 2012.

/s/ Hamilton Gayden

JUDGE HAMILTON GAYDEN, JR.

First Circuit Court

Twentieth Judicial District

24

APPROVED AND AGREED TO:

/s/ R E Cooper, Jr

ROBERT E. COOPER, JR., B.P.R. No. 10934

Attorney General and Reporter

/s/ Brant Harrell

BRANT HARRELL, B.P.R. No. 024470

Assistant Attorney General

Office of the Tennessee Attorney General

Consumer Advocate and Protection Division

Post Office Box 20207

Nashville, Tennessee 37202-0207

Phone: (615) 741-3549

Facsimile: (615) 532-2910

Email: brant.harrell@ag.tn.gov

Attorneys for the State of Tennessee

25

APPROVED AND AGREED TO:

FOR DEFENDANT:

SKECHERS USA, INC., d/b/a Skechers

By:	/s/ David Weinberg
	DAVID WEINBERG Executive Vice President SKECHERS USA, INC., d/b/a Skechers 228 Manhattan Beach Boulevard Manhattan Beach, CA 90266

26

APPROVED AND AGREED TO:

DEFENDANT’S COUNSEL OF RECORD:

By:	/s/ Charles Bone
	CHARLES ROBERT BONE B.P.R. No. 021161 Bone McAllester Norton, PLLC Nashville City Center, Suite 1600 511 Union Street Nashville, Tennessee 37219 Phone: (615) 238-6394 Facsimile: (615) 238-6301 crb@bonelaw.com

27

REPRESENTATIVES OF SKECHERS U.S.A., INC.:

DANIEL M. PETROCELLI

JEFFREY A. BARKER

MARYANNE S. KANE

O’Melveny & Myers LLP

1999 Avenue of the Stars, 7th Floor

Los Angeles, CA 90067

Phone: (310) 553-6700

Fax: (310) 246-6779

dpetrocelli@omm.com

jbarker@omm.com

makane@omm.com

28

ATTACHMENT A

[On Skechers USA, Inc., Letterhead]

[Insert Date]

[Addressee]

Dear Skechers USA, Inc., Retail Business Partner:

In response to a lawsuit by the Federal Trade Commission (FTC) and separate lawsuits brought by a group of state attorneys general, Skechers has agreed to stop making certain claims for the following footwear products: Shape-ups, the Resistance Runner, Toners, and Tone-ups.

Although we dispute the charges, to settle the FTC’s and the states’ cases against us, Skechers has agreed to stop using advertising or promotional materials claiming that any of our footwear products can:

• Improve or increase muscle tone and muscle strength;

• Improve or increase overall circulation or aerobic conditioning;

• Result in increased weight loss or loss of body fat; and/or;

• Result in improvement or reduction in body composition.

In addition to the above, Skechers has agreed to stop using advertising or promotional materials claiming that the Resistance Runner improves or increases muscle activation.

Please take these three steps immediately:

(1) If you have materials on display (POS, posters, etc.) that include any of these claims, please remove them.

(2) Where these claims appear on boxes, please cover them with stickers that Skechers will provide.

(3) If inserts in boxes or footwear hangtags include any of these claims, please remove them.

We are actively pursuing additional studies in the marketplace. We look forward to sharing these details with you as they become available.

You can find out more about the settlement at www.ftc.gov. Please call [Insert name and telephone numbers of the responsible Skechers USA, Inc., Attorney or Officer.] if you have any questions.

Skechers thanks you for your business and greatly appreciates your cooperation in this matter.

Sincerely,

Skechers USA, Inc.

29

SCHEDULE TO EXHIBIT

This Schedule of additional States, including the District of Columbia, in which substantially identical Consent Judgments have been approved is included pursuant to Instruction 2 of Item 601(a) of Regulation S-K for the purposes of setting forth the material details in which these Consent Judgments differ from the Consent Judgment filed herewith as Exhibit 10.2.

States including District of Columbia	Dates of Court Entry of Consent Judgments	Amounts Received by States under Consent Judgments
Alaska	5/18/2012	$71,001
Arizona	5/21/2012	$115,140
Arkansas	5/16/2012	$84,254
California	5/18/2012	$290,574
Colorado	5/21/2012	$96,951
Connecticut	6/12/2012	$88,208
Delaware	6/1/2012	$72,129
District of Columbia	6/21/2012	$70,349
Florida	5/24/2012	$179,701
Georgia	5/29/2012	$124,942
Hawaii	6/4/2012	$74,907
Idaho	5/29/2012	$76,152
Illinois	5/16/2012	$153,826
Indiana	5/16/2012	$105,691
Iowa	5/16/2012	$85,037
Kansas	5/16/2012	$83,876
Kentucky	5/25/2012	$92,806
Maine	5/23/2012	$74,715
Maryland	6/8/2012	$111,424
Massachusetts	5/29/2012	$106,075
Michigan	5/16/2012	$126,119
Mississippi	5/16/2012	$84,562
Missouri	5/16/2012	$102,718
Montana	5/21/2012	$72,678
Nebraska	5/16/2012	$77,707
Nevada	5/22/2012	$82,960
New Jersey	5/16/2012	$119,559
New Mexico	6/5/2012	$79,106
New York	6/15/2012	$183,167
North Carolina	5/16/2012	$124,027
North Dakota	5/21/2012	$70,775
Ohio	5/22/2012	$156,050
Oklahoma	5/16/2012	$89,273
Oregon	5/16/2012	$89,752
Pennsylvania	5/17/2012	$143,056
Rhode Island	6/11/2012	$73,058
South Carolina	6/4/2012	$104,525
South Dakota	5/16/2012	$71,625
Vermont	5/22/2012	$70,493
Virginia	5/17/2012	$114,807
Washington	5/16/2012	$117,138
West Virginia	5/16/2012	$77,867
Wisconsin	6/5/2012	$110,904

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Robert Greenberg, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the three months ended June 30, 2012 of Skechers U.S.A., Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2012

/S/ ROBERT GREENBERG

Robert Greenberg

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, David Weinberg, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the three months ended June 30, 2012 of Skechers U.S.A., Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2012

/S/ DAVID WEINBERG

David Weinberg

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Skechers U.S.A., Inc. (the “Company”) on Form 10-Q for the three months ended June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the date indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ ROBERT GREENBERG

Robert Greenberg

Chief Executive Officer

(Principal Executive Officer)

August 9, 2012

/s/ DAVID WEINBERG

David Weinberg

Chief Financial Officer

(Principal Financial and Accounting Officer)

August 9, 2012

A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO THE COMPANY AND WILL BE RETAINED BY THE COMPANY AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.

XML

Segment and Geographic Reporting Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Segment reporting information
Net sales	$ 384,001	$ 434,351	$ 735,275	$ 910,585
Gross margins	171,342	143,330	327,038	335,940
Identifiable assets	1,340,666		1,340,666		1,281,888
Additions to property, plant and equipment	10,999	49,502	22,588	92,881
Net sales
United States	278,923	313,345	500,100	607,398
Net Sales, Total	384,001	434,351	735,275	910,585
Property, plant and equipment
United States	356,277		356,277		358,405
Property and equipment, net	373,809		373,809		376,446
Canada [Member]
Net sales
Foreign Countries	11,808	11,715	24,099	27,517
Property, plant and equipment
Foreign Countries	1,472		1,472		1,179
Other international [Member]
Net sales
Foreign Countries	93,270	109,291	211,076	275,670
Property, plant and equipment
Foreign Countries	16,060		16,060		16,862
Domestic wholesale [Member]
Segment reporting information
Net sales	177,994	217,241	311,709	428,775
Gross margins	69,003	37,608	120,874	103,855
Identifiable assets	880,163		880,163		844,383
Additions to property, plant and equipment	7,503	42,993	11,636	78,784
International wholesale [Member]
Segment reporting information
Net sales	88,590	105,002	206,093	274,413
Gross margins	33,368	39,826	80,990	112,643
Identifiable assets	316,884		316,884		304,025
Additions to property, plant and equipment	1,395	851	1,954	1,824
Retail [Member]
Segment reporting information
Net sales	112,265	106,573	207,404	196,363
Gross margins	66,552	63,120	120,615	113,859
Identifiable assets	143,148		143,148		133,081
Additions to property, plant and equipment	2,101	5,658	8,998	12,273
E-commerce [Member]
Segment reporting information
Net sales	5,152	5,535	10,069	11,034
Gross margins	2,419	2,776	4,559	5,583
Identifiable assets	$ 471		$ 471		$ 399

XML

Loss Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Basic earnings (loss) per share
Net loss attributable to Skechers U.S.A., Inc.	$ (1,782)	$ (29,916)	$ (5,448)	$ (18,108)
Weighted average common shares outstanding	49,296	48,341	49,281	48,292
Basic loss per share attributable to Skechers U.S.A., Inc	$ (0.04)	$ (0.62)	$ (0.11)	$ (0.38)
Diluted earnings (loss) per share
Net loss attributable to Skechers U.S.A., Inc.	$ (1,782)	$ (29,916)	$ (5,448)	$ (18,108)
Weighted average common shares outstanding	49,296	48,341	49,281	48,292
Dilutive effect of stock options	0	0	0	0
Weighted average common shares outstanding	49,296	48,341	49,281	48,292
Diluted loss per share attributable to Skechers U.S.A., Inc	$ (0.04)	$ (0.62)	$ (0.11)	$ (0.38)

XML

Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2012

Stockholders' Equity [Abstract]

Equity attributable to non-controlling interest

	Six-Months Ended June 30,
	2012		2011
Non-controlling interest, January 1	$	39,966	$	37,631
Net earnings attributable to non-controlling interest		694		209
Foreign currency translation adjustment		83		381
Capital contribution by non-controlling interest		0		115
Non-controlling interest, June 30	$	40,743	$	38,336

XML

Related Party Transactions (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Related Party Transactions (Textual) [Abstract]
Contribution to Skechers Foundation for various charitable purposes	$ 0.3	$ 0.3	$ 0.5	$ 0.8

XML

Litigation (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended
	Dec. 31, 2011	Jun. 30, 2012 States
Litigation (Textual) [Abstract]
Litigation reserve	$ 45
Legal and professional fees	5
Attorney fee		5
Settle domestic advertising class lawsuits and related claims		45
Number of states		44
Legal settlement reflect current estimated range of loss		$ 50

XML

Other Comprehensive Loss

6 Months Ended

Jun. 30, 2012

Other Comprehensive Loss [Abstract]

OTHER COMPREHENSIVE LOSS

(3) OTHER COMPREHENSIVE LOSS

In addition to net loss, other comprehensive loss includes changes in foreign currency translation adjustments and loss attributable to non-controlling interests. The Company operates internationally through several foreign subsidiaries. Assets and liabilities of the foreign operations denominated in local currencies are translated at the rate of exchange at the balance sheet date. Revenues and expenses are translated at the weighted average rate of exchange during the period of translation. The resulting translation adjustments along with translation adjustments related to intercompany loans of a long-term nature are included in the translation adjustment in other comprehensive loss.

The activity in other comprehensive loss, net of income taxes, was as follows (in thousands):

	Three-Months Ended June 30,						Six-Months Ended June 30,
Comprehensive loss	2012			2011			2012			2011
Net loss	$	(1,344	)	$	(30,052	)	$	(4,754	)	$	(17,899	)
Gain (loss) on foreign currency translation adjustment, net of tax		(6,299	)		4,781			(1,603	)		9,324
Comprehensive loss		(7,643	)		(25,271	)		(6,357	)		(8,575	)
Comprehensive income (loss) attributable to non-controlling interest		368			26			777			(590	)
Comprehensive loss attributable to parent	$	(8,011	)	$	(25,245	)	$	(7,134	)	$	(9,165	)

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General (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
General (Textual) [Abstract]
Net earnings attributable to non-controlling interest	$ 438,000	$ (136,000)	$ 694,000	$ 209,000
General (Additional Textual) [Abstract]
Rent expense adjustment	3,200,000
Net of tax relating to percentage deferred rent	1,900,000
Corporate Joint Venture [Member]
General (Textual) [Abstract]
Net earnings attributable to non-controlling interest	$ 400,000	$ (100,000)	$ 700,000	$ 200,000

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General (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Carrying amounts and classification of assets and liabilities
Current assets	$ 944,846	$ 887,351
Noncurrent assets	395,820	394,537
Total assets	1,340,666	1,281,888
Current liabilities	375,260	308,466
Noncurrent liabilities	71,317	80,895
Total liabilities	446,577	389,361
Variable Interest Entity, Primary Beneficiary [Member]
Carrying amounts and classification of assets and liabilities
Current assets	14,574	11,287
Noncurrent assets	131,428	132,925
Total assets	145,975	144,212
Current liabilities	66,749	65,608
Noncurrent liabilities	18,211	18,341
Total liabilities	$ 84,960	$ 83,949

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Other Comprehensive Loss (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Other comprehensive loss:
Net Loss	$ (1,344)	$ (30,052)	$ (4,754)	$ (17,899)
Gain (loss) on foreign currency translation adjustment, net of tax	(6,299)	4,781	(1,603)	9,324
Comprehensive loss	(7,643)	(25,271)	(6,357)	(8,575)
Comprehensive income (loss) attributable to non-controlling interest	368	26	777	(590)
Comprehensive loss attributable to parent	$ (8,011)	$ (25,245)	$ (7,134)	$ (9,165)

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Share - Based Compensation (Details) (USD $)	6 Months Ended
	Jun. 30, 2012
Stock options granted pursuant to Equity Incentive Plan
Outstanding, Shares, Beginning of Period	206,400
Outstanding, Weighted average exercise price, Beginning of Period	$ 7.62
Stock options granted	0
Granted, Weighted average exercise price	$ 0.00
Exercised, Shares	(25,042)
Exercised, Weighted average exercise price	$ 6.95
Cancelled, Shares	(208)
Cancelled, Weighted average exercise price	$ 6.95
Outstanding, Shares, End of Period	181,150
Outstanding, Weighted average exercise price, End of Period	$ 7.71
Exercisable, Shares	181,150
Exercisable, Weighted Average Exercise Price	$ 7.71
Outstanding, Weighted Average Remaining Contractual Term	1 year
Exercisable, Weighted Average Remaining Contractual Term	1 year
Outstanding, Aggregate Intrinsic Value	$ 2,293,725
Exercisable, Aggregate Intrinsic Value	$ 2,293,725
Summary of nonvested shares related to Equity Incentive Plan
Nonvested, Shares, Beginning of Period	740,493
Nonvested, Weighted average grant - date fair value, Beginning of period	$ 19.02
Granted, Shares	0
Granted, Weighted average grant - date fair value	$ 0.00
Vested, Shares	(26,667)
Vested, Weighted average grant - date fair value	$ 30.55
Cancelled, Shares	(33,000)
Cancelled, Weighted average grant - date fair value	$ 27.6
Nonvested, Shares, End of Period	680,286
Nonvested, Weighted average grant - date fair value, End of period	$ 18.15

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Revenue Recognition

6 Months Ended

Jun. 30, 2012

Revenue Recognition [Abstract]

REVENUE RECOGNITION

(2) REVENUE RECOGNITION

The Company recognizes revenue on wholesale sales when products are shipped and the customer takes title and assumes risk of loss, collection of the relevant receivable is reasonably assured, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. This generally occurs at time of shipment. Wholesale and e-commerce sales are recognized on a net sales basis, which reflects allowances for estimated returns, sales allowances, discounts, chargebacks and amounts billed for shipping and handling costs. The Company recognizes revenue from retail sales at the point of sale. Allowances for estimated returns, discounts, doubtful accounts and chargebacks are provided for when related revenue is recorded. Related costs paid to third-party shipping companies are recorded as a cost of sales.

Royalty income is earned from licensing arrangements. Upon signing a new licensing agreement, the Company receives up-front fees, which are generally characterized as prepaid royalties. These fees are initially deferred and recognized as revenue as earned (i.e., as licensed sales are reported to the Company or on a straight-line basis over the term of the agreement). The first calculated royalty payment is based on actual sales of the licensed product. Typically, at each quarter-end we receive correspondence from our licensees indicating the actual sales for the period. This information is used to calculate and accrue the related royalties based on the terms of the agreement.

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Share -Based Compensation (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Share Based Compensation (Textual) [Abstract]
Share- based compensation expense	$ 3.2	$ 3.5	$ 6.7	$ 7.2
Unrecognized compensation cost related to nonvested	$ 4.2		$ 4.2
Unrecognized compensation cost weighted average amortization period			3 months 18 days

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Segment and Geographic Reporting Information (Details Textual)	6 Months Ended
	Jun. 30, 2012 Segment
Segment and Geographic Reporting Information (Textual) [Abstract]
Number of Reportable Segments	4

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current Assets:
Cash and cash equivalents	$ 374,189	$ 351,144
Trade accounts receivable, net	237,666	176,018
Other receivables	4,231	6,636
Total receivables	241,897	182,654
Inventories	258,125	226,407
Prepaid expenses and other current assets	31,494	88,005
Deferred tax assets	39,141	39,141
Total current assets	944,846	887,351
Property, plant and equipment, at cost, less accumulated depreciation and amortization	373,809	376,446
Goodwill and other intangible assets, less accumulated amortization	3,695	4,148
Deferred tax assets	4,945	530
Other assets, at cost	13,371	13,413
Total non-current assets	395,820	394,537
TOTAL ASSETS	1,340,666	1,281,888
Current Liabilities:
Current installments of long-term borrowings	10,229	10,059
Short-term borrowings	60,238	50,413
Accounts payable	285,402	231,000
Accrued expenses	19,391	16,994
Total current liabilities	375,260	308,466
Long-term borrowings, excluding current installments	71,285	76,531
Deferred tax liabilities	32	4,364
Total non-current liabilities	71,317	80,895
Total liabilities	446,577	389,361
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.001 par value; 10,000 authorized; none issued and outstanding	0	0
Additional paid-in capital	328,796	320,877
Accumulated other comprehensive loss	(2,580)	(894)
Retained earnings	527,081	532,529
Skechers U.S.A., Inc. equity	853,346	852,561
Non-controlling interests	40,743	39,966
Total equity	894,089	892,527
TOTAL LIABILITIES AND EQUITY	1,340,666	1,281,888
Common Class A [Member]
Stockholders' equity:
Common Stock	38	38
Common Class B [Member]
Stockholders' equity:
Common Stock	$ 11	$ 11

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities:
Net loss attributable to Skechers U.S.A. Inc.	$ (5,448)	$ (18,108)
Adjustments to reconcile net loss to net cash provided by operating activities:
Net earnings attributable to non-controlling interest	694	209
Depreciation of property and equipment	20,769	15,088
Amortization of deferred financing costs	475	652
Amortization of intangible assets	453	790
Provision for bad debts and returns	1,707	5,748
Tax benefits from share-based compensation	(79)	0
Non-cash share-based compensation	6,650	7,242
Loss on disposal of equipment	7	232
Deferred income taxes	(8,748)	75
(Increase) decrease in assets:
Receivables	(58,258)	(8,271)
Inventories	(31,375)	73,875
Prepaid expenses and other current assets	56,563	(15,973)
Other assets	(538)	65
Increase (decrease) in liabilities:
Accounts payable	54,255	1,871
Accrued expenses	2,731	(11,428)
Net cash provided by operating activities	39,858	52,067
Cash flows from investing activities:
Capital expenditures	(22,588)	(92,881)
Net cash used in investing activities	(22,588)	(92,881)
Cash flows from financing activities:
Net proceeds from the issuances of stock through employee stock purchase plan and the exercise of stock options	1,349	2,042
Increase in long-term borrowings	0	36,751
Payments on long-term debt	(5,030)	(9,390)
Increase in short-term borrowings	9,805	27,705
Contribution from non-controlling interest of consolidated entity	0	115
Excess tax benefits from stock-based compensation	0	219
Net cash provided by financing activities	6,124	57,442
Net increase in cash and cash equivalents	23,394	16,628
Effect of exchange rates on cash and cash equivalents	(349)	596
Cash and cash equivalents at beginning of the period	351,144	233,558
Cash and cash equivalents at end of the period	374,189	250,782
Cash paid (received) during the period for:
Interest	5,749	2,439
Income taxes	$ (50,572)	$ 7,588

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Income Taxes (Textual) [Abstract]
Effective Tax rate	68.20%	41.00%	58.60%	51.90%
Income tax expense	$ (2,887)	$ (20,846)	$ (6,732)	$ (19,313)

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Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2012

Share-Based Compensation [Abstract]

Stock options granted pursuant to Equity Incentive Plan

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2011		206,400		$	7.62
Granted		0			0
Exercised		(25,042	)		6.95
Cancelled		(208	)		6.95
Outstanding at June 30, 2012		181,150			7.71	1.0 years	$	2,293,725
Exercisable at June 30, 2012		181,150			7.71	1.0 years	$	2,293,725

Summary of nonvested shares related to Equity Incentive Plan

	Shares			Weighted Average Grant-Date Fair Value
Nonvested at December 31, 2011		740,493		$	19.02
Granted		0			0
Vested		(26,667	)		30.55
Cancelled		(33,000	)		27.60
Nonvested at June 30, 2012		680,826			18.15

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Line of Credit, Short-Term and Long-Term Borrowings (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Long-term debt
Long-term debt	$ 81,514,000	$ 86,590,000
Less current installments	10,229,000	10,059,000
Total long-term debt	71,285,000	76,531,000
Line of Credit Short-Term and Long-Term Borrowings (Additional Textual) [Abstract]
Outstanding letters of credit	4,100,000
Short-term borrowings	60,238,000	50,413,000
Note payable to bank one [Member]
Long-term debt
Long-term debt	31,658,000	34,259,000
Line of Credit Short-Term and Long-Term Borrowings (Textual) [Abstract]
Monthly repayment installment of note payable	531,400
Fixed interest rate of note payable	3.54%
Balloon payment required under note payable	12,635
Note payable to bank two [Member]
Long-term debt
Long-term debt	31,628,000	34,005,000
Line of Credit Short-Term and Long-Term Borrowings (Textual) [Abstract]
Monthly repayment installment of note payable	483,900
Fixed interest rate of note payable	3.19%
Balloon payment required under note payable	11,670
Loan From HF Logistics [Member]
Long-term debt
Long-term debt	18,210,000	18,297,000
Capital lease obligations [Member]
Long-term debt
Long-term debt	$ 18,000	$ 29,000

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Line of Credit, Short-Term and Long -Term Borrowings (Tables)

6 Months Ended

Jun. 30, 2012

Line of Credit, Short-Term and Long-Term Borrowings [Abstract]

Long-term debt

	June 30, 2012		December 31, 2011
Note payable to bank, due in monthly installments of $531.4 (includes principal and interest), fixed rate interest at 3.54%, secured by property, balloon payment of $12,635 due December 2015	$	31,658	$	34,259
Note payable to bank, due in monthly installments of $483.9 (includes principal and interest), fixed rate interest at 3.19%, secured by property, balloon payment of $11,670 due June 2016		31,628		34,005
Loan from HF Logistics I, LLC		18,210		18,297
Capital lease obligations		18		29
Subtotal		81,514		86,590
Less current installments		10,229		10,059
Total long-term debt	$	71,285	$	76,531

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General

6 Months Ended

Jun. 30, 2012

General [Abstract]

GENERAL

(1) GENERAL

Basis of Presentation

The accompanying condensed consolidated financial statements of Skechers U.S.A., Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include certain footnotes and financial presentations normally required under accounting principles generally accepted in the United States of America for complete financial reporting. The interim financial information is unaudited, but reflects all normal adjustments and accruals which are, in the opinion of management, considered necessary to provide a fair presentation for the interim periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

The results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2012. During the quarter ended June 30, 2012 the Company recorded an adjustment to rent expense of $3.2 million, or $1.9 million net of tax relating to percentage and deferred rent.

Use of Estimates

The preparation of the condensed consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Non-controlling interests

The Company has interests in certain joint ventures which are consolidated into its financial statements. Non-controlling interests resulted in income of $0.4 million and a loss of $0.1 million for the three months ended June 30, 2012 and 2011, respectively, which represents the share of net earnings or loss that is attributable to our joint venture partners. Non-controlling interests resulted in income of $0.7 million and $0.2 million for the six months ended June 30, 2012 and 2011, respectively.

The Company has determined that its joint venture with HF Logistics I, LLC (“HF”) is a variable interest entity (“VIE”) and that the Company is the primary beneficiary. Accordingly, HF is consolidated into the condensed consolidated financial statements and the carrying amounts, and classification of assets and liabilities was as follows (in thousands):

	June 30, 2012		December 31, 2011
Current assets	$	14,547	$	11,287
Noncurrent assets		131,428		132,925
Total assets	$	145,975	$	144,212
Current liabilities	$	66,749	$	65,608
Noncurrent liabilities		18,211		18,341
Total liabilities	$	84,960	$	83,949

The assets of these joint ventures are restricted in that they are not available for our general business use outside the context of the joint venture. The holders of the liabilities of each joint venture have no recourse to the Company. The Company does not have a significant variable interest in any unconsolidated VIE’s.

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Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Preferred Stock, par value	$ 0.001	$ 0.001
Preferred Stock, shares authorized	10,000	10,000
Preferred Stock, shares issued
Preferred Stock, shares outstanding
Common Class A [Member]
Common Stock, par value	$ 0.001	$ 0.001
Common Stock, shares authorized	100,000	100,000
Common Stock, Shares Issued	38,143	37,959
Common Stock, shares outstanding	38,143	37,959
Common Class B [Member]
Common Stock, par value	$ 0.001	$ 0.001
Common Stock, shares authorized	60,000	60,000
Common Stock, Shares Issued	11,274	11,297
Common Stock, shares outstanding	11,274	11,297

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Business and Credit Concentrations

6 Months Ended

Jun. 30, 2012

Business and Credit Concentrations [Abstract]

BUSINESS AND CREDIT CONCENTRATIONS

(11) BUSINESS AND CREDIT CONCENTRATIONS

The Company generates the majority of its sales in the United States; however, several of its products are sold into various foreign countries, which subjects the Company to the risks of doing business abroad. In addition, the Company operates in the footwear industry, which is impacted by the general economy, and its business depends on the general economic environment and levels of consumer spending. Changes in the marketplace may significantly affect management’s estimates and the Company’s performance. Management performs regular evaluations concerning the ability of customers to satisfy their obligations and provides for estimated doubtful accounts. Domestic accounts receivable, which generally do not require collateral from customers, were equal to $143.3 million and $90.9 million before allowances for bad debts, sales returns and chargebacks at June 30, 2012 and December 31, 2011, respectively. Foreign accounts receivable, which in some cases are collateralized by letters of credit, were equal to $94.4 million and $105.5 million before allowance for bad debts, sales returns and chargebacks at June 30, 2012 and December 31, 2011, respectively. The Company’s credit losses attributable to write-offs for the three months ended June 30, 2012 and 2011 were $1.5 million and $1.8 million, respectively. The Company’s credit losses attributable to write-offs for the six months ended June 30, 2012 and 2011 were $1.2 million and $2.5 million, respectively.

Assets located outside the U.S. consist primarily of cash, accounts receivable, inventory, property, plant and equipment, and other assets. Net assets held outside the United States were $338.4 million and $325.3 million at June 30, 2012 and December 31, 2011, respectively.

The Company’s net sales to its five largest customers accounted for approximately 23.0% and 25.2% of total net sales for the three months ended June 30, 2012 and 2011, respectively. The Company’s net sales to its five largest customers accounted for approximately 20.4% and 20.1% of total net sales for the six months ended June 30, 2012 and 2011, respectively. No customer accounted for more than 10% of our net sales during the three months ended June 30, 2012 and 2011, respectively. No customer accounted for more than 10% of our net sales during the six months ended June 30, 2012 and 2011, respectively. No customer accounted for more than 10% of net trade receivables at June 30, 2012. One customer accounted for 12.5% and another accounted for 10% of net trade receivables at December 31, 2011.

The Company’s top five manufacturers produced the following, as a percentage of total production, for the three and six months ended June 30, 2012 and 2011, respectively:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Manufacturer #1		34.6	%		31.7	%		34.7	%		30.8	%
Manufacturer #2		9.3	%		11.2	%		9.1	%		11.4	%
Manufacturer #3		8.0	%		7.6	%		6.7	%		8.6	%
Manufacturer #4		6.4	%		6.8	%		6.4	%		6.7	%
Manufacturer #5		6.3	%		6.3	%		5.6	%		6.3	%
		64.6	%		63.6	%		62.5	%		63.8	%

The majority of the Company’s products are produced in China. The Company’s operations are subject to the customary risks of doing business abroad, including, but not limited to, currency fluctuations and revaluations, custom duties and related fees, various import controls and other monetary barriers, restrictions on the transfer of funds, labor unrest and strikes and, in certain parts of the world, political instability. The Company believes it has acted to reduce these risks by diversifying manufacturing among various factories. To date, these business risks have not had a material adverse impact on the Company’s operations.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 01, 2012 Common Class A [Member]	Aug. 01, 2012 Common Class B [Member]
Entity Registrant Name	SKECHERS USA INC
Entity Central Index Key	0001065837
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		38,823,851	11,274,090

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Related Party Transactions

6 Months Ended

Jun. 30, 2012

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

(12) RELATED PARTY TRANSACTIONS

On July 29, 2010, the Company formed Skechers Foundation (the “Foundation”), which is a 501(c)(3) non-profit entity that does not have any shareholders or members. The Foundation is not a subsidiary of and is not otherwise affiliated with the Company, and the Company does not have a financial interest in the Foundation. However, two officers and directors of the Company, Michael Greenberg who is its President and David Weinberg who is its Chief Operating Officer and Chief Financial Officer, are also officers and directors of the Foundation. The Company contributed $0.3 million to the Foundation to use for various charitable causes during each of the three months ended June 30, 2012 and 2011. The Company contributed $0.5 million and $0.8 million to the Foundation to use for various charitable causes during the six months ended June 30, 2012 and 2011, respectively.

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Condensed Consolidated Statements of Operations [Abstract]
Net sales	$ 384,001	$ 434,351	$ 735,275	$ 910,585
Cost of sales	212,659	291,021	408,237	574,645
Gross profit	171,342	143,330	327,038	335,940
Royalty income, net	1,609	1,376	2,745	3,024
Operating income	172,951	144,706	329,783	338,964
Operating expenses:
Selling	39,100	53,099	69,449	90,659
General and administrative	135,382	139,781	266,259	281,208
Operating expenses	174,482	192,880	335,708	371,867
Loss from operations	(1,531)	(48,174)	(5,925)	(32,903)
Other income (expense):
Interest income	121	756	366	1,343
Interest expense	(3,377)	(2,352)	(6,343)	(4,317)
Other, net	556	(1,128)	416	(1,335)
Other income (expense)	(2,700)	(2,724)	(5,561)	(4,309)
Loss before income tax benefit	(4,231)	(50,898)	(11,486)	(37,212)
Income tax benefit	(2,887)	(20,846)	(6,732)	(19,313)
Net loss	(1,344)	(30,052)	(4,754)	(17,899)
Less: Net earnings (loss) attributable to non-controlling interests	438	(136)	694	209
Net loss attributable to Skechers U.S.A., Inc	$ (1,782)	$ (29,916)	$ (5,448)	$ (18,108)
Net loss per share attributable to Skechers U.S.A., Inc.:
Basic	$ (0.04)	$ (0.62)	$ (0.11)	$ (0.38)
Diluted	$ (0.04)	$ (0.62)	$ (0.11)	$ (0.38)
Weighted average shares used in calculating net loss per share attributable to Skechers U.S.A., Inc.:
Basic	49,296	48,341	49,281	48,292
Diluted	49,296	48,341	49,281	48,292

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Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

INCOME TAXES

(6) INCOME TAXES

The Company’s effective tax rates for the three and six months ended June 30, 2012 were 68.2% and 58.6%, respectively, compared to the effective tax rates of 41.0% and 51.9% for the three and six months ended June 30, 2011, respectively. Income tax benefit for the three months ended June 30, 2012 was $2.9 million compared to $20.8 million for the same period in 2011. Income tax benefit for the six months ended June 30, 2012 was $6.7 million compared to $19.3 million for the same period in 2011.

Estimating a reliable annual effective tax rate for the Company for the year has become increasingly difficult due to the uncertainty in forecasting taxable income or loss for the remainder of the year for each of our domestic and international operations. Such forecasts may vary significantly from quarter to quarter and even small changes in forecasts or actual results for either the Company’s domestic or international operations can result in significant changes in the Company’s estimated annual effective tax rate. Since forecasting an annual effective tax rate under these circumstances would not provide a meaningful estimate, the Company believes that the actual year-to-date effective tax rate is the best estimate of the annual tax rate in accordance with ASC 740-270. The Company’s income tax benefit has been calculated utilizing our actual effective tax rate for the three-month and six-month periods ended June 30, 2012.

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Loss Per Share

6 Months Ended

Jun. 30, 2012

Loss Per Share [Abstract]

LOSS PER SHARE

(5) LOSS PER SHARE

Basic loss per share represents net loss divided by the weighted average number of common shares outstanding for the period. Diluted loss per share, in addition to the weighted average determined for basic loss per share, includes potential common shares, if dilutive, that would arise from the exercise of stock options and nonvested shares using the treasury stock method.

The following is a reconciliation of net loss and weighted average common shares outstanding for purposes of calculating basic loss per share (in thousands, except per share amounts):

	Three-Months Ended June 30,						Six-Months Ended June 30,
Basic loss per share	2012			2011			2012			2011
Net loss attributable to Skechers U.S.A., Inc.	$	(1,782	)	$	(29,916	)	$	(5,448	)	$	(18,108	)
Weighted average common shares outstanding		49,296			48,341			49,281			48,292
Basic loss per share attributable to Skechers U.S.A., Inc.	$	(0.04	)	$	(0.62	)	$	(0.11	)	$	(0.38	)

The following is a reconciliation of net loss and weighted average common shares outstanding for purposes of calculating diluted loss per share (in thousands, except per share amounts):

	Three-Months Ended June 30,						Six-Months Ended June 30,
Diluted loss per share	2012			2011			2012			2011
Net loss attributable to Skechers U.S.A., Inc.	$	(1,782	)	$	(29,916	)	$	(5,448	)	$	(18,108	)
Weighted average common shares outstanding		49,296			48,341			49,281			48,292
Dilutive effect of stock options		0			0			0			0
Weighted average common shares outstanding		49,296			48,341			49,281			48,292
Diluted loss per share attributable to Skechers U.S.A., Inc.	$	(0.04	)	$	(0.62	)	$	(0.11	)	$	(0.38	)

There were no options included in the computation of diluted earnings per share for the three months and six months ended June 30, 2012 or 2011 because their effect would have been anti-dilutive.

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Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Loss Per Share [Abstract]

Basic earnings (loss) per share

	Three-Months Ended June 30,						Six-Months Ended June 30,
Basic loss per share	2012			2011			2012			2011
Net loss attributable to Skechers U.S.A., Inc.	$	(1,782	)	$	(29,916	)	$	(5,448	)	$	(18,108	)
Weighted average common shares outstanding		49,296			48,341			49,281			48,292
Basic loss per share attributable to Skechers U.S.A., Inc.	$	(0.04	)	$	(0.62	)	$	(0.11	)	$	(0.38	)

Diluted earnings (loss) per share

	Three-Months Ended June 30,						Six-Months Ended June 30,
Diluted loss per share	2012			2011			2012			2011
Net loss attributable to Skechers U.S.A., Inc.	$	(1,782	)	$	(29,916	)	$	(5,448	)	$	(18,108	)
Weighted average common shares outstanding		49,296			48,341			49,281			48,292
Dilutive effect of stock options		0			0			0			0
Weighted average common shares outstanding		49,296			48,341			49,281			48,292
Diluted loss per share attributable to Skechers U.S.A., Inc.	$	(0.04	)	$	(0.62	)	$	(0.11	)	$	(0.38	)

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General (Policies)

6 Months Ended

Jun. 30, 2012

General [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying condensed consolidated financial statements of Skechers U.S.A., Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include certain footnotes and financial presentations normally required under accounting principles generally accepted in the United States of America for complete financial reporting. The interim financial information is unaudited, but reflects all normal adjustments and accruals which are, in the opinion of management, considered necessary to provide a fair presentation for the interim periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

The results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2012. During the quarter ended June 30, 2012 the Company recorded an adjustment to rent expense of $3.2 million, or $1.9 million net of tax relating to percentage and deferred rent.

Use of Estimates

Use of Estimates

The preparation of the condensed consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Non-controlling interests

Non-controlling interests

The Company has interests in certain joint ventures which are consolidated into its financial statements. Non-controlling interests resulted in income of $0.4 million and a loss of $0.1 million for the three months ended June 30, 2012 and 2011, respectively, which represents the share of net earnings or loss that is attributable to our joint venture partners. Non-controlling interests resulted in income of $0.7 million and $0.2 million for the six months ended June 30, 2012 and 2011, respectively.

The Company has determined that its joint venture with HF Logistics I, LLC (“HF”) is a variable interest entity (“VIE”) and that the Company is the primary beneficiary. Accordingly, HF is consolidated into the condensed consolidated financial statements and the carrying amounts, and classification of assets and liabilities was as follows (in thousands):

	June 30, 2012		December 31, 2011
Current assets	$	14,547	$	11,287
Noncurrent assets		131,428		132,925
Total assets	$	145,975	$	144,212
Current liabilities	$	66,749	$	65,608
Noncurrent liabilities		18,211		18,341
Total liabilities	$	84,960	$	83,949

The assets of these joint ventures are restricted in that they are not available for our general business use outside the context of the joint venture. The holders of the liabilities of each joint venture have no recourse to the Company. The Company does not have a significant variable interest in any unconsolidated VIE’s.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2012

Stockholders' Equity [Abstract]

STOCKHOLDERS' EQUITY

(9) STOCKHOLDERS’ EQUITY

During the three months ended June 30, 2012, no shares of Class B common stock were converted into shares of Class A common stock. During the six months ended June 30, 2012, 22,880 shares of Class B common stock were converted into shares of Class A common stock. During the three months and six months ended June 30, 2011, 13,640 shares of Class B common stock were converted into shares of Class A common stock, respectively.

The following table reconciles equity attributable to non-controlling interest (in thousands):

	Six-Months Ended June 30,
	2012		2011
Non-controlling interest, January 1	$	39,966	$	37,631
Net earnings attributable to non-controlling interest		694		209
Foreign currency translation adjustment		83		381
Capital contribution by non-controlling interest		0		115
Non-controlling interest, June 30	$	40,743	$	38,336

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Line of Credit, Short -Term and Long -Term Borrowings

6 Months Ended

Jun. 30, 2012

Line of Credit, Short-Term and Long-Term Borrowings [Abstract]

LINE OF CREDIT, SHORT-TERM AND LONG-TERM BORROWINGS

(7) LINE OF CREDIT, SHORT-TERM AND LONG-TERM BORROWINGS

The Company and its subsidiaries had $4.1 million of outstanding letters of credit and short-term borrowings of $60.2 million as of June 30, 2012.

Long-term debt is as follows (in thousands):

	June 30, 2012		December 31, 2011
Note payable to bank, due in monthly installments of $531.4 (includes principal and interest), fixed rate interest at 3.54%, secured by property, balloon payment of $12,635 due December 2015	$	31,658	$	34,259
Note payable to bank, due in monthly installments of $483.9 (includes principal and interest), fixed rate interest at 3.19%, secured by property, balloon payment of $11,670 due June 2016		31,628		34,005
Loan from HF Logistics I, LLC		18,210		18,297
Capital lease obligations		18		29
Subtotal		81,514		86,590
Less current installments		10,229		10,059
Total long-term debt	$	71,285	$	76,531

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Litigation

6 Months Ended

Jun. 30, 2012

Litigation [Abstract]

LITIGATION

(8) LITIGATION

The Company recognizes legal expense in connection with loss contingencies as incurred.

The Company’s claims and advertising for its toning products including for its Shape-ups are subject to the requirements of, and routinely come under review by regulators including pending inquiries from the U.S. Federal Trade Commission (“FTC”), states’ Attorneys General and government and quasi-government regulators in foreign countries. The Company is currently responding to requests for information regarding its claims and advertising from regulatory and quasi-regulatory agencies in several countries and is fully cooperating with those requests. While the Company believes that its claims and advertising with respect to its core toning shoe products are supported by scientific tests, expert opinions and other relevant data, and while the Company has been successful in defending its claims and advertising in several different countries, it has discontinued using certain test results and periodically reviews and updates its claims and advertising. The regulatory inquiries may conclude in a variety of outcomes, including the closing of the inquiry with no further regulatory action, settlement of any issues through changes in our claims and advertising, settlement of any issues through payment to the regulatory entity, or litigation.

In accordance with U.S. generally accepted accounting principles, the Company records a liability in its consolidated financial statements for loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. Estimates of probable losses resulting from litigation and governmental proceedings are inherently difficult to predict, particularly when the matters are in the procedural stages or with unspecified or indeterminate claims for damages, potential penalties, or fines. During the fourth quarter ended December 31, 2011, the Company reserved $45 million for costs and potential exposure relating to existing litigation and regulatory matters. Additionally, the Company recorded a pre-tax expense of $5 million in legal and professional fees related to the aforementioned matters, which was included in general and administrative expense in our consolidated statement of operations for the year ended December 31, 2011. On May 16, 2012, the Company announced that it had settled all domestic legal proceedings relating to advertising claims made in connection with marketing its toning shoe products, including Shape-ups. Under the terms of the global settlement – without admitting any fault or liability, with no findings being made that the Company had violated any law, and with no fines or penalties being imposed – it made payments in the aggregate amount of $45 million and expect to pay a maximum of $5 million in class action attorneys’ fees to settle the domestic advertising lawsuits and related claims brought by the FTC and states’ Attorneys General for 44 states and the District of Columbia (“SAG”). The FTC Stipulated Final Judgment was approved by the United States District Court for the Northern District of Ohio on July 12, 2012, consent judgments have been approved and entered by state courts in 44 of the 45 SAG actions, and the Company is waiting for preliminary approval of the consumer class action settlement agreement by the United States District Court for the Western District of Kentucky. Although the Company believes the $50 million global settlement reflects the current estimated range of loss, the consumer class action settlement has not obtained Court approval and therefore it is not possible to predict the final outcome of the related proceedings or any other pending legal proceedings. Consequently, the final exposure and costs associated with pending legal proceedings could have a further material adverse impact on the Company’s result of operations or financial position.

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Segment and Geographic Reporting Information

6 Months Ended

Jun. 30, 2012

Segment and Geographic Reporting Information [Abstract]

SEGMENT AND GEOGRAPHIC REPORTING INFORMATION

(10) SEGMENT AND GEOGRAPHIC REPORTING INFORMATION

The Company has four reportable segments – domestic wholesale sales, international wholesale sales, retail sales, which includes domestic and international retail sales, and e-commerce sales. Management evaluates segment performance based primarily on net sales and gross profit. All other costs and expenses of the Company are analyzed on an aggregate basis, and these costs are not allocated to the Company’s segments. Net sales, gross profit and identifiable assets and additions to property, plant and equipment for the domestic wholesale segment, international wholesale, retail, and the e-commerce segment on a combined basis were as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Net sales
Domestic wholesale	$	177,994	$	217,241	$	311,709	$	428,775
International wholesale		88,590		105,002		206,093		274,413
Retail		112,265		106,573		207,404		196,363
E-commerce		5,152		5,535		10,069		11,034
Total	$	384,001	$	434,351	$	735,275	$	910,585

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Gross margins
Domestic wholesale	$	69,003	$	37,608	$	120,874	$	103,855
International wholesale		33,368		39,826		80,990		112,643
Retail		66,552		63,120		120,615		113,859
E-commerce		2,419		2,776		4,559		5,583
Total	$	171,342	$	143,330	$	327,038	$	335,940

	June 30, 2012		December 31, 2011
Identifiable assets
Domestic wholesale	$	880,163	$	844,383
International wholesale		316,884		304,025
Retail		143,148		133,081
E-commerce		471		399
Total	$	1,340,666	$	1,281,888

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Additions to property, plant and equipment
Domestic wholesale	$	7,503	$	42,993	$	11,636	$	78,784
International wholesale		1,395		851		1,954		1,824
Retail		2,101		5,658		8,998		12,273
Total	$	10,999	$	49,502	$	22,588	$	92,881

Geographic Information:

The following summarizes our operations in different geographic areas for the period indicated (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Net Sales (1)
United States	$	278,923	$	313,345	$	500,100	$	607,398
Canada		11,808		11,715		24,099		27,517
Other international (2)		93,270		109,291		211,076		275,670
Total	$	384,001	$	434,351	$	735,275	$	910,585

	June 30, 2012		December 31, 2011
Property, plant and equipment
United States	$	356,277	$	358,405
Canada		1,472		1,179
Other international (2)		16,060		16,862
Total	$	373,809	$	376,446

(1) The Company has subsidiaries in Canada, United Kingdom, Germany, France, Spain, Portugal, Italy, Netherlands, Brazil and Chile that generate net sales within those respective countries and in some cases the neighboring regions. The Company has joint ventures in China, Hong Kong, Malaysia, Singapore and Thailand that generate net sales from those countries. The Company also has a subsidiary in Switzerland that generates net sales from that country in addition to net sales to our distributors located in numerous non-European countries. Net sales are attributable to geographic regions based on the location of the Company subsidiary.

(2) Other international consists of Switzerland, United Kingdom, Germany, Austria, France, Spain, Portugal, Italy, Netherlands, China, Hong Kong, Malaysia, Singapore, Thailand, Brazil, Chile, Vietnam and Japan.

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Loss Per Share (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Loss Per Share (Textual) [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	0	0	0

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Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2012

Other Comprehensive Loss [Abstract]

Other comprehensive loss:

	Three-Months Ended June 30,						Six-Months Ended June 30,
Comprehensive loss	2012			2011			2012			2011
Net loss	$	(1,344	)	$	(30,052	)	$	(4,754	)	$	(17,899	)
Gain (loss) on foreign currency translation adjustment, net of tax		(6,299	)		4,781			(1,603	)		9,324
Comprehensive loss		(7,643	)		(25,271	)		(6,357	)		(8,575	)
Comprehensive income (loss) attributable to non-controlling interest		368			26			777			(590	)
Comprehensive loss attributable to parent	$	(8,011	)	$	(25,245	)	$	(7,134	)	$	(9,165	)

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Segment and Geographic Reporting Information (Tables)

6 Months Ended

Jun. 30, 2012

Segment and Geographic Reporting Information [Abstract]

Segment reporting information

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Net sales
Domestic wholesale	$	177,994	$	217,241	$	311,709	$	428,775
International wholesale		88,590		105,002		206,093		274,413
Retail		112,265		106,573		207,404		196,363
E-commerce		5,152		5,535		10,069		11,034
Total	$	384,001	$	434,351	$	735,275	$	910,585

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Gross margins
Domestic wholesale	$	69,003	$	37,608	$	120,874	$	103,855
International wholesale		33,368		39,826		80,990		112,643
Retail		66,552		63,120		120,615		113,859
E-commerce		2,419		2,776		4,559		5,583
Total	$	171,342	$	143,330	$	327,038	$	335,940

	June 30, 2012		December 31, 2011
Identifiable assets
Domestic wholesale	$	880,163	$	844,383
International wholesale		316,884		304,025
Retail		143,148		133,081
E-commerce		471		399
Total	$	1,340,666	$	1,281,888

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Additions to property, plant and equipment
Domestic wholesale	$	7,503	$	42,993	$	11,636	$	78,784
International wholesale		1,395		851		1,954		1,824
Retail		2,101		5,658		8,998		12,273
Total	$	10,999	$	49,502	$	22,588	$	92,881

Geographic Information

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Net Sales (1)
United States	$	278,923	$	313,345	$	500,100	$	607,398
Canada		11,808		11,715		24,099		27,517
Other international (2)		93,270		109,291		211,076		275,670
Total	$	384,001	$	434,351	$	735,275	$	910,585

	June 30, 2012		December 31, 2011
Property, plant and equipment
United States	$	356,277	$	358,405
Canada		1,472		1,179
Other international (2)		16,060		16,862
Total	$	373,809	$	376,446

(1) The Company has subsidiaries in Canada, United Kingdom, Germany, France, Spain, Portugal, Italy, Netherlands, Brazil and Chile that generate net sales within those respective countries and in some cases the neighboring regions. The Company has joint ventures in China, Hong Kong, Malaysia, Singapore and Thailand that generate net sales from those countries. The Company also has a subsidiary in Switzerland that generates net sales from that country in addition to net sales to our distributors located in numerous non-European countries. Net sales are attributable to geographic regions based on the location of the Company subsidiary.

(2) Other international consists of Switzerland, United Kingdom, Germany, Austria, France, Spain, Portugal, Italy, Netherlands, China, Hong Kong, Malaysia, Singapore, Thailand, Brazil, Chile, Vietnam and Japan.

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Business and Credit Concentrations (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012 Customer	Jun. 30, 2011 Customer	Jun. 30, 2012 Customer	Jun. 30, 2011 Customer	Dec. 31, 2011 Customer
Concentration Risk [Line Items]
Total Manufacturers Produced	64.60%	63.60%	62.50%	63.80%
Business and Credit Concentration (Textual) [Abstract]
Domestic accounts receivable which do not require collateral from customers	$ 143.3		$ 143.3		$ 90.9
Foreign accounts receivable which are collateralized by letters of credit	94.4		94.4		105.5
Losses due to company's credit write-offs	1.5	1.8	1.2	2.5
Net assets held outside the United States	$ 338.4		$ 338.4		$ 325.3
Percentage of Net Sales to Five Largest Customers	23.00%	25.20%	20.40%	20.10%
Number of customers accounting for more than 10% of sales	0	0	0	0
Number of customer accounting for more than 12.5% of Accounts receivable					1
Number of customers accounting for more than 10% of accounts receivable	0		0		1
Percentage of net trade receivables accounted for by one Major customer					12.50%
Percentage of net trade receivables accounted for by another Major customer					10.00%
Companies Top Five Manufacturers Produced [Member]
Concentration Risk [Line Items]
Manufacturer #1	34.60%	31.70%	34.70%	30.80%
Manufacturer #2	9.30%	11.20%	9.10%	11.40%
Manufacturer #3	8.00%	7.60%	6.70%	8.60%
Manufacturer #4	6.40%	6.80%	6.40%	6.70%
Manufacturer #5	6.30%	6.30%	5.60%	6.30%

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Condensed Consolidated Statements of Comprehensive Loss (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Condensed Consolidated Statements of Comprehensive Loss [Abstract]
Net loss attributable to Skechers U.S.A. Inc.	$ (1,782)	$ (29,916)	$ (5,448)	$ (18,108)
Other comprehensive loss:
Gain (loss) on foreign currency translation adjustment, net of tax	(6,229)	4,671	(1,686)	8,943
Total comprehensive loss attributable to Skechers U.S.A Inc.	$ (8,011)	$ (25,245)	$ (7,134)	$ (9,165)

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Share-Based Compensation

6 Months Ended

Jun. 30, 2012

Share-Based Compensation [Abstract]

SHARE-BASED COMPENSATION

(4) SHARE-BASED COMPENSATION

For stock-based awards we have recognized compensation expense based on the grant date fair value. Share-based compensation expense was $3.2 million and $3.5 million for the three months ended June 30, 2012 and 2011, respectively. Share-based compensation expense was $6.7 million and $7.2 million for the six months ended June 30, 2012 and 2011, respectively.

Stock options granted pursuant to the 1998 Stock Option, Deferred Stock and Restricted Stock Plan and the 2007 Incentive Award Plan (the “Equity Incentive Plans”) were as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2011		206,400		$	7.62
Granted		0			0
Exercised		(25,042	)		6.95
Cancelled		(208	)		6.95
Outstanding at June 30, 2012		181,150			7.71	1.0 years	$	2,293,725
Exercisable at June 30, 2012		181,150			7.71	1.0 years	$	2,293,725

A summary of the status and changes of our nonvested shares related to our Equity Incentive Plans as of and for the six months ended June 30, 2012 is presented below:

	Shares			Weighted Average Grant-Date Fair Value
Nonvested at December 31, 2011		740,493		$	19.02
Granted		0			0
Vested		(26,667	)		30.55
Cancelled		(33,000	)		27.60
Nonvested at June 30, 2012		680,826			18.15

As of June 30, 2012, there was $4.2 million of unrecognized compensation cost related to nonvested common shares. The cost is expected to be amortized over a weighted average period of 0.3 years.

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Business and Credit Concentrations (Tables)

6 Months Ended

Jun. 30, 2012

Business and Credit Concentrations [Abstract]

Company's top five manufacturers produced

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Manufacturer #1		34.6	%		31.7	%		34.7	%		30.8	%
Manufacturer #2		9.3	%		11.2	%		9.1	%		11.4	%
Manufacturer #3		8.0	%		7.6	%		6.7	%		8.6	%
Manufacturer #4		6.4	%		6.8	%		6.4	%		6.7	%
Manufacturer #5		6.3	%		6.3	%		5.6	%		6.3	%
		64.6	%		63.6	%		62.5	%		63.8	%

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Stockholder's Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Equity attributable to non-controlling interest
Non-controlling interest, January 1			$ 39,966	$ 37,631
Net earnings attributable to non-controlling interest	438	(136)	694	209
Foreign currency translation adjustment			83	381
Capital contribution by non-controlling interest			0	115
Non-controlling interest, June 30	$ 40,743	$ 38,336	$ 40,743	$ 38,336
Stockholder's Equity (Textual) [Abstract]
Certain Class B stockholders converted into Class A	0	13,640	22,880	13,640

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General (Tables)

6 Months Ended

Jun. 30, 2012

General [Abstract]

Carrying amounts and classification of assets and liabilities

	June 30, 2012		December 31, 2011
Current assets	$	14,547	$	11,287
Noncurrent assets		131,428		132,925
Total assets	$	145,975	$	144,212
Current liabilities	$	66,749	$	65,608
Noncurrent liabilities		18,211		18,341
Total liabilities	$	84,960	$	83,949