UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number
SKECHERS U.S.A., INC.
(Exact name of registrant as specified in its charter)
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(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
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(Address of Principal Executive Office) |
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(Zip Code) |
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(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading symbol |
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Name of each exchange on which registered |
Class A Common Stock, par value $0.001 per share |
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of April 30, 2021,
As of April 30, 2021,
SKECHERS U.S.A., INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
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Item 1. |
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3 |
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4 |
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Condensed Consolidated Statements of Comprehensive Income (Unaudited) |
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6 |
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7 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
8 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
15 |
Item 3. |
19 |
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Item 4. |
19 |
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PART II – OTHER INFORMATION |
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Item 1. |
20 |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
20 |
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Item 6. |
21 |
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22 |
2
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SKECHERS U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
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As of March 31, |
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As of December 31, |
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(in thousands, except par values) |
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2021 |
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2020 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Trade accounts receivable, less allowances of $ |
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Other receivables |
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Total receivables |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets ($ |
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Property, plant and equipment, net |
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Operating lease right-of-use assets |
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Deferred tax assets |
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Long-term investments |
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Goodwill |
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Other assets, net |
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Total non-current assets ($ |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current liabilities |
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Current installments of long-term borrowings |
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$ |
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$ |
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Short-term borrowings |
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Accounts payable |
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Operating lease liabilities |
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Accrued expenses |
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Total current liabilities ($ |
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Long-term borrowings, excluding current installments |
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Long-term operating lease liabilities |
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Deferred tax liabilities |
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Other long-term liabilities |
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Total non-current liabilities ($ |
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Total liabilities |
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Commitments and contingencies (Note 10) |
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Stockholders’ equity |
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Preferred Stock, $ |
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Class A Common Stock, $ |
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Class B Common Stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Retained earnings |
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Skechers U.S.A., Inc. equity |
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Noncontrolling interests |
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Total stockholders' equity |
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TOTAL LIABILITIES AND EQUITY |
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$ |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
3
SKECHERS U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
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Three Months Ended March 31, |
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(in thousands, except per share data) |
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2021 |
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2020 |
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Sales |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Royalty income |
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Operating expenses |
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Selling |
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General and administrative |
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Selling, general and administrative |
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Earnings from operations |
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Other income (expense) |
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Interest income |
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Interest expense |
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( |
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( |
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Other, net |
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( |
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Total other income (expense) |
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( |
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Earnings before income tax expense |
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Income tax expense |
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Net earnings |
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Less: Net earnings (loss) attributable to noncontrolling interests |
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( |
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Net earnings attributable to Skechers U.S.A., Inc. |
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$ |
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$ |
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Net earnings per share attributable to Skechers U.S.A., Inc. |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted-average shares used in calculating net earnings per share attributable to Skechers U.S.A, Inc. |
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Basic |
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Diluted |
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See accompanying notes to unaudited condensed consolidated financial statements.
4
SKECHERS U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(Unaudited)
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Three Months Ended March 31, |
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(in thousands) |
2021 |
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2020 |
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Net earnings |
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$ |
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$ |
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Other comprehensive income, net of tax |
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Loss on foreign currency translation adjustment |
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( |
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( |
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Comprehensive income |
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Less: Comprehensive income (loss) attributable to noncontrolling interests |
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( |
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Comprehensive income attributable to Skechers U.S.A., Inc. |
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$ |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
5
SKECHERS U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
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SHARES |
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AMOUNT |
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ACCUMULATED |
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CLASS A |
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CLASS B |
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CLASS A |
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CLASS B |
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ADDITIONAL |
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OTHER |
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SKECHERS |
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NON |
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TOTAL |
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COMMON |
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COMMON |
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COMMON |
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COMMON |
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PAID-IN |
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COMPREHENSIVE |
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RETAINED |
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U.S.A., INC. |
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CONTROLLING |
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STOCKHOLDERS' |
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(in thousands) |
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STOCK |
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STOCK |
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STOCK |
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STOCK |
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CAPITAL |
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LOSS |
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EARNINGS |
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EQUITY |
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INTEREST |
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EQUITY |
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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$ |
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Net earnings |
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— |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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( |
) |
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( |
) |
Contribution from noncontrolling interests |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Purchase of noncontrolling interest |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
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( |
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( |
) |
Net unrealized gain on derivative contract |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued under the incentive award plan |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Conversion of Class B Common Stock into Class A Common Stock |
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( |
) |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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$ |
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Balance at December 31, 2019 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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$ |
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Net earnings |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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( |
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( |
) |
Distributions to noncontrolling interests |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Noncontrolling interest of acquired businesses |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued under the incentive award plan |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares redeemed for employee tax withholdings |
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( |
) |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
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— |
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( |
) |
Balance at March 31, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
6
SKECHERS U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Three Months Ended March 31, |
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(in thousands) |
|
2021 |
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2020 |
|
||
Cash flows from operating activities |
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Net earnings |
|
$ |
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$ |
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Adjustments to reconcile net earnings to net cash from operating activities |
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Depreciation and amortization |
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Provision for bad debts and returns |
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Stock compensation |
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Deferred income taxes |
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( |
) |
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( |
) |
Net settlement gain |
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— |
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( |
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Net foreign currency adjustments |
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Changes in operating assets and liabilities |
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Receivables |
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( |
) |
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( |
) |
Inventory |
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( |
) |
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Other assets |
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Accounts payable |
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( |
) |
Other liabilities |
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( |
) |
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( |
) |
Net cash used in operating activities |
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( |
) |
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( |
) |
Cash flows from investing activities |
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Capital expenditures |
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( |
) |
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( |
) |
Purchases of investments |
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( |
) |
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( |
) |
Proceeds from sales and maturities of investments |
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Net cash used in investing activities |
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( |
) |
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( |
) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Repayments on long-term borrowings |
|
|
( |
) |
|
|
( |
) |
Proceeds from long-term borrowings |
|
|
|
|
|
|
|
|
Proceeds from (repayments on) short-term borrowings, net |
|
|
( |
) |
|
|
|
|
Payments for employee taxes related to stock compensation |
|
|
— |
|
|
|
( |
) |
Purchase of noncontrolling interest |
|
|
( |
) |
|
|
— |
|
Contributions from noncontrolling interests |
|
|
|
|
|
|
— |
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Net change in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents at beginning of the period |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information |
|
|
|
|
|
|
|
|
Cash paid during the period for |
|
|
|
|
|
|
|
|
Interest |
|
$ |
|
|
|
$ |
|
|
Income taxes, net |
|
|
|
|
|
|
|
|
Non-cash transactions |
|
|
|
|
|
|
|
|
ROU assets exchanged for lease liabilities |
|
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
7
SKECHERS U.S.A., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) |
GENERAL |
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Skechers U.S.A., Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S‑X. In the opinion of management, all normal adjustments and accruals considered necessary to provide a fair statement of the results of operations for the interim periods presented have been included. The December 31, 2020 balance sheet data was derived from audited financial statements; however, the accompanying notes to condensed consolidated financial statements do not include all of the annual disclosures required under GAAP and should be read in conjunction with the Company’s 2020 Annual Report on Form 10-K.
As previously disclosed in the Company’s 2020 Annual Report on Form 10-K, the duration and magnitude of the COVID-19 pandemic remains uncertain. The COVID-19 pandemic has had and may continue to have a significant impact on the Company’s consolidated results of operations, financial position and cash flows.
Noncontrolling Interests
The Company has equity interests in several joint ventures that were established either to exclusively distribute the Company’s products throughout Mexico, Asia and the Middle East or to construct the Company’s domestic distribution facility. These joint ventures are variable interest entities (“VIE”), and the Company is considered the primary beneficiary. This determination is based on the relationships between the Company and the VIE, including management agreements, governance documents and other contractual arrangements. Specifically, the Company has both of the following characteristics: (a) the power to direct the activities of the entity that most significantly impact the entity’s economic performance; and (b) the obligation to absorb losses of the entity that could potentially be significant to the VIE, or the right to receive benefits from the entity that could potentially be significant to the VIE. The assets and liabilities and results of operations of these entities are included in the Company’s condensed consolidated financial statements, even though the Company may not hold a majority equity interest.
In March 2021, the minority interest related to the Hong Kong joint venture was purchased for $
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value hierarchy as defined by applicable accounting standards prioritizes the use of inputs used in valuation techniques into the following three levels:
|
• |
Level 1: Quoted market prices in active markets for identical assets or liabilities. |
|
• |
Level 2: Other observable market-based inputs or unobservable inputs that are corroborated by market data. |
|
• |
Level 3: Unobservable inputs that cannot be corroborated by market data that reflect the reporting entity’s own assumptions. |
The Company’s Level 1 investments primarily include money market funds and U.S. Treasury securities; Level 2 investments primarily include corporate notes and bonds, asset-backed securities, U.S. Agency securities, and actively traded mutual funds; and the Company does not currently have any Level 3 assets or liabilities. The Company has
The carrying amount of receivables, payables and other amounts arising out of the normal course of business approximates fair value because of the relatively short maturity of such instruments. The carrying amount of the Company’s short-term and long-term borrowings, which are considered Level 2 liabilities, approximates fair value based on current rates and terms available to the Company for similar debt.
8
DERIVATIVE INSTRUMENTS
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, the Company uses an interest rate swap as part of its interest rate risk management strategy. The Company’s interest rate swap, designated as a cash flow hedge, involves the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. By utilizing an interest rate swap, the Company is exposed to credit-related losses in the event that the counterparty fails to perform under the terms of the derivative contract. To mitigate this risk, the Company enters into derivative contracts with major financial institutions based upon credit ratings and other factors. The Company continually assesses the creditworthiness of its counterparties. As of March 31, 2021, all counterparties to the interest rate swap had performed in accordance with their contractual obligations.
Recent Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general income tax accounting methodology including an exception for the recognition of a deferred tax liability when a foreign subsidiary becomes an equity method investment and an exception for interim periods showing operating losses in excess of anticipated operating losses for the year. The amendment also reduces the complexity surrounding franchise tax recognition; the step up in the tax basis of goodwill in conjunction with business combinations; and the accounting for the effect of changes in tax laws enacted during interim periods. The Company adopted ASU 2019-12 on
In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, as amended and supplemented by subsequent ASUs (collectively, “ASU 2020-04”), which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for borrowing instruments, which use LIBOR as a reference rate, and is effective immediately, but is only available through December 31, 2022. The Company does not expect the adoption of this ASU to have a material impact on its condensed consolidated financial statements.
(2) |
CASH, CASH EQUIVALENTS, SHORT-TERM AND LONG-TERM INVESTMENTS |
The following tables show the Company’s cash, cash equivalents, short-term and long-term investments by significant investment category:
|
|
As of March 31, 2021 |
|
|||||||||||||||||
(in thousands) |
|
Adjusted Cost |
|
|
Fair Value |
|
|
Cash and Cash Equivalents |
|
|
Short-Term Investments |
|
|
Long-Term Investments |
|
|||||
Cash |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
Level 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
U.S. Treasury securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Total level 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate notes and bonds |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
U.S. Agency securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Mutual funds |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Total level 2 |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
9
|
|
As of December 31, 2020 |
|
|||||||||||||||||
(in thousands) |
|
Adjusted Cost |
|
|
Fair Value |
|
|
Cash and Cash Equivalents |
|
|
Short-Term Investments |
|
|
Long-Term Investments |
|
|||||
Cash |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
Level 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
U.S. Treasury securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Total level 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate notes and bonds |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
U.S. Agency securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Mutual funds |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Total level 2 |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The Company’s investments consist of United States (“U.S.”) Treasury securities, corporate notes and bonds, asset-backed securities and U.S. Agency securities, which the Company has the intent and ability to hold to maturity and therefore are classified as held-to-maturity. The Company holds mutual funds in its deferred compensation plan which are classified as trading securities. The Company may sell certain of its investments prior to their stated maturities for strategic reasons including, but not limited to, anticipation of credit deterioration and duration management. The maturities of the Company’s long-term investments are less than
When evaluating an investment for its current expected credit losses, the Company reviews factors such as historical experience with defaults, losses, credit ratings, term, market sector and macroeconomic trends, including current conditions and forecasts to the extent they are reasonable and supportable.
(3) |
ACCRUED EXPENSES |
Accrued expenses at March 31, 2021 and December 31, 2020 are summarized as follows:
|
|
As of March 31, |
|
|
As of December 31, |
|
||
(in thousands) |
|
2021 |
|
|
2020 |
|
||
Accrued payroll, taxes, and other |
|
$ |
|
|
|
$ |
|
|
Return reserve liability |
|
|
|
|
|
|
|
|
Accrued inventory purchases |
|
|
|
|
|
|
|
|
Accrued expenses |
|
$ |
|
|
|
$ |
|
|
(4) |
FINANCIAL COMMITMENTS |
The Company had $
Long-term borrowings were as follows:
|
|
As of March 31, |
|
|
As of December 31, |
|
||
(in thousands) |
|
2021 |
|
|
2020 |
|
||
Revolving Credit Facility |
|
$ |
|
|
|
$ |
|
|
HF-T1 Distribution Center Loan |
|
|
|
|
|
|
|
|
HF-T2 Distribution Center Construction Loan |
|
|
|
|
|
|
|
|
China Distribution Center Construction Loan |
|
|
|
|
|
|
|
|
China Operational Loans |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Subtotal |
|
|
|
|
|
|
|
|
Less: Current installments |
|
|
( |
) |
|
|
( |
) |
Total long-term borrowings |
|
$ |
|
|
|
$ |
|
|
10
Revolving Credit Facility
The weighted-average annual interest rate on borrowings under the 2019 revolving credit facility was approximately
The Company is required to maintain a maximum total adjusted net leverage ratio of
As of March 31, 2021 and December 31, 2020, the unused credit capacity was $
HF-T1 Distribution Center Loan
The Company’s joint venture with HF Logistics I, LLC (“HF”), HF Logistics-SKX, LLC (the “JV”), through a wholly-owned subsidiary of the JV (“HF-T1”), entered into a $
HF-T1 also entered into an ISDA master agreement (together with the schedule related thereto, the “Swap Agreement”) with Bank of America, N.A. to govern derivative and/or hedging transactions that HF-T1 concurrently entered into with Bank of America, N.A. The Company’s objective in using the Swap Agreement is to stabilize interest expense and manage exposure to interest rate volatility. Pursuant to the Swap Agreement, on
The Interest Rate Swap involves the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of both March 31, 2021 and December 31, 2020, the Interest Rate Swap had an aggregate notional amount of $
HF-T2 Distribution Center Construction Loan
The weighted-average annual interest rate on borrowings under the 2020 distribution center construction loan was approximately
China Distribution Center Construction Loan
China Operational Loans
The balance of working capital loans was approximately $
(5) |
STOCK COMPENSATION |
INCENTIVE AWARD PLAN
As of March 31, 2021, there were
11
The Company issued the following stock-based instruments:
|
|
Three Months Ended March 31, |
|
|||||||||||||
|
|
2021 |
|
|
2020 |
|
||||||||||
|
|
Granted |
|
|
Weighted-Average Grant-Date Fair Value |
|
|
Granted |
|
|
Weighted-Average Grant-Date Fair Value |
|
||||
Restricted stock |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Performance-based restricted stock |
|
|
|
|
|
$ |
|
|
|
|
— |
|
|
$ |
— |
|
Market-based restricted stock |
|
|
|
|
|
$ |
|
|
|
|
— |
|
|
$ |
— |
|
A summary of the status and changes of the Company’s unvested shares is presented below:
|
|
Shares |
|
|
Weighted-Average Grant-Date Fair Value |
|
||
Unvested at December 31, 2020 |
|
|
|
|
|
$ |
|
|
Granted |
|
|
|
|
|
$ |
|
|
Vested |
|
|
( |
) |
|
$ |
|
|
Cancelled |
|
|
( |
) |
|
$ |
|
|
Unvested at March 31, 2021 |
|
|
|
|
|
$ |
|
|
The Company determines the fair value of restricted stock awards and any performance-related components based on the closing market price of the Company’s common stock on the date of grant. For share-based awards that have a performance-based vesting requirement, the Company evaluates the probability of achieving the performance criteria throughout the performance period and will adjust stock compensation expense up or down based on its estimated probable outcome. Certain performance-based awards contain market condition components which are valued on the date of grant using a Monte Carlo simulation model.
For the three months ended March 31, 2021 and 2020, the Company recognized $
(6) |
EARNINGS PER SHARE |
Basic EPS and diluted EPS are calculated by dividing net earnings by the following: for basic EPS, the weighted-average number of common shares outstanding for the period; and for diluted EPS, the sum of the weighted-average number of both outstanding common shares and potentially dilutive common shares using the treasury stock method.
The calculation of EPS is as follows:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands, except per share data) |
|
2021 |
|
|
2020 |
|
||
Net earnings attributable to Skechers U.S.A., Inc. |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding, basic |
|
|
|
|
|
|
|
|
Dilutive effect of nonvested shares |
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding, diluted |
|
|
|
|
|
|
|
|
Anti-dilutive common shares excluded above |
|
|
|
|
|
|
|
|
Net earnings attributable to Skechers U.S.A., Inc. per common share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
|
|
|
$ |
|
|
Diluted |
|
$ |
|
|
|
$ |
|
|
12
(7) |
INCOME TAXES |
The tax provisions for the three months ended March 31, 2021 and 2020 were computed using the estimated effective tax rates applicable to each of the domestic and international taxable jurisdictions for the full year. The Company’s tax rate is subject to management’s quarterly review and revision, as necessary. The Company’s provision for income tax expense and effective income tax rate are significantly impacted by the mix of the Company’s domestic and foreign earnings (loss) before income taxes. In the foreign jurisdictions in which the Company has operations, the applicable statutory rates range from
(8) |
RELATED PARTY TRANSACTIONS |
The Skechers Foundation (the “Foundation”) is a 501(c)(3) non-profit entity and not a subsidiary or otherwise affiliated with the Company. The Company does not have a financial interest in the Foundation. However, two officers and directors of the Company, Michael Greenberg, the Company’s President, and David Weinberg, the Company’s Chief Operating Officer, are also officers and directors of the Foundation. During the three months ended March 31, 2021 and 2020, the Company made contributions of $
(9) |
SEGMENT AND GEOGRAPHIC INFORMATION |
The Company has
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2021 |
|
|
2020 |
|
||
Sales |
|
|
|
|
|
|
|
|
Domestic Wholesale |
|
$ |
|
|
|
$ |
|
|
International Wholesale |
|
|
|
|
|
|
|
|
Direct-to-Consumer |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
Gross profit |
|
|
|
|
|
|
|
|
Domestic Wholesale |
|
$ |
|
|
|
$ |
|
|
International Wholesale |
|
|
|
|
|
|
|
|
Direct-to-Consumer |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
Sales (1) |
|
|
|
|
|
|
|
|
United States |
|
$ |
|
|
|
$ |
|
|
International |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
(1) |
During the three months ended March 31, 2021 and 2020, sales in China were $ |
The Company’s sales to its
The following summarizes the Company’s assets by segment and geographic area for the periods indicated:
(in thousands) |
|
As of March 31, 2021 |
|
|
As of December 31, 2020 |
|
||
Identifiable assets |
|
|
|
|
|
|
|
|
Domestic Wholesale |
|
$ |
|
|
|
$ |
|
|
International Wholesale |
|
|
|
|
|
|
|
|
Direct-to-Consumer |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
13
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2021 |
|
|
2020 |
|
||
Additions to property, plant and equipment |
|
|
|
|
|
|
|
|
Domestic Wholesale |
|
$ |
|
|
|
$ |
|
|
International Wholesale |
|
|
|
|
|
|
|
|
Direct-to-Consumer |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
(in thousands) |
|
As of March 31, 2021 |
|
|
As of December 31, 2020 |
|
||
Property, plant and equipment, net (1) |
|
|
|
|
|
|
|
|
United States |
|
$ |
|
|
|
$ |
|
|
International |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
(1) |
Property, plant and equipment, net in China was $ |
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 U.S. were $
The Company performs regular evaluations concerning the ability of customers to satisfy their obligations and provides for estimated doubtful accounts. Domestic accounts receivable generally do not require collateral. Foreign accounts receivable are generally collateralized by letters of credit. The Company’s credit losses charged to expense for the three months ended March 31, 2021 and 2020 were $
The Company’s accounts receivables, excluding the allowance for bad debts, sales returns and chargebacks, in different geographic areas are summarized as follows:
(in thousands) |
|
As of March 31, 2021 |
|
|
As of December 31, 2020 |
|
||
Domestic Accounts Receivable |
|
$ |
|
|
|
$ |
|
|
Foreign Accounts Receivable |
|
|
|
|
|
|
|
|
For the periods presented below, the Company’s top five manufacturers produced, as a percentage of total production, the following:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Manufacturer #1 |
|
|
|
% |
|
|
|
% |
Manufacturer #2 |
|
|
|
% |
|
|
|
% |
Manufacturer #3 |
|
|
|
% |
|
|
|
% |
Manufacturer #4 |
|
|
|
% |
|
|
|
% |
Manufacturer #5 |
|
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% |
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% |
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% |
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% |
(10) |
COMMITMENTS AND CONTINGENCIES |
In accordance with GAAP, the Company records a liability in its condensed 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. Accordingly, the Company cannot determine the final amount, if any, of its liability beyond the amount accrued in the condensed consolidated financial statements as of March 31, 2021, nor is it possible to estimate what litigation-related costs will be in the future; however, the Company believes that the likelihood that claims related to litigation would result in a material loss to the Company, either individually or in the aggregate, is remote.
14
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and Notes thereto in Item 1 of this report and our annual report on Form 10-K for the year ended December 31, 2020.
We intend for this discussion to provide the reader with information that will assist in understanding our condensed consolidated 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 condensed consolidated 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:
|
• |
the COVID-19 pandemic and its adverse impact on our operations and our business, sales and results of operations around the world; |
|
• |
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; |
|
• |
the loss of any significant customers, decreased demand by industry retailers and the cancellation of order commitments; |
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• |
our ability to remain competitive among sellers of footwear for consumers, including in the highly competitive performance footwear market; global economic, political and market conditions including the challenging consumer retail market in the United States; |
|
• |
our ability to sustain, manage and forecast our costs and proper inventory levels; |
|
• |
our ability to continue to manufacture and ship our products that are sourced in China and Vietnam, which could be adversely affected by various economic, political or trade conditions, or a natural disaster in China or Vietnam; |
|
• |
other factors referenced or incorporated by reference in our annual report on Form 10-K for the year ended December 31, 2020 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 herein 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, and new risk factors emerge from time to time. 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 inherent and changing 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.
OVERVIEW
Sales were a new quarterly record of $1.4 billion, reflecting growth in our International Wholesale and Direct-to-Consumer segments despite continued impacts to global markets and business channels from the COVID-19 pandemic. The quarter began as expected with the pandemic continuing to influence tepid consumer trends worldwide, especially as many markets reinstituted lockdowns. However, mid-quarter, we began seeing signs of consumer engagement and optimism domestically that we have not seen in over a year. Consumers are returning to a new normalcy, one that involves more walking, more comfort on the job, and a casual lifestyle mindset. We are a natural choice for any demographic worldwide with comfort technology at our core.
We continue to invest for growth with a focus on enhancing our global infrastructure.
|
• |
To further enhance our consumer shopping experience, we updated our point of sale system in our domestic retail locations, including enhancements to our omnichannel capabilities, and began plans to launch new e-commerce sites internationally. |
|
• |
We are in the process of opening new distribution centers in Peru, the United Kingdom and Japan. |
|
• |
Our new China distribution center remains on-track for full implementation by mid-year. |
|
• |
Development continued on our North American distribution center expansion, which we expect to be completed in 2022. |
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• |
We opened 12 company-owned stores and 183 third-party Skechers stores globally. |
15
RESULTS OF OPERATIONS
We have three reportable segments – Domestic Wholesale, International Wholesale, and Direct-to-Consumer, which includes results from both our retail store and e-commerce channels. We evaluate segment performance based primarily on sales and gross margin.
The following table sets forth, for the periods indicated, selected information from our results of operations:
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2021 |
2020 |
|
|
$ |
% |
|
||||||||
Sales |
|
$ |
1,428,418 |
|
|
$ |
1,242,345 |
|
|
$ |
186,073 |
|
|
|
15.0 |
|
Cost of sales |
|
|
748,796 |
|
|
|
694,677 |
|
|
|
54,119 |
|
|
|
7.8 |
|
Gross profit |
|
|
679,622 |
|
|
|
547,668 |
|
|
|
131,954 |
|
|
|
24.1 |
|
Gross margin |
|
|
47.6 |
|
% |
|
44.1 |
|
% |
|
|
|
|
|
350 |
bps |
Royalty income |
|
|
6,037 |
|
|
|
5,248 |
|
|
|
789 |
|
|
|
15.0 |
|
|
|
|
685,659 |
|
|
|
552,916 |
|
|
|
132,743 |
|
|
|
24.0 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling |
|
|
85,296 |
|
|
|
74,055 |
|
|
|
11,241 |
|
|
|
15.2 |
|
General and administrative |
|
|
442,695 |
|
|
|
434,051 |
|
|
|
8,644 |
|
|
|
2.0 |
|
Selling, general and administrative |
|
|
527,991 |
|
|
|
508,106 |
|
|
|
19,885 |
|
|
|
3.9 |
|
Earnings from operations |
|
|
157,668 |
|
|
|
44,810 |
|
|
|
112,858 |
|
|
|
251.9 |
|
Interest income |
|
|
796 |
|
|
|
2,307 |
|
|
|
(1,511 |
) |
|
|
(65.5 |
) |
Interest expense |
|
|
(4,113 |
) |
|
|
(1,999 |
) |
|
|
(2,114 |
) |
|
|
105.8 |
|
Other, net |
|
|
(10,857 |
) |
|
|
3,471 |
|
|
|
(14,328 |
) |
|
|
(412.8 |
) |
Earnings before income tax expense |
|
|
143,494 |
|
|
|
48,589 |
|
|
|
94,905 |
|
|
|
195.3 |
|
Income tax expense |
|
|
28,985 |
|
|
|
7,429 |
|
|
|
21,556 |
|
|
|
290.2 |
|
Net earnings |
|
|
114,509 |
|
|
|
41,160 |
|
|
|
73,349 |
|
|
|
178.2 |
|
Less: Net earnings (loss) attributable to noncontrolling interests |
|
|
15,936 |
|
|
|
(7,941 |
) |
|
|
23,877 |
|
|
|
(300.7 |
) |
Net earnings attributable to Skechers U.S.A., Inc. |
|
$ |
98,573 |
|
|
$ |
49,101 |
|
|
$ |
49,472 |
|
|
|
100.8 |
|
Sales
Sales increased $186.1 million, or 15.0%, to $1.4 billion as compared to $1.2 billion as a result of a 20.2% increase in the Company’s international sales and an 8.5% increase in domestic sales. Increases in international sales were driven by wholesale. Domestic sales increases were driven by direct-to-consumer, partially offset by a slight decline in wholesale. Our International Wholesale segment sales increased 23.8% and Direct-to-Consumer segment sales increased 18.1% offset by decreased Domestic Wholesale segment sales of 0.9%.
Gross margin
Gross margin increased 350 basis points to 47.6% compared to 44.1% as a result of increased margins in both the International Wholesale and Direct-to-Consumer segments. The strong margin performance was driven by an increase in selling price across all channels and a favorable mix of e-commerce sales.
Selling expenses
Selling expenses increased by $11.2 million, or 15.2%, to $85.3 million from $74.1 million primarily due to higher domestic marketing spending of $12.0 million. As a percentage of sales, selling expenses were 6.0% for both of the three-month periods ended March 31, 2021 and 2020.
General and administrative expenses
General and administrative expenses increased by $8.6 million, or 2.0%, primarily driven by increased global warehouse and distribution expenses of $21.8 million, offset by reduced retail labor of $10.0 million.
Other income (expense)
Interest income decreased $1.5 million to $0.8 million as compared to $2.3 million, primarily due to lower average interest rates compared to the prior year period. Interest expense increased $2.1 million due to a full quarter of borrowing under our credit facility in the current year and additional borrowings to support China operations. Other decreased $14.3 million as a result of a $13.9 million gain related to the acquisition of our Mexico joint venture in the prior year.
16
Income taxes
Income tax expense and the effective tax rate were as follows:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2021 |
|
|
2020 |
|
||
Income tax expense |
|
$ |
28,985 |
|
|
$ |
7,429 |
|
Effective tax rate |
|
|
20.2 |
% |
|
|
15.3 |
% |
Our provision for income tax expense and effective income tax rate are significantly impacted by the mix of our domestic and foreign earnings (losses) before income taxes. In the foreign jurisdictions in which we have operations, the applicable statutory rates range from 0.0% to 34.0%, which on average are generally significantly lower than the U.S. federal and state combined statutory rate of approximately 24.5%. For the quarter, the increase in the effective tax rate was primarily due to increased profitability in certain higher tax jurisdictions such as China and the United States.
Noncontrolling interest in net income of consolidated subsidiaries
Net earnings attributable to noncontrolling interest increased $23.9 million to $15.9 million as compared to a loss of $7.9 million, primarily due to increased profitability by our joint ventures, due to reduced impacts related to the COVID-19 pandemic. Noncontrolling interest represents the share of net earnings that is attributable to our joint venture partners.
RESULTS OF SEGMENT OPERATIONS
Domestic Wholesale
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
Sales |
|
$ |
374,665 |
|
|
$ |
377,962 |
|
|
$ |
(3,297 |
) |
|
|
(0.9 |
) |
Gross profit |
|
|
139,924 |
|
|
|
145,277 |
|
|
|
(5,353 |
) |
|
|
(3.7 |
) |
Gross margin |
|
|
37.3 |
% |
|
|
38.4 |
% |
|
|
|
|
|
|
(110 |
) bps |
Domestic Wholesale sales decreased $3.3 million, or 0.9% to $374.7 million. Sales volume decreased slightly to 16.9 million pairs sold, partially offset by an increase in average selling price. The average selling price increased to $21.89 per pair from $21.32.
Domestic Wholesale gross margin decreased 110 basis points to 37.3% due to higher cost per pair partially offset by an increase in the average selling price.
International Wholesale
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
Sales |
|
$ |
712,175 |
|
|
$ |
575,199 |
|
|
$ |
136,976 |
|
|
|
23.8 |
|
Gross profit |
|
|
320,781 |
|
|
|
240,475 |
|
|
|
80,306 |
|
|
|
33.4 |
|
Gross margin |
|
|
45.0 |
% |
|
|
41.8 |
% |
|
|
|
|
|
|
320 |
bps |
International Wholesale sales increased $137.0 million, or 23.8%, to $712.2 million compared to sales of $575.2 million, primarily driven by growth in China of 174.4%, partially offset by an 8.1% decline in Europe and a 6.5% decline in distributor sales. Direct sales by our foreign subsidiaries and joint ventures were $632.0 million, an increase of $142.6 million, or 29.1%. Volume increased 12.7% in the number of units sold and average selling price per unit increased 9.9%.
International Wholesale gross margin increased 320 basis points to 45.0% primarily due to the aforementioned increase in average selling price per unit and a favorable mix of joint venture sales.
Direct-to-Consumer
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
Sales |
|
$ |
341,578 |
|
|
$ |
289,184 |
|
|
$ |
52,394 |
|
|
|
18.1 |
|
Gross profit |
|
|
218,917 |
|
|
|
161,916 |
|
|
|
57,001 |
|
|
|
35.2 |
|
Gross margin |
|
|
64.1 |
% |
|
|
56.0 |
% |
|
|
|
|
|
|
810 |
bps |
Direct-to-Consumer sales increased $52.4 million, or 18.1%, to $341.6 million as compared to sales of $289.2 million, primarily driven by an increase in e-commerce sales of 143.0% and an increase in retail sales of 13.6%. Direct-to-Consumer comparable same store sales increased 10.2%, including increases of 25.7% domestically, partially offset by decreases of 27.4% internationally. Average selling price per unit increased 9.8% and volume increased 7.6% in the number of units sold.
Direct-to-Consumer gross margin increased 810 basis points to 64.1%, primarily driven by a higher mix of e-commerce sales which have higher margins as well as the aforementioned increase in average selling price per unit.
17
Comparable store sales mentioned above includes stores that have been opened for at least thirteen calendar months as well as sales on our company-owned websites. We did not make any adjustments for the effects of the COVID-19 pandemic and the related impacts of store closures and reduced operating hours. Definitions and calculations of comparable store sales differ among companies in the retail industry, and therefore comparable store sales disclosed by us may not be comparable to the metrics disclosed by other companies.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity outlook
Our liquidity remains ample and we believe we are well-positioned to endure the economic environment associated with the COVID-19 pandemic. As a precautionary measure, in March 2020, we borrowed $490.0 million on our unsecured revolving credit facility. At March 31, 2021, we have unused credit capacity of $10.5 million along with an additional $250.0 million available through an accordion feature on the unsecured revolving credit facility. We continue to partner with our vendors, landlords, and lenders to maximize our liquidity and mitigate cash flow risk. We believe that anticipated cash flows from operations, existing cash and investments balances, available borrowings under our credit agreement, and current financing arrangements will be sufficient to provide us with the liquidity necessary to fund our anticipated working capital and capital requirements for the next twelve months.
As of March 31, 2021, we had approximately $1.3 billion in cash and cash equivalents, of which $741.3 million, or 58%, was held outside the U.S. Of the $741.3 billion held outside of the U.S., approximately $379.3 million is available for repatriation to the U.S. without incurring U.S. federal income taxes and applicable non-U.S. income and withholding taxes in excess of the amounts accrued in our Condensed Consolidated Financial Statements as of March 31, 2021.
Cash Flows
Our working capital at March 31, 2021 was $2.2 billion, an increase of $0.1 billion from working capital of $2.1 billion at December 31, 2020. Our cash and cash equivalents at March 31, 2021 were $1.3 billion, compared to $1.4 billion at December 31, 2020. Our primary sources of operating cash are collections from customers. Our primary uses of cash are inventory purchases, selling, general and administrative expenses and capital expenditures.
Operating Activities
For the three months ended March 31, 2021, net cash used in operating activities was $13.8 million as compared to $135.0 million for the three months ended March 31, 2020. On a comparative year-over-year basis, the $121.2 million decrease in net cash used in operating activities primarily resulted from the timing of payments to vendors and increased net earnings, partially offset by increased inventory purchases.
Investing Activities
Net cash used in investing activities was $105.5 million for the three months ended March 31, 2021 as compared to $76.3 million for the three months ended March 31, 2020. The $29.2 million increase was primarily due to an increase in investment purchases of $27.3 million. Capital expenditures for the three months ended March 31, 2021 were approximately $84.2 million, which consisted primarily of approximately $42.9 million related to the expansion of our joint-venture owned domestic distribution center, $13.8 million related to investments in our new corporate offices in California and $12.4 million related to investments in our direct-to-consumer technology and retail stores. We expect our ongoing capital expenditures for the remainder of 2021 to be approximately $200.0 million to $250.0 million, which is primarily related to the expansion of our worldwide distribution capabilities, continued investments in retail and e-commerce technologies and stores, and our new corporate offices in California. We expect to fund ongoing capital expenses through a combination of borrowings and available cash.
Financing Activities
Net cash provided by financing activities was $34.8 million during the three months ended March 31, 2021 compared to $558.0 million in net cash provided by financing activities during the three months ended March 31, 2020. The $523.2 million decrease is primarily reduced proceeds from long-term borrowings of $523.8 million.
Capital Resources and Prospective Capital Requirements
Financing Arrangements
As of March 31, 2021, outstanding short-term and long-term borrowings were $779.7 million, of which $452.5 million relates to our unsecured revolving credit facility, $244.3 million relates to loans for our domestic and China distribution centers, $80.5 million relates to our operations in China and the remainder relates to our international operations. Our long-term debt obligations contain both financial and non-financial covenants, including cross-default provisions. We were in compliance with all debt covenants related to our short-term and long-term borrowings as of the date of this quarterly report. See Note 4 – Financial Commitments of the Condensed Consolidated Financial Statements for additional information.
18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes from the information previously reported under Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
ITEM 4. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this Quarterly Report on Form 10-Q, we performed an evaluation under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the design and effectiveness of our disclosure controls and procedures, which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our CEO and CFO concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective in the timely and accurate recording, processing, summarizing and reporting of material financial and non-financial information within the time periods specified within the SEC’s rules and forms. Our CEO and CFO also concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting during the three months ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
19
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments with respect to the information previously reported under Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
ITEM 1A. RISK FACTORS
There have been no material developments with respect to the information previously reported under Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) Recent Sales of Unregistered Securities: None.
(b) Use of Proceeds from Registered Securities: None.
(c) Issuer Purchases of Equity Securities: None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
20
ITEM 6. EXHIBITS
Exhibit Number |
|
Description |
|
|
|
10.1 |
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
32.1* |
|
|
|
|
|
101 |
|
Financial statements from the quarterly report on Form 10-Q of Skechers U.S.A., Inc. for the quarter ended March 31, 2021 formatted in inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Earnings; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the Notes to the Condensed Consolidated Financial Statements |
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|
|
|
* |
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. |
21
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: May 7, 2021 |
SKECHERS U.S.A., INC. |
|
|
|
|
|
By: |
/s/ John Vandemore |
|
|
John Vandemore |
|
|
Chief Financial Officer |
22
Exhibit 10.1
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of March 23, 2021, is entered into by and among SKECHERS U.S.A., INC., a Delaware corporation (the “Borrower”), BANK OF AMERICA, N.A., as administrative agent for the Lenders (in such capacity, the “Administrative Agent”), and the Lenders and L/C Issuers parties hereto.
Unless otherwise specified herein, capitalized and/or initially capitalized terms used in this Amendment shall have the meanings ascribed to them in the Credit Agreement (as hereinafter defined) as amended hereby.
A.WHEREAS, the Borrower, the Administrative Agent and the Lenders are parties to that certain Credit Agreement, dated as of November 21, 2019 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”);
B.WHEREAS, the Borrower has requested that the Administrative Agent, the L/C Issuers and the Lenders party hereto, subject to the terms and conditions set forth herein, agree to effectuate certain modifications of the Credit Agreement.
NOW, THEREFORE, for and in consideration of the premises and mutual agreements herein contained and for the purposes of setting forth the terms and conditions of this Amendment and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be bound, hereby agree as follows:
1.Amendment to Credit Agreement. Subject to the terms and conditions of this Amendment, the Credit Agreement is amended by amending and restating the definition of “Letter of Credit” located in Section 1.01 of the Credit Agreement in its entirety to read as follows:
““Letter of Credit” means any standby or documentary letter of credit or documentary bankers’ acceptance issued by an L/C Issuer hereunder and shall include the Existing Letters of Credit.”
2.Effectiveness. This Amendment shall become effective when the Administrative Agent has received a fully-executed copy of this Amendment.
3.Representations. The Borrower hereby represents and warrants to the Administrative Agent that: (a) it has all necessary power and authority to execute and deliver this Amendment and perform its obligations hereunder, (b) no Default or Event of Default exists both before and after giving effect to this Amendment, (c) this Amendment and the Loan Documents, as amended hereby, constitute the legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms, (d) all Liens created under the Loan Documents continue to be first priority (subject only to Liens permitted under Section 7.1 of the Credit Agreement) perfected Liens, and (e) the representations and warranties of the Borrower and each other Loan Party contained in Article V of the Credit Agreement or any other Loan Document shall be true and correct in all material respects (except that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true in all respects) on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects (except that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true in all respects) as of such earlier date.
4.Ratification. Except as expressly modified in this Amendment, all of the terms, provisions and conditions of the Credit Agreement, as heretofore amended, shall remain unchanged and in
full force and effect. Except as herein specifically agreed, the Credit Agreement and each other Loan Document are hereby ratified and confirmed and shall remain in full force and effect according to their terms. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under the Credit Agreement or any of the other Loan Documents, or constitute a waiver of any provision of the Credit Agreement or any of the other Loan Documents. This Amendment shall not constitute a course of dealing with Administrative Agent or any Lender at variance with the Credit Agreement or the other Loan Documents such as to require further notice by such Person to require strict compliance with the terms of the Credit Agreement and the other Loan Documents in the future. The Borrower acknowledges and expressly agrees that Administrative Agent reserves the right to, and does in fact, require strict compliance with all terms and provisions of the Credit Agreement and the other Loan Documents. The Borrower hereby: (i) affirms that it is indebted to the Administrative Agent and the Lenders under the terms and conditions of the Credit Agreement and the other Loan Documents, each of which constitutes the valid and binding obligation of the Borrower, enforceable in accordance with their respective terms, and that no offsets, expenses or counterclaims to its obligations thereunder exist; and (ii) affirmatively waives any right to challenge the liens and security interests granted in favor of the Administrative Agent under the Credit Agreement, the other Loan Documents or hereunder.
5.GOVERNING LAW. THIS AMENDMENT AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AMENDMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
6.Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AMENDMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.
|
7. |
Miscellaneous. |
(a)Counterparts; Integration; Effectiveness. This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Amendment constitutes the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 2, this Amendment shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or other electronic imaging means (e.g. “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart of this Amendment.
(b)ENTIRE AGREEMENT. THIS AMENDMENT REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
2
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
(c)Severability. If any provision of this Amendment is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Amendment shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
(d)Incorporation. This Amendment shall form a part of the Credit Agreement, and all references to the Credit Agreement shall mean that document as hereby modified. Upon the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby.
(e)No Prejudice; No Impairment. This Amendment shall not prejudice any rights or remedies of the Administrative Agent or any Lender under the Credit Agreement or any other Loan Documents as hereby amended. The Administrative Agent reserves, without limitation, all rights which it has against any guarantor or endorser of the Obligations.
[Signatures Immediately Follow]
3
IN WITNESS WHEREOF, the undersigned have executed this First Amendment to Credit Agreement as of the date first written above.
BORROWER: |
|
SKECHERS U.S.A., INC. |
By: /s/ John Vandemore |
Name: John Vandemore |
Title: Chief Financial Officer |
|
BANK OF AMERICA, N.A., |
as Administrative Agent, a Lender and L/C Issuer |
By: /s/ David R. Barney |
Name: David R. Barney |
Title: Senior Vice President |
|
JPMORGAN CHASE BANK, N.A., |
as a Lender and L/C Issuer |
By: /s/ Anna C. Araya |
Name: Anna C. Araya |
Title: Executive Director |
|
HSBC BANK USA, N.A., |
as a Lender and L/C Issuer |
By: /s/ Jaime Mariano |
Name: Jaime Mariano |
Title: Senior Vice President #21440 |
|
BANK OF CHINA, LOS ANGELES BRANCH, |
as a Lender |
By: /s/ Yong Ou |
Name: Yong Ou |
Title: SVP and Branch Manager |
|
MUFG UNION BANK., N.A., |
as a Lender |
By: /s/ Reema Sharma |
Name: Reema Sharma |
Title: Authorized Signatory |
|
CITY NATIONAL BANK, |
as a Lender |
By: /s/ Scott Sanford |
Name: Scott Sanford |
Title: Vice President |
Signature Page to First Amendment to Credit Agreement
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 March 31, 2021 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: May 7, 2021
/s/ Robert Greenberg |
Robert Greenberg |
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, John Vandemore, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the three months ended March 31, 2021 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: May 7, 2021
/s/ John Vandemore |
John Vandemore |
Chief Financial Officer |
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 March 31, 2021 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) |
May 7, 2021 |
/s/ John Vandemore |
John Vandemore |
Chief Financial Officer |
(Principal Financial and Accounting Officer) |
May 7, 2021 |
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.
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Statement Of Income And Comprehensive Income [Abstract] | ||
Net earnings | $ 114,509 | $ 41,160 |
Other comprehensive income, net of tax | ||
Loss on foreign currency translation adjustment | (12,505) | (29,764) |
Comprehensive income | 102,004 | 11,396 |
Less: Comprehensive income (loss) attributable to noncontrolling interests | 12,495 | (14,879) |
Comprehensive income attributable to Skechers U.S.A., Inc. | $ 89,509 | $ 26,275 |
Condensed Consolidated Statements of Equity - USD ($) |
Total |
Class A Common Stock [Member] |
Class B Common Stock [Member] |
Common Stock [Member]
Class A Common Stock [Member]
|
Common Stock [Member]
Class B Common Stock [Member]
|
ADDITIONAL PAID-IN CAPITAL [Member] |
ACCUMULATED OTHER COMPREHENSIVE LOSS [Member] |
RETAINED EARNINGS [Member] |
SKECHERS U.S.A., INC. EQUITY [Member] |
NON CONTROLLING INTEREST [Member] |
---|---|---|---|---|---|---|---|---|---|---|
Beginning Balance at Dec. 31, 2019 | $ 2,536,107,000 | $ 131,000 | $ 22,000 | $ 306,669,000 | $ (29,993,000) | $ 2,037,836,000 | $ 2,314,665,000 | $ 221,442,000 | ||
Beginning Balance, Shares at Dec. 31, 2019 | 131,071,000 | 22,408,000 | ||||||||
Net earnings | 41,160,000 | 49,101,000 | 49,101,000 | (7,941,000) | ||||||
Foreign currency translation adjustment | (29,764,000) | (22,826,000) | (22,826,000) | (6,938,000) | ||||||
Distributions to noncontrolling interests | (14,865,000) | (14,865,000) | ||||||||
Noncontrolling interest of acquired businesses | 49,045,000 | 49,045,000 | ||||||||
Stock compensation expense | 12,441,000 | 12,441,000 | 12,441,000 | |||||||
Shares issued under the incentive award plan, Shares | 376,000 | |||||||||
Shares redeemed for employee tax withholdings | (5,659,000) | (5,659,000) | (5,659,000) | |||||||
Shares redeemed for employee tax withholdings, Shares | (171,000) | |||||||||
Ending Balance at Mar. 31, 2020 | 2,588,465,000 | 131,000 | 22,000 | 313,451,000 | (52,819,000) | 2,086,937,000 | 2,347,722,000 | 240,743,000 | ||
Ending Balance, Shares at Mar. 31, 2020 | 131,276,000 | 22,408,000 | ||||||||
Beginning Balance at Dec. 31, 2020 | 2,725,663,000 | 134,000 | 21,000 | 372,165,000 | (27,285,000) | 2,136,400,000 | 2,481,435,000 | 244,228,000 | ||
Beginning Balance, Shares at Dec. 31, 2020 | 133,618,000 | 21,016,000 | ||||||||
Net earnings | 114,509,000 | 98,573,000 | 98,573,000 | 15,936,000 | ||||||
Foreign currency translation adjustment | (12,505,000) | (9,064,000) | (9,064,000) | (3,441,000) | ||||||
Contribution from noncontrolling interests | 14,000 | 14,000 | ||||||||
Purchase of noncontrolling interest | (9,928,000) | (6,856,000) | (6,856,000) | (3,072,000) | ||||||
Net unrealized gain on derivative contract | 1,752,000 | 1,752,000 | ||||||||
Stock compensation expense | 12,041,000 | 12,041,000 | 12,041,000 | |||||||
Shares issued under the incentive award plan, Shares | 487,000 | |||||||||
Conversion of Class B Common Stock into Class A Common Stock, Shares | 67,000 | (67,000) | ||||||||
Ending Balance at Mar. 31, 2021 | $ 2,831,546,000 | $ 134,000 | $ 21,000 | $ 377,350,000 | $ (36,349,000) | $ 2,234,973,000 | $ 2,576,129,000 | $ 255,417,000 | ||
Ending Balance, Shares at Mar. 31, 2021 | 134,172,000 | 20,949,000 |
General |
3 Months Ended | |||||||||||
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Mar. 31, 2021 | ||||||||||||
Accounting Policies [Abstract] | ||||||||||||
General |
Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Skechers U.S.A., Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S‑X. In the opinion of management, all normal adjustments and accruals considered necessary to provide a fair statement of the results of operations for the interim periods presented have been included. The December 31, 2020 balance sheet data was derived from audited financial statements; however, the accompanying notes to condensed consolidated financial statements do not include all of the annual disclosures required under GAAP and should be read in conjunction with the Company’s 2020 Annual Report on Form 10-K. As previously disclosed in the Company’s 2020 Annual Report on Form 10-K, the duration and magnitude of the COVID-19 pandemic remains uncertain. The COVID-19 pandemic has had and may continue to have a significant impact on the Company’s consolidated results of operations, financial position and cash flows. Noncontrolling Interests The Company has equity interests in several joint ventures that were established either to exclusively distribute the Company’s products throughout Mexico, Asia and the Middle East or to construct the Company’s domestic distribution facility. These joint ventures are variable interest entities (“VIE”), and the Company is considered the primary beneficiary. This determination is based on the relationships between the Company and the VIE, including management agreements, governance documents and other contractual arrangements. Specifically, the Company has both of the following characteristics: (a) the power to direct the activities of the entity that most significantly impact the entity’s economic performance; and (b) the obligation to absorb losses of the entity that could potentially be significant to the VIE, or the right to receive benefits from the entity that could potentially be significant to the VIE. The assets and liabilities and results of operations of these entities are included in the Company’s condensed consolidated financial statements, even though the Company may not hold a majority equity interest. In March 2021, the minority interest related to the Hong Kong joint venture was purchased for $10.0 million. Other than the change in the Company’s ownership of the Hong Kong entity, which continues to be included in the Company’s condensed consolidated financial statements, there have been no changes during 2021 in the accounting treatment or characterization of any previously identified variable interest entities. The Company continues to reassess these relationships quarterly. The assets of these joint ventures are restricted, as they are not available for general business use outside the context of such joint ventures. The holders of the liabilities of each joint venture have no recourse to the Company. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value hierarchy as defined by applicable accounting standards prioritizes the use of inputs used in valuation techniques into the following three levels:
The Company’s Level 1 investments primarily include money market funds and U.S. Treasury securities; Level 2 investments primarily include corporate notes and bonds, asset-backed securities, U.S. Agency securities, and actively traded mutual funds; and the Company does not currently have any Level 3 assets or liabilities. The Company has one Level 2 derivative instrument which is an interest rate swap related to the refinancing of its U.S. distribution center (see Note 4 – Financial Commitments) classified as other long-term liabilities. The fair value of the interest rate swap was determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipt was based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. Credit valuation adjustments were incorporated to appropriately reflect both the Company’s nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. The carrying amount of receivables, payables and other amounts arising out of the normal course of business approximates fair value because of the relatively short maturity of such instruments. The carrying amount of the Company’s short-term and long-term borrowings, which are considered Level 2 liabilities, approximates fair value based on current rates and terms available to the Company for similar debt. DERIVATIVE INSTRUMENTS The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, the Company uses an interest rate swap as part of its interest rate risk management strategy. The Company’s interest rate swap, designated as a cash flow hedge, involves the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. By utilizing an interest rate swap, the Company is exposed to credit-related losses in the event that the counterparty fails to perform under the terms of the derivative contract. To mitigate this risk, the Company enters into derivative contracts with major financial institutions based upon credit ratings and other factors. The Company continually assesses the creditworthiness of its counterparties. As of March 31, 2021, all counterparties to the interest rate swap had performed in accordance with their contractual obligations. Recent Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general income tax accounting methodology including an exception for the recognition of a deferred tax liability when a foreign subsidiary becomes an equity method investment and an exception for interim periods showing operating losses in excess of anticipated operating losses for the year. The amendment also reduces the complexity surrounding franchise tax recognition; the step up in the tax basis of goodwill in conjunction with business combinations; and the accounting for the effect of changes in tax laws enacted during interim periods. The Company adopted ASU 2019-12 on January 1, 2021, and the adoption did not have a material impact on its condensed consolidated financial statements. In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, as amended and supplemented by subsequent ASUs (collectively, “ASU 2020-04”), which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for borrowing instruments, which use LIBOR as a reference rate, and is effective immediately, but is only available through December 31, 2022. The Company does not expect the adoption of this ASU to have a material impact on its condensed consolidated financial statements. |
Cash, Cash Equivalents, Short-Term And Long-Term Investments |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash Cash Equivalents And Short Term And Long Term Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents, Short-Term and Long-Term Investments |
The following tables show the Company’s cash, cash equivalents, short-term and long-term investments by significant investment category:
The Company’s investments consist of United States (“U.S.”) Treasury securities, corporate notes and bonds, asset-backed securities and U.S. Agency securities, which the Company has the intent and ability to hold to maturity and therefore are classified as held-to-maturity. The Company holds mutual funds in its deferred compensation plan which are classified as trading securities. The Company may sell certain of its investments prior to their stated maturities for strategic reasons including, but not limited to, anticipation of credit deterioration and duration management. The maturities of the Company’s long-term investments are less than two years. The Company minimizes the potential risk of principal loss by investing in highly-rated securities and limiting the amount of credit exposure to any one issuer. Fair values were determined for each individual security in the investment portfolio. When evaluating an investment for its current expected credit losses, the Company reviews factors such as historical experience with defaults, losses, credit ratings, term, market sector and macroeconomic trends, including current conditions and forecasts to the extent they are reasonable and supportable. |
Accrued Expenses |
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Accrued Expenses |
Accrued expenses at March 31, 2021 and December 31, 2020 are summarized as follows:
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Financial Commitments |
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Financial Commitments |
The Company had $37.0 million and $38.7 million of outstanding letters of credit as of March 31, 2021 and December 31, 2020, and approximately $1.1 million and $3.3 million in short-term borrowings as of March 31, 2021 and December 31, 2020. Long-term borrowings were as follows:
Revolving Credit Facility The weighted-average annual interest rate on borrowings under the 2019 revolving credit facility was approximately 1.37% during the three months ended March 31, 2021. The credit facility was amended during the first quarter to define letters of credit. The Company is required to maintain a maximum total adjusted net leverage ratio of 3.75:1, except in the event of an acquisition in which case the ratio may be increased at the Company’s election to 4.25:1 for the quarter in which such acquisition occurs and for the next three quarters thereafter. As of March 31, 2021 and December 31, 2020, the unused credit capacity was $10.5 million and $8.8 million, respectively, on the Company’s 2019 revolving credit facility. The Company was in compliance with the financial covenants under the 2019 credit facility as of March 31, 2021. HF-T1 Distribution Center Loan The Company’s joint venture with HF Logistics I, LLC (“HF”), HF Logistics-SKX, LLC (the “JV”), through a wholly-owned subsidiary of the JV (“HF-T1”), entered into a $129.5 million construction loan agreement which matures on March 18, 2025 (the “HF-T1 2020 Loan”) with interest of LIBOR Daily Floating Rate plus a margin of 1.75% per annum. HF-T1 also entered into an ISDA master agreement (together with the schedule related thereto, the “Swap Agreement”) with Bank of America, N.A. to govern derivative and/or hedging transactions that HF-T1 concurrently entered into with Bank of America, N.A. The Company’s objective in using the Swap Agreement is to stabilize interest expense and manage exposure to interest rate volatility. Pursuant to the Swap Agreement, on August 14, 2015, HF-T1 entered into a confirmation of swap transactions (the “Interest Rate Swap”) as amended (the “Swap Agreement Amendment”) on March 18, 2020 with Bank of America, N.A with a maturity date of March 18, 2025. The Swap Agreement Amendment fixes the effective interest rate on the HF-T1 2020 Loan at 2.55% per annum. The HF-T1 2020 Loan and Swap Agreement Amendment are subject to customary covenants and events of default. Bank of America, N.A. also acts as a lender and syndication agent under the Company’s 2019 Credit Agreement. The Interest Rate Swap involves the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of both March 31, 2021 and December 31, 2020, the Interest Rate Swap had an aggregate notional amount of $129.5 million. Under the terms of the Swap Agreement Amendment, the Company will pay a weighted-average fixed rate of 0.795% on the notional amount and receive payments from the counterparty based on the 30-day LIBOR rate, effectively modifying the Company’s exposure to interest rate risk by converting floating-rate debt to a fixed rate of 4.08%. HF-T2 Distribution Center Construction Loan The weighted-average annual interest rate on borrowings under the 2020 distribution center construction loan was approximately 2.02% during the three months ended March 31, 2021. The obligations of the JV under this loan are guaranteed by TGD Holdings I, LLC, which is an affiliate of HF. China Distribution Center Construction Loan The interest rate at March 31, 2021 was 4.15% and may increase or decrease over the life of the loan, and will be evaluated every 12 months. Beginning in 2021, the principal of the loan will be repaid in semi-annual installments of variable amounts. The obligations of the China distribution center construction loan, entered through the Company’s Taicang Subsidiary are jointly and severally guaranteed by the Company’s China joint venture. As of March 31, 2021, the outstanding balance under this loan included approximately $13.9 million classified as short-term borrowings in the Company’s condensed consolidated balance sheets.
China Operational Loans The balance of working capital loans was approximately $61.4 million with interest rates ranging from 1.73% to 3.65% per annum as of March 31, 2021. The balance of working capital loans as of December 31, 2020 was approximately $30.1 million with interest rates ranging from 1.75% to 3.92% per annum. The balance of loans related to a corporate office building in Shanghai was approximately $19.1 million and $18.6 million as of March 31, 2021 and December 31, 2020 with interest at 4.28% per annum, for both periods, payable at terms agreed by the lender. As of March 31, 2021, the outstanding balance under this loan included approximately $47.0 million classified as short-term borrowings in the Company’s condensed consolidated balance sheets. |
Stock Compensation |
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Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Compensation |
INCENTIVE AWARD PLAN As of March 31, 2021, there were 5,121,800 shares available for grant as equity awards under the 2017 Incentive Award Plan. In the first quarter of 2021, the Company granted restricted stock with time-based vesting as well as performance-based awards. The performance-based awards include a market condition tied to the Company’s total shareholder return in relation to its peer companies as well as a financial performance condition tied to annual EPS growth. The vesting and ultimate payout of performance awards is determined at the end of the performance period and can vary from zero to 200% based on actual results. The Company issued the following stock-based instruments:
A summary of the status and changes of the Company’s unvested shares is presented below:
The Company determines the fair value of restricted stock awards and any performance-related components based on the closing market price of the Company’s common stock on the date of grant. For share-based awards that have a performance-based vesting requirement, the Company evaluates the probability of achieving the performance criteria throughout the performance period and will adjust stock compensation expense up or down based on its estimated probable outcome. Certain performance-based awards contain market condition components which are valued on the date of grant using a Monte Carlo simulation model. For the three months ended March 31, 2021 and 2020, the Company recognized $12.0 million and $12.4 million of compensation expense for grants under the 2017 Incentive Award Plan. As of March 31, 2021, the balance of unamortized stock compensation was $92.9 million which is expected to be recognized over a weighted-average period of 2.06 years. |
Earnings Per Share |
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Earnings Per Share |
Basic EPS and diluted EPS are calculated by dividing net earnings by the following: for basic EPS, the weighted-average number of common shares outstanding for the period; and for diluted EPS, the sum of the weighted-average number of both outstanding common shares and potentially dilutive common shares using the treasury stock method. The calculation of EPS is as follows:
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||
Income Taxes |
The tax provisions for the three months ended March 31, 2021 and 2020 were computed using the estimated effective tax rates applicable to each of the domestic and international taxable jurisdictions for the full year. The Company’s tax rate is subject to management’s quarterly review and revision, as necessary. The Company’s provision for income tax expense and effective income tax rate are significantly impacted by the mix of the Company’s domestic and foreign earnings (loss) before income taxes. In the foreign jurisdictions in which the Company has operations, the applicable statutory rates range from 0.0% to 34.0%, which is on average significantly lower than the U.S. federal and state combined statutory rate of approximately 24.5%. The Company’s effective tax rate was 20.2% and 15.3% for the three months ended March 31, 2021 and 2020. The increase primarily reflects the increased profitability in certain higher tax jurisdictions such as China and the United States. |
Related Party Transactions |
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Related Party Transactions [Abstract] | |
Related Party Transactions |
The Skechers Foundation (the “Foundation”) is a 501(c)(3) non-profit entity and not a subsidiary or otherwise affiliated with the Company. The Company does not have a financial interest in the Foundation. However, two officers and directors of the Company, Michael Greenberg, the Company’s President, and David Weinberg, the Company’s Chief Operating Officer, are also officers and directors of the Foundation. During the three months ended March 31, 2021 and 2020, the Company made contributions of $500,000 to the Foundation in each period. In March 2021, the Company purchased two properties for $2.7 million, from an entity controlled by its President, Michael Greenberg, to facilitate future expansion of our corporate office buildings in Manhattan Beach, California. The terms of the sale were no less favorable than could be obtained from an unrelated third party. |
Segment and Geographic Information |
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Segment and Geographic Information |
The Company has three reportable segments – Domestic Wholesale, International Wholesale and Direct-to-Consumer. Management evaluates segment performance based primarily on sales and gross margin. All other costs and expenses of the Company are analyzed on an aggregate basis and not allocated to the segments. The following summarizes the Company’s operations by segment and geographic area for the periods indicated:
The Company’s sales to its five largest customers accounted for approximately 9.5% and 11.4% of total sales for the three months ended March 31, 2021 and 2020. The following summarizes the Company’s assets by segment and geographic area for the periods indicated:
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 U.S. were $3.7 billion and $3.1 billion at March 31, 2021 and December 31, 2020, respectively. The Company performs regular evaluations concerning the ability of customers to satisfy their obligations and provides for estimated doubtful accounts. Domestic accounts receivable generally do not require collateral. Foreign accounts receivable are generally collateralized by letters of credit. The Company’s credit losses charged to expense for the three months ended March 31, 2021 and 2020 were $6.3 million and $1.5 million. The Company’s accounts receivables, excluding the allowance for bad debts, sales returns and chargebacks, in different geographic areas are summarized as follows:
For the periods presented below, the Company’s top five manufacturers produced, as a percentage of total production, the following:
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Commitments and Contingencies |
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Commitments And Contingencies Disclosure [Abstract] | |||
Commitments and Contingencies |
In accordance with GAAP, the Company records a liability in its condensed 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. Accordingly, the Company cannot determine the final amount, if any, of its liability beyond the amount accrued in the condensed consolidated financial statements as of March 31, 2021, nor is it possible to estimate what litigation-related costs will be in the future; however, the Company believes that the likelihood that claims related to litigation would result in a material loss to the Company, either individually or in the aggregate, is remote. |
General (Policies) |
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Accounting Policies [Abstract] | ||||||||||
Basis of Presentation |
Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Skechers U.S.A., Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S‑X. In the opinion of management, all normal adjustments and accruals considered necessary to provide a fair statement of the results of operations for the interim periods presented have been included. The December 31, 2020 balance sheet data was derived from audited financial statements; however, the accompanying notes to condensed consolidated financial statements do not include all of the annual disclosures required under GAAP and should be read in conjunction with the Company’s 2020 Annual Report on Form 10-K. As previously disclosed in the Company’s 2020 Annual Report on Form 10-K, the duration and magnitude of the COVID-19 pandemic remains uncertain. The COVID-19 pandemic has had and may continue to have a significant impact on the Company’s consolidated results of operations, financial position and cash flows. |
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Noncontrolling Interests |
Noncontrolling Interests The Company has equity interests in several joint ventures that were established either to exclusively distribute the Company’s products throughout Mexico, Asia and the Middle East or to construct the Company’s domestic distribution facility. These joint ventures are variable interest entities (“VIE”), and the Company is considered the primary beneficiary. This determination is based on the relationships between the Company and the VIE, including management agreements, governance documents and other contractual arrangements. Specifically, the Company has both of the following characteristics: (a) the power to direct the activities of the entity that most significantly impact the entity’s economic performance; and (b) the obligation to absorb losses of the entity that could potentially be significant to the VIE, or the right to receive benefits from the entity that could potentially be significant to the VIE. The assets and liabilities and results of operations of these entities are included in the Company’s condensed consolidated financial statements, even though the Company may not hold a majority equity interest. In March 2021, the minority interest related to the Hong Kong joint venture was purchased for $10.0 million. Other than the change in the Company’s ownership of the Hong Kong entity, which continues to be included in the Company’s condensed consolidated financial statements, there have been no changes during 2021 in the accounting treatment or characterization of any previously identified variable interest entities. The Company continues to reassess these relationships quarterly. The assets of these joint ventures are restricted, as they are not available for general business use outside the context of such joint ventures. The holders of the liabilities of each joint venture have no recourse to the Company. |
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Fair Value of Financial Instruments |
FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value hierarchy as defined by applicable accounting standards prioritizes the use of inputs used in valuation techniques into the following three levels:
The Company’s Level 1 investments primarily include money market funds and U.S. Treasury securities; Level 2 investments primarily include corporate notes and bonds, asset-backed securities, U.S. Agency securities, and actively traded mutual funds; and the Company does not currently have any Level 3 assets or liabilities. The Company has one Level 2 derivative instrument which is an interest rate swap related to the refinancing of its U.S. distribution center (see Note 4 – Financial Commitments) classified as other long-term liabilities. The fair value of the interest rate swap was determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipt was based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. Credit valuation adjustments were incorporated to appropriately reflect both the Company’s nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. The carrying amount of receivables, payables and other amounts arising out of the normal course of business approximates fair value because of the relatively short maturity of such instruments. The carrying amount of the Company’s short-term and long-term borrowings, which are considered Level 2 liabilities, approximates fair value based on current rates and terms available to the Company for similar debt. |
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Derivative Instruments |
DERIVATIVE INSTRUMENTS The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, the Company uses an interest rate swap as part of its interest rate risk management strategy. The Company’s interest rate swap, designated as a cash flow hedge, involves the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. By utilizing an interest rate swap, the Company is exposed to credit-related losses in the event that the counterparty fails to perform under the terms of the derivative contract. To mitigate this risk, the Company enters into derivative contracts with major financial institutions based upon credit ratings and other factors. The Company continually assesses the creditworthiness of its counterparties. As of March 31, 2021, all counterparties to the interest rate swap had performed in accordance with their contractual obligations. |
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Recent Accounting Pronouncements |
Recent Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general income tax accounting methodology including an exception for the recognition of a deferred tax liability when a foreign subsidiary becomes an equity method investment and an exception for interim periods showing operating losses in excess of anticipated operating losses for the year. The amendment also reduces the complexity surrounding franchise tax recognition; the step up in the tax basis of goodwill in conjunction with business combinations; and the accounting for the effect of changes in tax laws enacted during interim periods. The Company adopted ASU 2019-12 on January 1, 2021, and the adoption did not have a material impact on its condensed consolidated financial statements. In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, as amended and supplemented by subsequent ASUs (collectively, “ASU 2020-04”), which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for borrowing instruments, which use LIBOR as a reference rate, and is effective immediately, but is only available through December 31, 2022. The Company does not expect the adoption of this ASU to have a material impact on its condensed consolidated financial statements. |
Cash, Cash Equivalents, Short-Term And Long-Term Investments (Tables) |
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Cash Cash Equivalents And Short Term And Long Term Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Cash, Cash Equivalents, Short-Term and Long-Term Investments by Significant Investment Category |
The following tables show the Company’s cash, cash equivalents, short-term and long-term investments by significant investment category:
|
Accrued Expenses (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables And Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Accrued Expenses |
Accrued expenses at March 31, 2021 and December 31, 2020 are summarized as follows:
|
Financial Commitments (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Borrowings |
Long-term borrowings were as follows:
|
Stock Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock-Based Instruments |
The Company issued the following stock-based instruments:
|
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Summary of Unvested Shares |
A summary of the status and changes of the Company’s unvested shares is presented below:
|
Earnings Per Share (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Calculation of EPS |
The calculation of EPS is as follows:
|
Segment and Geographic Information (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Information |
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|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Geographic Information |
The following summarizes the Company’s assets by segment and geographic area for the periods indicated:
|
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Summary of Accounts Receivables Excluding the Allowance for Bad Debts Sales Returns and Chargebacks |
The Company’s accounts receivables, excluding the allowance for bad debts, sales returns and chargebacks, in different geographic areas are summarized as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Company's Top Five Manufacturers Produced, as Percentage of Total Production |
For the periods presented below, the Company’s top five manufacturers produced, as a percentage of total production, the following:
|
General - Additional Information (Detail) $ in Millions |
1 Months Ended | 3 Months Ended |
---|---|---|
Mar. 31, 2021
USD ($)
Derivative
|
Mar. 31, 2021
Derivative
|
|
Schedule Of Organization And Summary Of Significant Accounting Policies [Line Items] | ||
Change in accounting principle, accounting standards update, adopted | true | true |
Change in accounting principle, accounting standards update, adoption date | Jan. 01, 2021 | Jan. 01, 2021 |
Change in accounting principle, accounting standards update, immaterial effect | true | true |
Accounting Standards Update [Extensible List] | us-gaap:AccountingStandardsUpdate201912Member | |
Interest Rate Swap [Member] | Level 2 [Member] | ||
Schedule Of Organization And Summary Of Significant Accounting Policies [Line Items] | ||
Number of derivative instrument | Derivative | 1 | 1 |
Skechers Hong Kong Limited [Member] | ||
Schedule Of Organization And Summary Of Significant Accounting Policies [Line Items] | ||
Purchase of joint venture | $ | $ 10.0 |
Cash, Cash Equivalents, Short-Term and Long-Term Investments - Additional Information (Detail) |
3 Months Ended |
---|---|
Mar. 31, 2021 | |
Maximum [Member] | |
Cash Cash Equivalents Short Term And Long Term Investments [Line Items] | |
Long-term investments maturity period | 2 years |
Accrued Expenses - Summary of Accrued Expenses (Detail) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Payables And Accruals [Abstract] | ||
Accrued payroll, taxes, and other | $ 71,013 | $ 104,004 |
Return reserve liability | 77,675 | 77,219 |
Accrued inventory purchases | 35,421 | 27,489 |
Accrued expenses | $ 184,109 | $ 208,712 |
Financial Commitments - Long-Term Borrowings (Detail) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Debt Instrument [Line Items] | ||
Long-term borrowings | $ 778,537 | $ 731,665 |
Less: Current installments | (60,942) | (52,250) |
Long-term borrowings, excluding current installments | 717,595 | 679,415 |
China Operational Loans [Member] | ||
Debt Instrument [Line Items] | ||
Long-term borrowings | 80,497 | 48,743 |
China Distribution Center Construction Loan [Member] | ||
Debt Instrument [Line Items] | ||
Long-term borrowings | 78,302 | 77,501 |
Other [Member] | ||
Debt Instrument [Line Items] | ||
Long-term borrowings | 1,201 | 1,247 |
2019 Credit Agreement [Member] | Revolving Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Long-term borrowings | 452,500 | 452,500 |
HF-T1 Distribution Center Loan [Member] | ||
Debt Instrument [Line Items] | ||
Long-term borrowings | 129,505 | 129,505 |
HF-T2 Distribution Center Construction Loan [Member] | ||
Debt Instrument [Line Items] | ||
Long-term borrowings | $ 36,532 | $ 22,169 |
Stock Compensation - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Performance-Based Awards [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Performance period | 3 years | |
Performance-Based Awards [Member] | Minimum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Payout percentage of performance awards | 0.00% | |
Performance-Based Awards [Member] | Maximum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Payout percentage of performance awards | 200.00% | |
2017 Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares that remain available for grant | 5,121,800 | |
Recognized compensation expense | $ 12.0 | $ 12.4 |
Unrecognized compensation cost related to nonvested common shares | $ 92.9 | |
Weighted average period for recognition of cost | 2 years 21 days |
Stock Compensation - Summary of Stock-Based Instruments (Detail) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted, shares | 623,750 | |
Weighted-Average Grant-Date Fair Value, shares | $ 42.01 | |
Restricted Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted, shares | 406,250 | 1,013,500 |
Weighted-Average Grant-Date Fair Value, shares | $ 39.53 | $ 36.96 |
Performance-Based Restricted Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted, shares | 108,750 | |
Weighted-Average Grant-Date Fair Value, shares | $ 38.95 | |
Market-Based Restricted Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted, shares | 108,750 | |
Weighted-Average Grant-Date Fair Value, shares | $ 54.34 |
Stock Compensation - Summary of Unvested Shares (Detail) |
3 Months Ended |
---|---|
Mar. 31, 2021
$ / shares
shares
| |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Unvested, Shares, Beginning of Period | shares | 3,112,023 |
Granted, Shares | shares | 623,750 |
Vested, Shares | shares | (487,550) |
Cancelled, Shares | shares | (8,500) |
Unvested, Shares, End of Period | shares | 3,239,723 |
Unvested, Weighted Average Grant-Date Fair Value, Beginning of Period | $ / shares | $ 35.06 |
Granted, Weighted Average Grant-Date Fair Value | $ / shares | 42.01 |
Vested, Weighted Average Grant-Date Fair Value | $ / shares | 36.59 |
Cancelled, Weighted Average Grant-Date Fair Value | $ / shares | 37.31 |
Unvested, Weighted Average Grant-Date Fair Value, End of Period | $ / shares | $ 36.16 |
Earnings Per Share - Summary of Calculation of EPS (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Earnings Per Share [Abstract] | ||
Net earnings attributable to Skechers U.S.A., Inc. | $ 98,573 | $ 49,101 |
Weighted-average common shares outstanding, basic | 154,818 | 153,555 |
Dilutive effect of nonvested shares | 1,118 | 1,097 |
Weighted-average common shares outstanding, diluted | 155,936 | 154,652 |
Anti-dilutive common shares excluded above | 52,792 | 36,766 |
Net earnings attributable to Skechers U.S.A., Inc. per common share | ||
Basic | $ 0.64 | $ 0.32 |
Diluted | $ 0.63 | $ 0.32 |
Income Taxes - Additional Information (Detail) |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Schedule Of Income Taxes [Line Items] | ||
U.S. federal and state statutory rate | 24.50% | |
Effective tax rate | 20.20% | 15.30% |
Foreign Jurisdictions [Member] | Minimum [Member] | ||
Schedule Of Income Taxes [Line Items] | ||
Statutory federal rate | 0.00% | |
Foreign Jurisdictions [Member] | Maximum [Member] | ||
Schedule Of Income Taxes [Line Items] | ||
Statutory federal rate | 34.00% |
Related Party Transactions - Additional Information (Detail) |
1 Months Ended | 3 Months Ended | |
---|---|---|---|
Mar. 31, 2021
USD ($)
Property
|
Mar. 31, 2021
USD ($)
Property
|
Mar. 31, 2020
USD ($)
|
|
Management [Member] | |||
Related Party Transaction [Line Items] | |||
Contribution to Skechers Foundation for various charitable purposes | $ 500,000 | $ 500,000 | |
Entity Controlled by President [Member] | |||
Related Party Transaction [Line Items] | |||
Number of purchased properties | Property | 2 | 2 | |
Purchases during the period | $ 2,700,000 |
Segment and Geographic Information - Additional Information (Detail) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021
USD ($)
Segment
Customer
|
Mar. 31, 2020
USD ($)
Customer
|
Dec. 31, 2020
USD ($)
|
|
Segment Reporting Information [Line Items] | |||
Number of reportable segments | Segment | 3 | ||
Credit losses attributable to expense | $ 7,348 | $ 26,277 | |
Non-US [Member] | |||
Segment Reporting Information [Line Items] | |||
Net assets held outside the United States | 3,700,000 | $ 3,100,000 | |
Credit losses attributable to expense | $ 6,300 | $ 1,500 | |
Sales [Member] | Customer Concentration Risk [Member] | |||
Segment Reporting Information [Line Items] | |||
Number of largest customers | Customer | 5 | 5 | |
Percentage of concentration risk | 9.50% | 11.40% |
Segment and Geographic Information - Geographic Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
|
Segment Reporting Information [Line Items] | |||
Sales | $ 1,428,418 | $ 1,242,345 | |
Property, plant and equipment, net | |||
Property, plant and equipment, net | 992,512 | $ 935,441 | |
Domestic [Member] | |||
Segment Reporting Information [Line Items] | |||
Sales | 602,117 | 555,174 | |
Property, plant and equipment, net | |||
Property, plant and equipment, net | 588,542 | 535,648 | |
International [Member] | |||
Segment Reporting Information [Line Items] | |||
Sales | 826,301 | $ 687,171 | |
Property, plant and equipment, net | |||
Property, plant and equipment, net | $ 403,970 | $ 399,793 |
Segment and Geographic Information - Geographic Information (Parenthetical) (Detail) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
|
Segment Reporting Information [Line Items] | |||
Sales | $ 1,428,418 | $ 1,242,345 | |
Property, plant and equipment, net | 992,512 | $ 935,441 | |
China [Member] | |||
Segment Reporting Information [Line Items] | |||
Sales | 250,600 | $ 91,000 | |
Property, plant and equipment, net | $ 245,400 | $ 241,600 |
Segment and Geographic Information - Summary of Accounts Receivables Excluding the Allowance for Bad Debts Sales Returns and Chargebacks (Detail) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Domestic [Member] | ||
Segment Reporting Information [Line Items] | ||
Accounts receivable | $ 314,131 | $ 230,546 |
Non-US [Member] | ||
Segment Reporting Information [Line Items] | ||
Accounts receivable | $ 532,173 | $ 437,816 |
Segment and Geographic Information - Company's Top Five Manufacturers Produced, as Percentage of Total Production (Detail) - Cost of Goods, Total [Member] - Supplier Concentration Risk [Member] |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Segment Reporting Information [Line Items] | ||
Percentage of Total Production | 37.50% | 46.70% |
Manufacturer One [Member] | ||
Segment Reporting Information [Line Items] | ||
Percentage of Total Production | 18.60% | 24.90% |
Manufacturer Two [Member] | ||
Segment Reporting Information [Line Items] | ||
Percentage of Total Production | 5.00% | 7.50% |
Manufacturer Three [Member] | ||
Segment Reporting Information [Line Items] | ||
Percentage of Total Production | 4.80% | 6.70% |
Manufacturer Four [Member] | ||
Segment Reporting Information [Line Items] | ||
Percentage of Total Production | 4.80% | 3.90% |
Manufacturer Five [Member] | ||
Segment Reporting Information [Line Items] | ||
Percentage of Total Production | 4.30% | 3.70% |
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