Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

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.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of ~~October~~July 28, ~~2022, 134,212,238~~2023 134,368,462 shares of the registrant’s Class A Common Stock, $0.001 par value per share, were outstanding.

As of ~~October~~July 28, ~~2022, 20,888,571~~2023 20,385,569 shares of the registrant’s Class B Common Stock, $0.001 par value per share, were outstanding.

See accompanying notes to unaudited condensed consolidated financial statements.

	Shares						Amount								Accumulated
	Class A			Class B			Class A			Class B		Additional			other					Skechers						Total
	Common			Common			Common			Common		paid-in			comprehensive			Retained		U.S.A., Inc.			Noncontrolling			stockholders'			Shares						Amount								Accumulated
(in thousands)	Stock			Stock			Stock			Stock		capital			loss			earnings		equity			interests			equity			Class A Common Stock			Class B Common Stock			Class A Common Stock			Class B Common Stock		Additional paid–in capital			other comprehensive loss			Retained earnings		Skechers U.S.A., Inc. equity			Noncontrolling interests			Total stockholders' equity
Balance at June 30, 2022		134,845			20,889		$	135		$	21	$	402,360		$	(75,784	)	$	3,089,530	$	3,416,262		$	301,842		$	3,718,104
Balance at March 31, 2023																														134,259			20,474		$	134		$	20	$	383,540		$	(80,217	)	$	3,411,374	$	3,714,851		$	331,444		$	4,046,295
Net earnings		—			—			—			—		—			—			85,886		85,886			8,448			94,334			—			—			—			—		—			—			152,759		152,759			28,824			181,583
Foreign currency translation adjustment		—			—			—			—		—			(28,542	)		—		(28,542	)		(14,346	)		(42,888	)		—			—			—			—		—			(7,490	)		—		(7,490	)		(8,654	)		(16,144	)
Distributions to noncontrolling interests		—			—			—			—		—			—			—		—			(8,891	)		(8,891	)
Net unrealized gain on derivative contract		—			—			—			—		—			—			—		—			3,113			3,113			—			—			—			—		—			—			—		—			499			499
Stock compensation expense		—			—			—			—		10,223			—			—		10,223			—			10,223			—			—			—			—		17,716			—			—		17,716			—			17,716
Proceeds from the employee stock purchase plan																														148			—			—			—		5,402			—			—		5,402			—			5,402
Shares issued under the incentive award plan		10			—			—			—		—			—			—		—			—			—			713			—			1			—		(1	)		—			—		—			—			—
Shares redeemed for employee tax withholdings		(4	)		—			—			—		(112	)		—			—		(112	)		—			(112	)		(260	)		—			—			—		(13,877	)		—			—		(13,877	)		—			(13,877	)
Repurchases of common stock		(639	)		—			(1	)		—		(25,012	)		—			—		(25,013	)		—			(25,013	)		(579	)		—			(1	)		—		(30,011	)		—			—		(30,012	)		—			(30,012	)
Balance at September 30, 2022		134,212			20,889		$	134		$	21	$	387,459		$	(104,326	)	$	3,175,416	$	3,458,704		$	290,166		$	3,748,870
Conversion of Class B Common Stock into Class A Common Stock																														10			(10	)		—			—		—			—			—		—			—			—
Balance at June 30, 2023																														134,291			20,464		$	134		$	20	$	362,769		$	(87,707	)	$	3,564,133	$	3,839,349		$	352,113		$	4,191,462

Balance at June 30, 2021		134,884			20,949		$	135		$	21	$	395,951		$	(34,990	)	$	2,372,342	$	2,733,459		$	280,645		$	3,014,104
Balance at March 31, 2022																														134,829			20,939		$	135		$	21	$	415,357		$	(46,822	)	$	2,999,126	$	3,367,817		$	298,099		$	3,665,916
Net earnings		—			—			—			—		—			—			103,139		103,139			13,562			116,701			—			—			—			—		—			—			90,404		90,404			15,756			106,160
Foreign currency translation adjustment		—			—			—			—		—			(9,520	)		—		(9,520	)		(3,507	)		(13,027	)		—			—			—			—		—			(28,962	)		—		(28,962	)		(13,267	)		(42,229	)
Contributions from noncontrolling interests		—			—			—			—		—			—			—		—			6,717			6,717
Distributions to noncontrolling interests		—			—			—			—		—			—			—		—			(7,126	)		(7,126	)
Net unrealized gain on derivative contract		—			—			—			—		—			—			—		—			200			200			—			—			—			—		—			—			—		—			1,254			1,254
Stock compensation expense		—			—			—			—		14,664			—			—		14,664			—			14,664			—			—			—			—		15,828			—			—		15,828			—			15,828
Proceeds from the employee stock purchase plan																														144			—			—			—		4,836			—			—		4,836			—			4,836
Shares issued under the incentive award plan		14			—			—			—		—			—			—		—			—			—			692			—			1			—		(1	)		—			—		—			—			—
Shares redeemed for employee tax withholdings		(5	)		—			—			—		(239	)		—			—		(239	)		—			(239	)		(234	)		—			—			—		(9,429	)		—			—		(9,429	)		—			(9,429	)
Repurchases of common stock																														(636	)		—			(1	)		—		(24,231	)		—			—		(24,232	)		—			(24,232	)
Conversion of Class B Common Stock into Class A Common Stock		10			(10	)		—			—		—			—			—		—			—			—			50			(50	)		—			—		—			—			—		—			—			—
Balance at September 30, 2021		134,903			20,939		$	135		$	21	$	410,376		$	(44,510	)	$	2,475,481	$	2,841,503		$	290,491		$	3,131,994
Balance at June 30, 2022																														134,845			20,889		$	135		$	21	$	402,360		$	(75,784	)	$	3,089,530	$	3,416,262		$	301,842		$	3,718,104

See accompanying notes to unaudited condensed consolidated financial statements.

	Shares						Amount								Accumulated
	Class A			Class B			Class A			Class B		Additional			other					Skechers						Total
	Common			Common			Common			Common		paid-in			comprehensive			Retained		U.S.A., Inc.			Noncontrolling			stockholders'			Shares						Amount									Accumulated
(in thousands)	Stock			Stock			Stock			Stock		capital			loss			earnings		equity			interests			equity			Class A Common Stock			Class B Common Stock			Class A Common Stock			Class B Common Stock			Additional paid–in capital			other comprehensive loss			Retained earnings		Skechers U.S.A., Inc. equity			Noncontrolling interests			Total stockholders' equity
Balance at December 31, 2022																														134,473			20,810		$	134		$	21		$	403,799		$	(84,897	)	$	3,250,931	$	3,569,988		$	301,598		$	3,871,586
Net earnings																														—			—			—			—			—			—			313,202		313,202			58,665			371,867
Foreign currency translation adjustment																														—			—			—			—			—			(2,810	)		—		(2,810	)		(6,483	)		(9,293	)
Distributions to noncontrolling interests																														—			—			—			—			—			—			—		—			(750	)		(750	)
Net unrealized loss on derivative contract																														—			—			—			—			—			—			—		—			(917	)		(917	)
Stock compensation expense																														—			—			—			—			31,968			—			—		31,968			—			31,968
Proceeds from the employee stock purchase plan																														148			—			—			—			5,402			—			—		5,402			—			5,402
Shares issued under the incentive award plan																														938			—			1			—			(1	)		—			—		—			—			—
Shares redeemed for employee tax withholdings																														(358	)		—			—			—			(18,375	)		—			—		(18,375	)		—			(18,375	)
Repurchases of common stock																														(1,256	)		—			(2	)		—			(60,024	)		—			—		(60,026	)		—			(60,026	)
Conversion of Class B Common Stock into Class A Common Stock																														346			(346	)		1			(1	)		—			—			—		—			—			—
Balance at June 30, 2023																														134,291			20,464		$	134		$	20		$	362,769		$	(87,707	)	$	3,564,133	$	3,839,349		$	352,113		$	4,191,462

Balance at December 31, 2021		135,107			20,939		$	135		$	21	$	429,608		$	(48,323	)	$	2,877,903	$	3,259,344		$	282,728		$	3,542,072			135,107			20,939		$	135		$	21		$	429,608		$	(48,323	)	$	2,877,903	$	3,259,344		$	282,728		$	3,542,072
Net earnings		—			—			—			—		—			—			297,513		297,513			39,147			336,660			—			—			—			—			—			—			211,627		211,627			30,699			242,326
Foreign currency translation adjustment		—			—			—			—		—			(56,003	)		—		(56,003	)		(27,625	)		(83,628	)		—			—			—			—			—			(27,461	)		—		(27,461	)		(13,279	)		(40,740	)
Distributions to noncontrolling interests		—			—			—			—		—			—			—		—			(13,541	)		(13,541	)		—			—			—			—			—			—			—		—			(4,650	)		(4,650	)
Net unrealized gain on derivative contract		—			—			—			—		753			—			—		753			9,457			10,210			—			—			—			—			753			—			—		753			6,344			7,097
Stock compensation expense		—			—			—			—		44,018			—			—		44,018			—			44,018			—			—			—			—			33,796			—			—		33,796			—			33,796
Proceeds from the employee stock purchase plan		144			—			—			—		4,836			—			—		4,836			—			4,836			144			—			—			—			4,836			—			—		4,836			—			4,836
Shares issued under the incentive award plan		1,268			—			1			—		(1	)		—			—		—			—			—			1,258			—			1			—			(1	)		—			—		—			—			—
Shares redeemed for employee tax withholdings		(430	)		—			—			—		(17,512	)		—			—		(17,512	)		—			(17,512	)		(427	)		—			—			—			(17,401	)		—			—		(17,401	)		—			(17,401	)
Repurchases of common stock		(1,927	)		—			(2	)		—		(74,243	)		—			—		(74,245	)		—			(74,245	)		(1,287	)		—			(1	)		—			(49,231	)		—			—		(49,232	)		—			(49,232	)
Conversion of Class B Common Stock into Class A Common Stock		50			(50	)		—			—		—			—			—		—			—			—			50			(50	)		—			—			—			—			—		—			—			—
Balance at September 30, 2022		134,212			20,889		$	134		$	21	$	387,459		$	(104,326	)	$	3,175,416	$	3,458,704		$	290,166		$	3,748,870

Balance at December 31, 2020		133,618			21,016		$	134		$	21	$	372,165		$	(27,285	)	$	2,136,400	$	2,481,435		$	244,228		$	2,725,663
Net earnings		—			—			—			—		—			—			339,081		339,081			53,952			393,033
Foreign currency translation adjustment		—			—			—			—		—			(17,225	)		—		(17,225	)		(5,295	)		(22,520	)
Contributions from noncontrolling interests		—			—			—			—		—			—			—		—			6,731			6,731
Distributions to noncontrolling interests		—			—			—			—		—			—			—		—			(7,876	)		(7,876	)
Purchase of noncontrolling interest		—			—			—			—		(6,856	)		—			—		(6,856	)		(3,072	)		(9,928	)
Net unrealized gain on derivative contract		—			—			—			—		—			—			—		—			1,823			1,823
Stock compensation expense		—			—			—			—		41,350			—			—		41,350			—			41,350
Proceeds from the employee stock purchase plan		141			—			—			—		4,027			—			—		4,027			—			4,027
Shares issued under the incentive award plan		1,073			—			1			—		(1	)		—			—		—			—			—
Shares redeemed for employee tax withholdings		(6	)		—			—			—		(309	)		—			—		(309	)		—			(309	)
Conversion of Class B Common Stock into Class A Common Stock		77			(77	)		—			—		—			—			—		—			—			—
Balance at September 30, 2021		134,903			20,939		$	135		$	21	$	410,376		$	(44,510	)	$	2,475,481	$	2,841,503		$	290,491		$	3,131,994
Balance at June 30, 2022																														134,845			20,889		$	135		$	21		$	402,360		$	(75,784	)	$	3,089,530	$	3,416,262		$	301,842		$	3,718,104

See accompanying notes to unaudited condensed consolidated financial statements.

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, ~~2021~~2022 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 ~~2021~~2022 Annual Report on Form 10-K. Certain reclassifications have been made to the condensed consolidated financial statements in prior years to conform to the current year ~~presentation, including but not limited to combining royalty income into sales.~~presentation.

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 U.S. Treasury securities, corporate notes and bonds, asset-backed securities and ~~asset-backed~~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.~~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. Included in long-term investments on the Condensed Consolidated Balance Sheets are company owned life insurance contracts of $48.6 million and $46.5 million as of June 30, 2023 and December 31, 2022. Interest income was $5.2 million and $1.6 million for three months ended June 30, 2023 and 2022, and $7.9 million and $2.7 million for six months ended June 30, 2023 and 2022.

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.

As of

As of

(in thousands)

September 30, 2022

December 31, 2021

Accrued payroll, taxes, and other

$
156,112

$
143,295

Return reserve liability

64,207

68,944

Accrued inventory purchases

41,258

53,181

Accrued expenses

$
261,577

$
265,420

(4)

Financial Commitments

~~(4)~~

~~Financial Commitments~~

The Company had ~~$2.8~~$3.1 million and $2.7 ~~and $17.2~~ million ~~of outstanding~~ letters of credit as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, and approximately ~~$31.0~~$36.7 million and ~~$1.2~~$19.6 million in short-term borrowings as of ~~September~~June 30, ~~2022,~~2023 and December 31, ~~2021.~~2022. Interest expense was ~~$5.1~~$6.0 million and ~~$3.3~~$4.6 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~ 2022,and ~~$14.1~~$11.1 million and ~~$10.9~~$9.1 million for ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

Long-term borrowings were as follows:

As of

As of

(in thousands)

September 30, 2022

December 31, 2021

HF-T1 Distribution Center Loan

$
129,505

$
129,505

HF-T2 Distribution Center Construction Loan

72,098

57,227

China Distribution Center Construction Loan

92,308

75,621

China Operational Loans

60,588

69,796

Other

7,936

8,263

Subtotal

362,435

340,412

Less: Current installments

136,930

76,967

Total long-term borrowings

$
225,505

$
263,445


	As of		As of
(in thousands)	June 30, 2023		December 31, 2022
HF-T1 Distribution Center Loan	$	129,505	$	129,505
HF-T2 Distribution Center Construction Loan		73,017		72,098
China Distribution Center Construction Loan		19,255		41,329
China Distribution Center Expansion Construction Loan		34,015		14,507
China Operational Loans		53,051		54,361
Other		4,308		7,872
Subtotal		313,151		319,672
Less: Current installments		76,388		103,184
Total long-term borrowings	$	236,763	$	216,488

Revolving Credit Facility

The Company maintains a revolving credit facility to manage ~~liquidity;~~liquidity, including working capital and capital expenditures. On December 15, 2021, the Company amended its ~~$500.0~~$500.0 million senior, unsecured revolving credit agreement dated November 21, 2019 (the “Amended Credit Agreement”). The Amended Credit Agreement expands its senior, unsecured credit facility to ~~$750.0~~$750.0 million, which may be increased by up to ~~$250.0~~$250.0 million under certain conditions and provides for the issuance of letters of credit up to a maximum of ~~$100.0~~$100.0 million and swingline loans up to a maximum of ~~$50.0~~$50.0 million. The Amended Credit Agreement extends the maturity date of the credit agreement, which was due to expire on November 21, 2024, to December 15, 2026. As of ~~September~~June 30, ~~2022,~~2023, there was ~~$25.0 million~~no outstanding balance under the revolving credit facility which is included in the short-term borrowings on the condensed consolidated balance sheets, and the weighted-average annual interest rate on borrowings was approximately 2.03% during the nine months ended September 30, 2022.facility. The unused credit capacity was ~~$722.2~~$746.9 million and ~~$732.8~~$747.3 million as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

The Company is required to maintain a maximum total adjusted net leverage ratio of ~~3.75:~~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:~~4.25:1 for the quarter in which such acquisition occurs and for the next three quarters thereafter. The Company was in compliance with the financial covenants as of ~~September~~June 30, 2023.

In addition, the Company had $36.7 million and $19.6 million outstanding under short-term borrowings as of June 30, 2023 and December 31, 2022. Included in these amounts are $30.8 million and $14.5 million as of June 30, 2023 and December 31, 2022, related to our subsidiary in India, which has a line of credit of $.42.9 million and $34.1 million as of June 30, 2023 and December 31, 2022, and a weighted average interest rate of 8.7% for the six months ended June 30, 2023.

HF-T1 Distribution Center Loan

To finance construction and improvements to the Company’s North American distribution center, thethe 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~~$129.5 million construction loan agreement which matures on March 18, 2025 (the “HF-T1 2020 Loan”) with interest of ~~LIBOR~~SOFR Daily Floating Rate plus a margin of ~~1.75%~~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. 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~~N.A. with a maturity date of March 18, ~~2025.~~2025. The Swap Agreement Amendment fixes the effective interest rate on the HF-T1 2020 Loan at ~~2.55%~~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 revolving credit facility. The obligations of the JV under this loan are guaranteed by HF.

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. During the second quarter of 2023, the Company amended certain terms of our loan agreement with Bank of America and the related interest rate swap to replace the LIBOR with the daily SOFR as part of our planned reference rate reform activities. As of both ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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%~~0.778% on the notional amount and receive payments from the counterparty based on the 30-day ~~LIBOR~~SOFR rate, effectively modifying the Company’s exposure to interest rate risk by converting floating-rate debt to a fixed rate of ~~4.08%~~2.63%.

HF-T2 Distribution Center Construction Loan

To finance the expansion of the Company’s North American distribution center, the JV, through HF Logistics-SKX T2, LLC, a wholly-owned subsidiary of the JV (“HF-T2”) entered into a construction loan agreement of up to ~~$73.0~~$73.0 million which matures on April 3, ~~2025.~~ 2025. Under the 2020 Construction Loan Agreement, the interest rate per annum on the HF-T2 2020 Construction Loan ~~is BSBY~~ based on the Bloomberg Short-Term Bank Yield Index (“BSBY”) Daily Floating Rate (as defined therein) plus a margin of 190 basis points, reducing to 175 basis points upon substantial completion of the construction and certain other conditions being satisfied.The weighted-average annual interest rate on borrowings under the HF-T2 Distribution Center Construction Loan was approximately ~~3.27%~~6.63% during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023. 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

TheThe Company entered into a 700.0 million yuan loan agreement to finance the construction of its distribution center in China which matures on September 28, ~~2023.~~ 2023. The interest rate at ~~September~~June 30, ~~2022~~2023 was ~~4.00%~~4.00% 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 is 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 ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the outstanding balance under this loan included approximately ~~$92.3~~$19.3 million and ~~$28.2~~$41.3 million classified as current installments of long-term ~~borrowings in the Company’s condensed consolidated balance sheets.~~ borrowings.

China Distribution Center Expansion Construction Loan ~~(Subsequent Event)~~

On October 18, 2022, the Company entered into a loan agreement for 1.1 billion yuan with Bank of China Co., Ltd to finance the construction of its distribution center expansion in China. Interest is paid quarterly. The interest rate at ~~October 18, 2022~~June 30, 2023 was ~~3.4%~~3.4% and may increase or decrease over the life of the loan, and will be evaluated every 12 months. This loan matures 10 years from the initial receipt of funds. Beginning in 2026, the principal of the loan will be repaid in semi-annual installments of variable amounts. The obligations of this loan entered through the Company’s Taicang Subsidiary are jointly and severally guaranteed by the Company’s China joint venture.

China Operational Loans

The Company has ~~entered~~ certain secured credit facilities to support the operations of its China joint venture. The balance of working capital loans was approximately ~~$46.6~~$53.1 million with interest rates ranging from ~~3.00%~~2.90% to ~~4.30%~~3.00% per annum as of ~~September~~June 30, ~~2022.~~2023. The balance of working capital loans as of December 31, ~~2021~~2022 was approximately ~~$52.6~~$54.4 million with interest rates ranging from ~~1.00%~~2.90% to ~~3.70%~~3.41% per annum. The ~~balance of loans related to a corporate office building in Shanghai was approximately $14.0~~million, with interest at 4.13% per annum, as of September 30, 2022 and $17.2 million as of December 31, 2021, with interest at 4.28% per annum, payable at terms agreed by the lender. As of September 30, 2022 the outstanding balances under these working capital loans are classified as current ~~borrowings in the Company’s condensed consolidated balance sheets included $32.9 million related to the working capital loans~~installments of long-term borrowings.

(5)

Stockholders Equity and ~~$4.2 million related to the office building loans.~~ As of December 31, 2021, the outstanding balances classified as current borrowings in the Company’s condensed consolidated balance sheets included $37.6 million related to the working capital loans and $4.0 million related to the office building loans.

Stock Compensation

~~(5)~~

~~Stockholders Equity and Stock Compensation~~

SHARE REPURCHASE PROGRAM

On January 31, 2022, the Company’s Board of Directors authorized a share repurchase program (the “Share Repurchase Program”), pursuant to which the Company may, from time to time, purchase shares of its Class A common stock, for an aggregate repurchase price not to exceed ~~$500~~$500 million. The Share Repurchase Program expires on January 31, 2025 and does not obligate the Company to acquire any particular amount of shares. As of ~~September~~June 30, ~~2022~~,2023, there was ~~$425.8~~$365.7 million remaining to repurchase shares under the Share Repurchase Program.

The following table provides a summary the Company’s stock repurchase activities:

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Shares repurchased

639,295

—

1,926,781

—

Average cost per share

$
39.13

$
—

$
38.53

$
—

Total cost of shares repurchased (in thousands)

$
25,013

$
—

$
74,245

$
—


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Shares repurchased		579,475		635,712		1,255,665		1,287,486
Average cost per share	$	51.79	$	38.12	$	47.80	$	38.24
Total cost of shares repurchased (in thousands)	$	30,012	$	24,232	$	60,026	$	49,232

INCENTIVE AWARD PLAN

On April 6, 2023, the Company's Board of Directors adopted the 2023 Incentive Award Plan (the "2023 Plan"), which became effective upon approval by the Company's stockholders on June 12, 2023. The 2023 Plan replaced and superseded in its entirety the 2017 Plan. A total of 7,500,000 shares of Class A Common Stock are reserved for issuance under the 2023 Plan, which provides for the grants of ISOs, non-qualified stock options, restricted stock and various other types of equity awards as described in the plan to the employees, consultants, and directors of the Company. The 2023 Plan is administered by the Company's Board of Directors with respect to awards to non-employee directors and by the Company's Compensation Committee with respect to other eligible participants.

In the ~~nine~~six months ended ~~September~~June 30, ~~2022~~,2023, 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 earnings per share (“EPS”) growth. The vesting and ultimate payout of performance awards is determined at the end of the three-year performance period and can vary from zero to ~~200%~~200% based on actual results. As of ~~September~~June 30, ~~2022,~~2023, there were ~~2,782,132~~6,768,539 shares available for grant as equity awards under the ~~2017~~2023 Incentive Award Plan if target levels are achieved for performance-based awards and ~~2,082,132~~6,292,756 if maximum levels are achieved.

The Company issued the following stock-based instruments:


	Six Months Ended June 30,
	2023				2022
	Granted		Weighted-Average Grant-Date Fair Value		Granted		Weighted-Average Grant-Date Fair Value
Restricted stock		885,490	$	45.83		1,314,850	$	38.57
Performance-based restricted stock		121,225	$	43.34		116,250	$	42.46
Market-based restricted stock		121,225	$	59.71		116,250	$	58.85

Nine Months Ended September 30,

2022

2021

Granted

Weighted-Average Grant-Date Fair Value

Granted

Weighted-Average Grant-Date Fair Value

Restricted stock

1,380,650

$
38.43

699,300

$
43.40

Performance-based restricted stock

116,250

$
42.46

108,750

$
38.95

Market-based restricted stock

116,250

$
58.85

108,750

$
54.34

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, 2021

3,253,316

$
38.97

Granted

1,613,150

40.19

Vested

(1,266,281
)

36.07

Cancelled

(53,633
)

40.81

Unvested at September 30, 2022

3,546,552

$
40.53


	Shares			Weighted-Average Grant-Date Fair Value
Unvested at December 31, 2022		3,423,902		$	40.62
Granted		1,127,940			47.06
Vested		(938,237	)		38.96
Cancelled		(37,000	)		40.63
Unvested at June 30, 2023		3,576,605		$	43.08

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 with 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 ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company recognized $~~$9.7~~16.9 million and ~~$14.2~~$15.1 million of incentive stock compensation expense. For the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company recognized ~~$42.0~~$30.4 million and ~~$39.7~~$32.3 million of incentive stock compensation expense. As of ~~September~~June 30, ~~2022,~~2023, the unamortized stock compensation of $~~$98.0~~111.6 million is expected to be recognized over a weighted-average period of ~~2.01~~1.93 ~~years~~. years.

STOCK PURCHASE PLAN

A total of 5,000,000 shares of Class A Common Stock are available for sale under the 2018 Employee Stock Purchase Plan (“2018 ESPP”). The 2018 ESPP provides eligible employees of the Company and its subsidiaries the opportunity to purchase shares of the Company’s Class A Common Stock at a purchase price equal to ~~85%~~85% of the fair market value on the first trading day or last trading day of each purchase period, whichever is lower. Eligible employees can invest up to ~~15%~~15% of their compensation through payroll deductions during each purchase period. The purchase price discount and the look-back feature cause the 2018 ESPP to be compensatory and the Company recognizes compensation expense, which is computed using the Black-Scholes valuation model.

For the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~,2022, the Company recognized ~~$0.6~~$0.8 million and ~~$0.5~~$0.7 million of ESPP stock compensation expense. For the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company recognized ~~$2.1 million and $1.7~~$1.5 million of ESPP stock compensation expense. As of ~~September~~June 30, ~~2022~~,2023, there were ~~3,914,503~~3,667,869 shares available for sale under the 2018 ESPP.

(6)

Earnings Per Share

~~(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~~.method.

The calculation of EPS is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2023		2022		2023		2022
Net earnings attributable to Skechers U.S.A., Inc.	$	152,759	$	90,404	$	313,202	$	211,627

Weighted-average common shares outstanding, basic		154,970		155,941		155,055		155,969
Dilutive effect of nonvested shares		1,601		807		1,599		1,105
Weighted-average common shares outstanding, diluted		156,571		156,748		156,654		157,074
Anti-dilutive common shares excluded above		12		67		14		37
Net earnings per share attributable to Skechers U.S.A., Inc.
Basic	$	0.99	$	0.58	$	2.02	$	1.36
Diluted	$	0.98	$	0.58	$	2.00	$	1.35

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except per share data)

2022

2021

2022

2021

Net earnings attributable to Skechers U.S.A., Inc.

$
85,886

$
103,139

$
297,513

$
339,081

Weighted-average common shares outstanding, basic

155,420

155,835

155,783

155,413

Dilutive effect of nonvested shares

813

1,288

931

1,177

Weighted-average common shares outstanding, diluted

156,233

157,123

156,714

156,590

Anti-dilutive common shares excluded above

55

—

40

11

Net earnings per share attributable to Skechers U.S.A., Inc.

Basic

$
0.55

$
0.66

$
1.91

$
2.18

Diluted

$
0.55

$
0.66

$
1.90

$
2.17

(7)

Income Taxes

~~(7)~~

~~Income Taxes~~

The tax provisions for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022, 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%~~0% to ~~35.0%~~35%, which is on average significantly lower than the U.S. federal and state combined statutory rate of approximately ~~25%~~25%. The Company’s effective tax rate was ~~17.9%~~17.7% and ~~15.6%~~21.3% for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, and ~~19.8%~~18.1% and ~~19.0%~~20.6% for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. The ~~increase~~decrease for the quarterly ~~and nine-month~~ rates is ~~the result of~~ ~~revisions~~primarily due to the ~~estimated provision compared to the 2021 U.S. federal income tax return finalized in the current quarter and changes in the valuation allowance.~~positive impact of discrete items.

(8)

Related Party Transactions

~~(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 officers and directors of the Foundation. ~~The Company made contributions to the Foundation of $0.5 million and $1.5 million for~~During the three months ended ~~September~~June 30, 2023 and June 30, 2022, ~~and 2021, and $1.5~~the Company made contributions of $1.0 million and ~~$2.5~~$0.5 million, and contributions of $1.0 million for each of the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021. In March 2021, the~~June 30, 2022.

(9)

Segment and Geographic Information

The Company ~~purchased~~has 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.~~

~~(9)~~

~~Segment and Geographic Information~~

~~During the first quarter of 2022,~~ ~~the Company refined the way in which management assesses performance and allocates resources and now presents its~~ reportable ~~segment results as~~segments, Wholesale and Direct-to-Consumer. ~~Comparative periods have been recast to reflect these changes.~~ Management ~~continues to evaluate~~evaluates segment performance based primarily on sales and gross margin. 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:

Segment Information


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2023			2022			2023			2022
Wholesale sales	$	1,073,019		$	1,140,325		$	2,367,576		$	2,391,631
Gross profit		431,551			414,479			943,550			869,439
Gross margin		40.2	%		36.3	%		39.9	%		36.4	%

Direct-to-Consumer sales	$	939,497		$	727,479		$	1,646,868		$	1,295,767
Gross profit		628,973			483,100			1,095,553			852,303
Gross margin		66.9	%		66.4	%		66.5	%		65.8	%

Total sales	$	2,012,516		$	1,867,804		$	4,014,444		$	3,687,398
Gross profit		1,060,524			897,579			2,039,103			1,721,742
Gross margin		52.7	%		48.1	%		50.8	%		46.7	%


(in thousands)	As of June 30, 2023		As of December 31, 2022
Identifiable assets
Wholesale	$	3,575,560	$	3,682,860
Direct-to-Consumer		3,532,097		3,210,627
Total	$	7,107,657	$	6,893,487


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Additions to property, plant and equipment
Wholesale	$	55,916	$	49,965	$	107,432	$	114,663
Direct-to-Consumer		20,296		24,148		39,993		48,848
Total	$	76,212	$	74,113	$	147,425	$	163,511

Three Months Ended September 30,

Nine Months Ended September 30,
(in thousands)

2022

2021

2022

2021

Wholesale sales

$
1,191,586

$
944,465

$
3,583,216

$
2,851,803

Gross profit

424,600

361,868

1,294,039

1,110,859

Gross margin

35.6
%

38.3
%

36.1
%

39.0
%

Direct-to-Consumer sales

$
686,781

$
614,011

$
1,982,549

$
1,802,999

Gross profit

459,335

415,095

1,311,638

1,205,355

Gross margin

66.9
%

67.6
%

66.2
%

66.9
%

Total sales

$
1,878,367

$
1,558,476

$
5,565,765

$
4,654,802

Gross profit

883,935

776,963

2,605,677

2,316,214

Gross margin

47.1
%

49.9
%

46.8
%

49.8
%

(in thousands)

As of
September 30, 2022

As of
December 31, 2021

Identifiable assets

Wholesale

$
3,700,436

$
3,816,513

Direct-to-Consumer

2,978,203

2,674,767

Total

$
6,678,639

$
6,491,280

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

2022

2021

2022

2021

Additions to property, plant and equipment

Wholesale

$
69,344

$
57,185

$
184,007

$
182,378

Direct-to-Consumer

30,776

32,222

79,624

53,248

Total

$
100,120

$
89,407

$
263,631

$
235,626

Geographic Information

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

2022

2021

2022

2021

Geographic sales

Domestic Wholesale

$
406,594

$
354,338

$
1,466,204

$
1,132,853

Domestic Direct-to-Consumer

339,174

294,906

898,131

849,339

Total domestic sales

745,768

649,244

2,364,335

1,982,192

International Wholesale

784,991

590,127

2,117,011

1,718,950

International Direct-to-Consumer

347,608

319,105

1,084,419

953,660

Total international sales

1,132,599

909,232

3,201,430

2,672,610

Total sales

$
1,878,367

$
1,558,476

$
5,565,765

$
4,654,802


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Geographic sales
Domestic Wholesale	$	390,783	$	521,041	$	832,685	$	1,059,610
Domestic Direct-to-Consumer		411,063		319,508		710,027		558,956
Total domestic sales		801,846		840,549		1,542,712		1,618,566

International Wholesale		682,236		619,284		1,534,891		1,332,021
International Direct-to-Consumer		528,434		407,971		936,841		736,811
Total international sales		1,210,670		1,027,255		2,471,732		2,068,832

Total sales	$	2,012,516	$	1,867,804	$	4,014,444	$	3,687,398


Regional Sales
Americas (AMER)	$	1,027,006	$	1,033,879	$	1,972,936	$	1,980,765
Europe, Middle East & Africa (EMEA)		433,351		374,566		967,845		815,767
Asia Pacific (APAC)		552,159		459,359		1,073,663		890,866
Total sales	$	2,012,516	$	1,867,804	$	4,014,444	$	3,687,398

China sales	$	302,401	$	254,917	$	584,354	$	527,948


(in thousands)	As of June 30, 2023		As of December 31, 2022
Property, plant and equipment, net
Domestic	$	901,797	$	870,924
International		515,428		474,446
Total	$	1,417,225	$	1,345,370

China property plant and equipment, net	$	280,463	$	264,422

Regional Sales

Americas (AMER)

$
947,987

$
815,786

$
2,928,752

$
2,396,644

Europe, Middle East & Africa (EMEA)

469,787

318,389

1,285,554

961,955

Asia Pacific (APAC)

460,593

424,301

1,351,459

1,296,203

Total sales

$
1,878,367

$
1,558,476

$
5,565,765

$
4,654,802

China sales

$
226,728

$
278,081

$
754,676

$
845,554

(in thousands)

As of
September 30, 2022

As of
December 31, 2021

Property, plant and equipment, net

Domestic

$
835,637

$
708,763

International

453,883

420,146

Total

$
1,289,520

$
1,128,909

China property plant and equipment, net

$
252,685

$
255,421

The Company’s sales to its five largest customers accounted for approximately ~~10.3%~~8.0% and ~~10.1%~~11.1% of total sales for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, and for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022 were 7.8% and ~~2021 were 10.2% and 9.0%~~10.2%.

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 ~~$4.1~~$4.8 billion and ~~$4.2~~$4.4 billion at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022. Goodwill of ~~$93.5~~$101.5 million and $93.5 million is included in the Wholesale ~~segment.~~segment as of June 30, 2023 and December 31, 2022.

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 additions to the provision for expected credit losses for the three months ended ~~September~~June 30, 2023 and 2022 ~~and 2021~~ were ~~$2.2~~$0.4 million and ~~$2.2~~$0.7 million, and for the~~the nine~~six months ended ~~September~~June 30, 2023 and 2022 ~~and~~ ~~2021~~were ~~$3.3~~$1.1 million and ~~$2.6 million~~$.1.0 million.

The Company’s accounts receivables, excluding allowances for bad debts ~~allowances~~ and chargebacks, by geography are summarized as follows:


(in thousands)	As of June 30, 2023		As of December 31, 2022
Domestic Accounts Receivable	$	331,663	$	310,138
International Accounts Receivable		677,039		597,621

(in thousands)

As of
September 30, 2022

As of
December 31, 2021

Domestic Accounts Receivable

$
357,634

$
270,404

International Accounts Receivable

635,092

525,073

The Company’s top five manufacturers produced the following:


	Three Months Ended June 30,				Six Months Ended June 30,
(percentage of total production)	2023		2022		2023		2022
Manufacturer #1		17.1		16.1		19.8	16.9
Manufacturer #2		7.1		6.3		6.5	5.6
Manufacturer #3		6.8		6.1		6.5	5.6
Manufacturer #4		6.1		6.0		5.7	5.1
Manufacturer #5		5.5		5.0		5.2	4.7
Total		42.6		39.5		43.7	37.9

Three Months Ended September 30,

Nine Months Ended September 30,

(percentage of total production)

2022

2021

2022

2021

Manufacturer #1

14.5

16.3

16.0

17.3

Manufacturer #2

7.8

6.3

6.4

5.8

Manufacturer #3

6.9

5.3

5.7

4.8

Manufacturer #4

6.0

4.8

5.5

4.8

Manufacturer #5

6.0

4.7

5.3

4.5

41.2

37.4

38.9

37.2

(10)

Commitments and Contingencies

~~(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 ~~September~~June 30, ~~2022,~~2023, 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.

(11)

Business Combinations

Business acquisitions are accounted for under the acquisition method by assigning the purchase consideration to tangible and intangible assets acquired and liabilities assumed. The results of businesses acquired in a business combination are included in the consolidated financial statements from the date of acquisition. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase consideration over the amounts assigned is recorded as goodwill. Purchased intangible assets with finite lives are amortized over their estimated useful lives. Fair value determinations require judgment and may involve the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives, and market multiples, among other items.

On May 31, 2023, the Company acquired 100% of the equity interests of Sports Connection Holdings ApS ("Sports Connection"), a Denmark-based company and a former distributor, to further broaden our reach in Europe. The total consideration is approximately $84.0 million and consisted of an initial cash payment of $74.8 million, the settlement of pre-existing receivables of $1.7 million and a contingent consideration payable of up to $7.5 million, subject to the acquiree achieving certain 2023 financial results. On the acquisition date, we recorded intangible assets of $54.4 million, goodwill of $8.0 million and other net assets of $21.6 million. The intangible assets have an estimated life of 7 years and are primarily related to reacquired rights. The acquisition is a non-taxable business combination and goodwill is not deductible for tax purposes.

The results of Sports Connection's operations have been included in, but are not material to, the Company's consolidated results of operations since the date of acquisition. Unaudited supplemental pro forma results of operations have not been presented because the effect of the acquisition was not material to the Company's condensed consolidated financial statements. One-time acquisition related costs of $1.4 million were expensed as general and administrative expenses as incurred.

The purchase accounting for the Sports Connection acquisition remains preliminary. Although the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, as well as any contingent consideration, the estimates are inherently uncertain and subject to refinement. As a result, any adjustments will be recognized in the reporting period in which the amounts are determined, but not to exceed twelve months from the acquisition date.

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~~notes thereto in Item 1 of this report and our annual report on Form 10-K for the year ended December 31, ~~2021.~~2022 and our quarterly report on Form 10-Q for the quarter ended March 31, 2023.

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 contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements with regards to future revenue, projected operating results, earnings, spending, margins, cash flow, orders, expected timing of shipment of products, inventory levels, future growth or success in specific countries, categories or market sectors, continued or expected distribution to specific retailers, liquidity, capital resources and market risk, strategies and objectives. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or simply state future results, performance or achievements, and can be identified by the use of forward-looking language such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will,” “could,” “may,” “might,” or any variations of such words with similar meanings. 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:

•

our ability to manage the impact from delays and disruptions in our supply chain;

•

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, health or trade conditions, or a natural disaster in China or Vietnam;

•

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;

•

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

•

global economic, political and market conditions including the effects of inflation and foreign currency exchange rate fluctuations around the world, the challenging consumer retail market in the United States and the impact of Russia’s war with Ukraine; and

•

other factors referenced or incorporated by reference in our annual report on Form 10-K for the year ended December 31, 2022 and our quarterly report on Form 10-Q for the quarter ended March 31, 2023 under the captions “Item 1A: Risk Factors” and “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

•

~~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 manage the impact from delays and disruptions in our supply chain;~~

•

~~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;

•

~~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;~~

•

~~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 effects of inflation around the world, challenging consumer retail market in the United States (“U.S.”) and the impact of Russia’s war with Ukraine; and

•

other factors referenced or incorporated by reference in our annual report on Form 10-K for the year ended December 31, 2021 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 of ~~$1.9~~$2.0 billion in the ~~third~~second quarter set a new quarterly record, reflecting the robust global demand for our product. ~~Sales increased across both~~Gross margins improved year-over-year to 52.7% and inventory was reduced by 18.3% from December 31, 2022. Our record sales, expanded gross margins and meaningfully improved inventory levels are an indication of the strength of our ~~segments compared to the same period in 2021. We delivered this global growth despite continued headwinds, including supply chain challenges, adverse foreign exchange rates,~~comfort technology products and ~~macroeconomic volatility.~~impactful marketing worldwide.

Our core product philosophy of comfort, style, innovation, and quality at ~~the right~~a reasonable price continues to resonate with consumers, and we remain focused on delivering our comfort technology footwear ~~as quickly as possible~~ to meet ~~the~~ consumer demand.

~~We remain confident in the strength of our brand and the relevance of our distinct product offering.~~ We continue to ~~invest for~~build efficiencies and expand our distribution capabilities around the world. We remain focused on executing against our long-term growth ~~with a focus on enhancing~~strategies and believe we are well positioned to meet our ~~global infrastructure, direct-to-consumer technologies and developing innovative footwear. Current global infrastructure investments, technology projects and activities include:~~sales goal of $10 billion by 2026.

On April 22, 2023, we released our first Impact Report. With one of America’s largest LEED Gold Certified facilities and our environmentally minded European Distribution Center, we are committed to reducing our impact on the world through green building design, operational efficiencies, and waste and water use reduction.

•

~~Expanding our e-commerce presence internationally.~~

•

~~Completing the expansion of our North American LEED Certified Gold distribution center and leasing additional warehouse space nearby to increase capacity.~~

•

~~Continuing development on our LEED Certified Gold corporate headquarters expansion and product design center.~~

RESULTS OF OPERATIONS – ~~THIRD~~SECOND QUARTER

~~During the first quarter of 2022, the Company realigned its reporting structure to~~We have two reportable segments, Wholesale and Direct-to-Consumer. ~~Prior period amounts have been recast.~~ Wholesale includes sales to department stores, family shoe stores, specialty running and sporting goods retailers, and big box club stores; franchisee and licensee third-party store operators; dedicated e-commerce retailers; and international distributors. Direct-to-Consumer includes direct sales to consumers through an integrated retail format of company-owned physical stores and digital platforms and hosted digital marketplaces in select international markets.

Selected information from our results of operations follows:


	Three Months Ended September 30,								Change						Three Months Ended June 30,							Change
(in thousands)	2022				2021				$			%			2023			2022				$			%
Sales	$	1,878,367			$	1,558,476				319,891			20.5		$	2,012,516		$	1,867,804				144,712			7.7
Cost of sales		994,432				781,513				212,919			27.2			951,992			970,225				(18,233	)		(1.9	)
Gross profit		883,935				776,963				106,972			13.8			1,060,524			897,579				162,945			18.2
Gross margin		47.1		%		49.9		%					(280	)bps		52.7	%		48.1		%					460 bps
Operating expenses
Selling		150,857				127,845				23,012			18.0			187,118			166,609				20,509			12.3
General and administrative		603,107				502,871				100,236			19.9			655,673			576,812				78,861			13.7
Total operating expenses		753,964				630,716				123,248			19.5			842,791			743,421				99,370			13.4
As a % of sales		40.1		%		40.5		%					(30	)bps		41.9	%		39.8		%					210 bps
Earnings from operations		129,971				146,247				(16,276	)		(11.1	)		217,733			154,158				63,575			41.2
Operating margin		6.9		%		9.4		%					(250	)bps		10.8	%		8.3		%					260 bps
Other expense		(15,139	)			(8,049	)			(7,090	)		88.1
Other income (expense)																2,792			(19,259	)			22,051		n/m
Earnings before income taxes		114,832				138,198				(23,366	)		(16.9	)		220,525			134,899				85,626			63.5
Income tax expense		20,498				21,497				(999	)		(4.6	)		38,942			28,739				10,203			35.5
Net earnings		94,334				116,701				(22,367	)		(19.2	)		181,583			106,160				75,423			71.0
Net earnings attributable to noncontrolling interests		8,448				13,562				(5,114	)		(37.7	)		28,824			15,756				13,068			82.9
Net earnings attributable to Skechers U.S.A., Inc.	$	85,886			$	103,139				(17,253	)		(16.7	)	$	152,759		$	90,404				62,355			69.0

~~Sales~~

Sales

Sales increased ~~$319.9~~$144.7 million, or ~~20.5%~~7.7%, to ~~$1.9~~$2.0 billion compared to ~~$1.6~~$1.9 billion as a result of a ~~14.9%~~17.9% increase ~~domestically~~internationally and a ~~24.6% increase internationally, primarily driven by strength in wholesale sales. Both segments experienced growth, with~~4.6% decrease domestically. Direct-to-Consumer increased 29.1% and Wholesale ~~growth of 26.2% and Direct-to-Consumer growth of 11.9%~~declined 5.9%. Sales increased overall due to ~~improved~~higher sales volume in Direct-to-Consumer and higher average selling ~~prices.~~prices in Wholesale.

Gross margin

Gross margin ~~decreased 280~~increased 460 basis points to ~~47.1%~~52.7% compared to ~~49.9%~~48.1%, ~~primarily~~ ~~the result of increased freight and logistics costs, and~~due to a higher proportion of ~~distributor~~Direct-to-Consumer sales ~~partially offset by~~and higher average selling ~~price increases~~prices..

Operating expenses

Operating expenses increased ~~$123.2~~$99.4 million, or ~~19.5%~~13.4%, to ~~$754.0~~$842.8 million, and as a percentage of sales ~~improved 30~~increased 210 basis points to ~~40.1%~~41.9% compared to ~~40.5%~~39.8% in the prior year. Selling expenses increased ~~$23.0~~$20.5 million, or ~~18.0%~~12.3%, to ~~$150.9~~$187.1 million, primarily due to higher ~~global digital and~~ brand demand creation expenditures. General and administrative expenses increased ~~$100.2~~$78.9 million, or ~~19.9%~~13.7%, to ~~$603.1 million, and as a percentage of sales improved 20 basis points to 32.1%. These~~$655.7 million. The increased expenses were primarily due to ~~higher~~increase in labor costs of ~~$56.5~~$35.7 million, ~~as a result~~facility related costs of ~~supply chain~~$23.2 million, including rent and ~~logistics challenges,~~depreciation, and ~~volume-driven~~ warehouse and distribution ~~expenses~~costs of ~~$25.0~~$10.2 million.

Other ~~expense~~income (expense)

Other income was $2.8 million for the three months ended June 30, 2023, as compared to an expense of ~~$15.1~~$19.3 million ~~increased $7.1~~for the three months ended June 30, 2022. The increase of $22.1 million was primarily due to ~~unfavorable losses~~favorable gains on foreign currency exchange ~~rates, primarily in Europe, Middle East & Africa.~~rates.

Income taxes

Income tax expense and the effective tax rate were as follows:


	Three Months Ended September 30,						Three Months Ended June 30,
(in thousands)	2022			2021			2023			2022
Income tax expense	$	20,498		$	21,497		$	38,942		$	28,739
Effective tax rate		17.9	%		15.6	%		17.7	%		21.3	%

Our income tax expense and effective income tax rate are significantly impacted by the mix of our domestic and foreign earnings before income taxes. In the foreign jurisdictions in which we have operations, the applicable statutory rates range from ~~0.0%~~0% to 35%, which on average is significantly lower than the U.S. federal and state combined statutory rate of approximately 25%. For the quarter, the ~~increase~~decrease in the effective tax rate is ~~the result of~~ ~~revisions~~primarily due to the ~~estimated provision compared to the 2021 U.S. federal income tax return finalized in the current quarter and changes in the valuation allowance.~~positive impact of discrete items.

Noncontrolling interests in net ~~income~~earnings of consolidated ~~joint ventures~~subsidiaries

Noncontrolling interests represents the share of net earnings that is attributable to our joint venture partners. Net earnings attributable to noncontrolling interests ~~decreased $5.1~~increased $13.1 million to ~~$8.4~~$28.8 million compared to ~~$13.6~~$15.8 million in the prior year, due to ~~lower~~higher earnings by our joint ventures, predominantly in China, ~~and partially offset by improvements~~due to impacts of COVID-related restrictions in ~~other Asia Pacific countries.~~the prior year.

RESULTS OF SEGMENT OPERATIONS – ~~THIRD~~SECOND QUARTER

Wholesale

Three Months Ended September 30,

2022 vs 2021 Change

2021 vs 2020 Change

(in thousands)

2022

2021

2020

$

%

$

%

Sales

$
1,191,586

$
944,465

$
842,741

247,121

26.2

101,724

12.1

Gross profit

424,600

361,868

344,403

62,732

17.3

17,465

5.1

Gross margin

35.6
%

38.3
%

40.9
%

(270
)bps

(260
)bps

~~2022 to 2021 Comparison~~


	Three Months Ended June 30,						Change
(in thousands)	2023			2022			$			%
Sales	$	1,073,019		$	1,140,325			(67,306	)		(5.9	)
Gross profit		431,551			414,479			17,072			4.1
Gross margin		40.2	%		36.3	%					390 bps

Wholesale sales ~~increased $247.1~~declined $67.3 million, or ~~26.2%~~5.9%, to ~~$1.2~~$1.1 billion, ~~led~~which includes a decrease in the Americas of 18.7%, partially offset by ~~growth~~increases in Asia Pacific of ~~58.8% in~~14.3% and Europe, Middle East & Africa of 7.4%. Wholesale volume decreased 13.1% and ~~18.1%~~average selling price increased 8.0%.

Wholesale gross margin increased 390 basis points to 40.2% driven by average selling price increases.

Direct-to-Consumer


	Three Months Ended June 30,						Change
(in thousands)	2023			2022			$		%
Sales	$	939,497		$	727,479			212,018		29.1
Gross profit		628,973			483,100			145,873		30.2
Gross margin		66.9	%		66.4	%				50 bps

Direct-to-Consumer sales increased $212.0 million, or 29.1%, to $939.5 million, which includes increases in the ~~Americas.~~ ~~Volume~~Americas of 28.2%, Asia Pacific of 25.1% and Europe, Middle East & Africa of 47.2%. Direct-to-Consumer volume increased ~~25.1% in the number of units sold~~23.8% and average selling price per unit increased ~~1.4%~~4.4%..

~~Wholesale gross margin decreased 270 basis points to 35.6% due to higher average cost per unit, driven by increased freight costs which were partially offset by average selling price increases.~~

~~2021 to 2020 Comparison~~

Wholesale sales increased $101.7 million, or 12.1%, to $944.5 million, as a result of growth across all regions. Growth was 17.2% in the Americas, 8.1% in Europe, Middle East & Africa, and 7.4% in Asia Pacific. Volume increased 7.3% in the number of units sold and average selling price per unit increased 4.0%.

~~Wholesale gross margin decreased 260 basis points to 38.3% primarily due to higher average per unit costs and a higher mix of distributor sales, partially offset by average selling price increases.~~

~~Direct-to-Consumer~~

Three Months Ended September 30,

2022 vs 2021 Change

2021 vs 2020 Change

(in thousands)

2022

2021

2020

$

%

$

%

Sales

$
686,781

$
614,011

$
461,361

72,770

11.9

152,650

33.1

Gross profit

459,335

415,095

283,934

44,240

10.7

131,161

46.2

Gross margin

66.9
%

67.6
%

61.5
%

(70
)bps

610
bps

~~2022 to 2021 Comparison~~

Direct-to-Consumer sales increased $72.8 million, or 11.9%, to $686.8 million, led by increases in the Americas of 13.8% and Asia Pacific of 10.0%. Volume increased 11.1% in the number of units sold and average selling price per unit increased 0.6%.

Direct-to-Consumer gross margin ~~decreased 70~~increased 50 basis points to 66.9%, primarily ~~due to higher per unit freight costs~~driven by average selling prices increases, partially offset by ~~average selling price increases.~~increased costs.

~~2021 to 2020 Comparison~~

Direct-to-Consumer sales increased $152.7 million, or 33.1%, to $614.0 million, driven by increases across all regions which experienced COVID restrictions in 2020. Growth was 45.4% in the Americas, 43.5% in Europe, Middle East & Africa, and 11.1% in Asia Pacific. Volume increased 10.7% in the number of units sold and average selling price per unit increased 20.2%.

~~Direct-to-Consumer gross margin increased 610 basis points to 67.6%, primarily driven by higher average selling prices.~~

RESULTS OF OPERATIONS – ~~NINE~~SIX MONTHS

Selected information from our results of operations follows:


	Nine Months Ended September 30,								Change						Six Months Ended June 30,							Change
(in thousands)	2022				2021				$			%			2023			2022				$		%
Sales	$	5,565,765			$	4,654,802				910,963			19.6		$	4,014,444		$	3,687,398				327,046		8.9
Cost of sales		2,960,088				2,338,588				621,500			26.6			1,975,341			1,965,656				9,685		0.5
Gross profit		2,605,677				2,316,214				289,463			12.5			2,039,103			1,721,742				317,361		18.4
Gross margin		46.8		%		49.8		%					(290	)bps		50.8	%		46.7		%				410 bps
Operating expenses
Selling		425,675				360,640				65,035			18.0			315,678			274,818				40,860		14.9
General and administrative		1,719,969				1,450,449				269,520			18.6			1,282,115			1,116,862				165,253		14.8
Total operating expenses		2,145,644				1,811,089				334,555			18.5			1,597,793			1,391,680				206,113		14.8
As a % of sales		38.6		%		38.9		%					(40	)bps		39.8	%		37.7		%				210 bps
Earnings from operations		460,033				505,125				(45,092	)		(8.9	)		441,310			330,062				111,248		33.7
Operating margin		8.3		%		10.9		%					(260	)bps		11.0	%		9.0		%				200 bps
Other expense		(40,144	)			(20,065	)			(20,079	)		100.1
Other income (expense)																12,715			(25,005	)			37,720	n/m
Earnings before income taxes		419,889				485,060				(65,171	)		(13.4	)		454,025			305,057				148,968		48.8
Income tax expense		83,229				92,027				(8,798	)		(9.6	)		82,158			62,731				19,427		31.0
Net earnings		336,660				393,033				(56,373	)		(14.3	)		371,867			242,326				129,541		53.5
Net earnings attributable to noncontrolling interests		39,147				53,952				(14,805	)		(27.4	)
Less: Net earnings attributable to noncontrolling interests																58,665			30,699				27,966		91.1
Net earnings attributable to Skechers U.S.A., Inc.	$	297,513			$	339,081				(41,568	)		(12.3	)	$	313,202		$	211,627				101,575		48.0

~~Sales~~

Sales

Sales increased ~~$911.0 million,~~$0.3 billion, or ~~19.6%~~8.9%, to ~~$5.6~~$4.0 billion as compared to ~~$4.7~~$3.7 billion ~~reflecting~~as a ~~19.3%~~result of a 19.5% increase ~~domestically~~internationally and a ~~19.8% increase internationally, with the largest contribution derived from wholesale sales. Both segments experienced increases with~~4.7% decrease domestically. Direct-to-Consumer increased 27.1% and Wholesale ~~increasing 25.6% and Direct-to-Consumer increasing 10.0%~~declined 1.0%. Sales increased overall due to ~~improved~~higher sales volume in Direct-to-Consumer and higher average selling ~~prices.~~prices in Wholesale.

Gross margin

Gross margin ~~decreased 290~~increased 410 basis points to ~~46.8%~~50.8% compared to ~~49.8%~~46.7%, ~~primarily~~ ~~driven by increased freight~~due to higher average selling prices in Wholesale and ~~logistics costs, and an increased~~a greater mix of ~~wholesale sales, partially offset by average selling price increases.~~Direct-to-Consumer sales.

Operating expenses

Operating expenses increased ~~$334.6~~$206.1 million, or ~~18.5%~~14.8%, to ~~$2.1~~$1.6 billion, and as a percentage of sales ~~improved 40~~increased 210 basis points to ~~38.6%~~39.8% compared to ~~38.9%~~37.7% in the prior year. Selling expenses increased ~~$65.0~~$40.9 million, or ~~18.0%~~14.9%, to ~~$425.7~~$315.7 million, ~~from $360.6 million,~~ primarily due to higher brand demand creation ~~expenditures.~~expenditures. General and administrative expenses increased ~~$269.5~~$165.3 million, or ~~18.6%~~14.8%, to ~~$1.7 billion,~~$1.3 billion. The increased expenses were primarily due to ~~higher~~increase in labor ~~and compensation~~ costs of ~~$139.3~~$65.5 million, facility related costs of $38.7 million, including rent and ~~volume-driven~~depreciation, and warehouse and distribution ~~expenses~~costs of ~~$39.9~~$28.3 million.

Other ~~expense~~income (expense)

Other ~~expense increased $20.1~~income was $12.7 million ~~to $40.1 million,~~for the six months ended June 30, 2023, as compared to ~~$20.1~~an expense of $25.0 million for the six months ended June 30, 2022. The increase of $37.7 million was primarily due to ~~unfavorable losses~~favorable gains on foreign currency exchange ~~rates in Europe, Middle East & Africa.~~rates.

~~Income taxes~~

Income tax expense and the effective tax rate were as follows:


	Nine Months Ended September 30,						Six Months Ended June 30,
(in thousands)	2022			2021			2023			2022
Income tax expense	$	83,229		$	92,027		$	82,158		$	62,731
Effective tax rate		19.8	%		19.0	%		18.1	%		20.6	%

Our provision for income tax expense and effective income tax rate are significantly impacted by the mix of our domestic and foreign earnings (loss) before income taxes. In the foreign jurisdictions in which we have operations, the applicable statutory rates range from ~~0.0%~~0% to ~~35.0%~~35%, which on average are generally significantly lower than the U.S. federal and state combined statutory rate of approximately 25%. Year-to-date, the ~~increase~~decrease in the effective tax rate ~~was the result of revisions~~is primarily due to the ~~estimated provision compared to the 2021 U.S. federal income tax return finalized in the current quarter and changes in the valuation allowance.~~positive impact of discrete items.

Noncontrolling interest in net income of consolidated joint ventures

Noncontrolling ~~interest~~interests represents the share of net earnings that is attributable to our joint venture partners. Net earnings attributable to noncontrolling ~~interest decreased $14.8~~interests increased $28.0 million to ~~$39.1~~$58.7 million compared to ~~$54.0~~$30.7 million ~~primarily~~in the prior year, due to ~~lower~~higher earnings by our joint ventures, predominantly in China, ~~which were partially offset by improvements~~due to impacts of COVID-related restrictions in ~~other Asia Pacific countries.~~the prior year.

RESULTS OF SEGMENT OPERATIONS – ~~NINE~~SIX MONTHS

Wholesale


	Nine Months Ended September 30,									2022 vs 2021 Change					2021 vs 2020 Change					Six Months Ended June 30,						Change
(in thousands)	2022			2021			2020			$		%			$		%			2023			2022			$			%
Sales	$	3,583,216		$	2,851,803		$	2,114,748			731,413		25.6			737,055		34.9		$	2,367,576		$	2,391,631			(24,055	)		(1.0	)
Gross profit		1,294,039			1,110,859			832,369			183,180		16.5			278,490		33.5			943,550			869,439			74,111			8.5
Gross margin		36.1	%		39.0	%		39.4	%				(280	)bps				(40	)bps		39.9	%		36.4	%					350 bps

~~2022 to 2021 Comparison~~

Wholesale sales ~~increased $0.7 billion,~~declined $24.1 million, or ~~25.6%~~1.0%, to ~~$3.6~~$2.4 billion, ~~driven primarily~~led by ~~growth of 31.7%~~a decrease in the Americas of 15.9%, partially offset by increases in Europe, Middle East & Africa of 14.6% and in Asia Pacific of 19.2%. Wholesale volume decreased 7.3% and average selling price increased 6.6%.

Wholesale gross margin increased 350 basis points to 39.9% driven by average selling price increases.

Direct-to-Consumer


	Six Months Ended June 30,						Change
(in thousands)	2023			2022			$		%
Sales	$	1,646,868		$	1,295,767			351,101		27.1
Gross profit		1,095,553			852,303			243,250		28.5
Gross margin		66.5	%		65.8	%				70 bps

Direct-to-Consumer sales increased $351.1 million, or 27.1%, to $1.6 billion, which includes increases in the Americas of 28.4%, Asia Pacific of 21.7% and Europe, Middle East & Africa of ~~34.8%~~40.4%. ~~Volume~~Direct-to-Consumer volume increased ~~20.8% in the number of units sold~~25.2% and average selling price per unit increased ~~4.4%~~1.5%..

~~Wholesale~~Direct-to-Consumer gross margin ~~decreased 280~~increased 70 basis points to ~~36.1% due to higher average cost per unit,~~66.5%, primarily driven by ~~increased freight and logistics costs, partially offset by average selling price increases.~~

~~2021 to 2020 Comparison~~

Wholesale sales increased $0.7 billion, or 34.9%, to $2.9 billion, as a result of growth across the Americas of 38.3%, Asia Pacific of 40.2%, and Europe, Middle East & Africa of 25.5% which were impacted by 2020 COVID-related market closures. Volume increased 29.7% in the number of units soldproduct mix and average selling price ~~per unit increased 4.0%.~~increases.

~~Wholesale gross margin decreased 40 basis points to 39.0% primarily due to higher average per unit costs and a higher mix of distributor sales, partially offset by average selling price increases.~~21

~~Direct-to-Consumer~~

Nine Months Ended September 30,

2022 vs 2021 Change

2021 vs 2020 Change

(in thousands)

2022

2021

2020

$

%

$

%

Sales

$
1,982,549

$
1,802,999

$
1,169,017

179,550

10.0

633,982

54.2

Gross profit

1,311,638

1,205,355

720,046

106,283

8.8

485,309

67.4

Gross margin

66.2
%

66.9
%

61.6
%

(70
)bps

530
bps

~~2022 to 2021 Comparison~~

Direct-to-Consumer sales increased $179.6 million, or 10.0%, to $2.0 billion, led by increases in the Americas of 9.3%, Europe, Middle East & Africa of 27.6%, and Asia Pacific of 6.7%. Volume increased 3.4% in the number of units sold and average selling price per unit increased 6.3%.

~~Direct-to-Consumer gross margin decreased 70 basis points to 66.2%, driven by increased freight costs, partially offset by average selling price increases.~~

~~2021 to 2020 Comparison~~

~~Direct-to-Consumer sales increased $0.6 billion, or 54.2%, to $1.8 billion, driven by increases of 59.5% in the Americas, and 43.1% in Asia Pacific, and 71.0% in Europe, Middle East & Africa~~ ~~which experienced COVID restrictions in 2020. Volume increased 32.7% in the number of units sold and average selling price per unit increased 16.2%.~~

~~Direct-to-Consumer gross margin increased 530 basis points to 66.9%, primarily driven by higher average selling prices.~~

LIQUIDITY AND CAPITAL RESOURCES

Liquidity outlook

We have cash and cash equivalents of ~~$508.3~~$896.5 million at ~~September~~June 30, ~~2022.~~2023. Amounts held outside the U.S. were ~~$440.5~~$778.4 million, or ~~86.7%,~~86.8% and approximately ~~$146.7~~$288.5 million was available for repatriation to the U.S. as of ~~September~~June 30, ~~2022~~2023, without incurring additional U.S. federal income taxes and applicable non-U.S. income and withholding taxes.

~~We borrowed $25.0~~As of June 30, 2023, we have unused credit capacity of $746.9 million ~~during the quarter~~ on our revolving credit facility, ~~for working capital management.~~ ~~As of September 30, 2022, our~~ ~~unused credit capacity under this agreement was $722.2 million~~ with an additional $250.0 million available through an accordion feature.We believe that anticipated cash flows from operations, existing cash and investments balances, available borrowings under our revolving credit facility, 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.

Cash Flows

Our working capital at ~~September~~June 30, ~~2022~~2023 was ~~$2.0~~$2.2 billion, an increase of ~~$0.1~~$0.2 billion from working capital of ~~$1.9~~$2.0 billion at December 31, ~~2021.~~2022. Our cash and cash equivalents at ~~September~~June 30, ~~2022~~2023 were ~~$508.3~~$896.5 million, compared to ~~$796.3~~$615.7 million at December 31, ~~2021.~~2022. Capital expenditures were $147.4 million and we repurchased $60.0 million of common stock during the period ended June 30, 2023. Our primary sources of operating cash are collections from customers. Our primary uses of cash are working capital, selling, general and administrative expenses and capital expenditures.

Operating Activities

For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, net cash ~~used in~~provided by operating activities was ~~$42.8~~$575.3 million compared to ~~net cash provided of $253.2~~$154.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The ~~$296.1~~$420.6 million ~~decrease~~increase in operating cash flows primarily resulted from ~~increased~~decreased inventory ~~purchases~~levels and changes in receivables balances, ~~on wholesale sales and lower net earnings.~~partially offset by changes in payable balances.

Investing Activities

Net cash used in investing activities was ~~$192.7~~$222.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, compared to ~~$256.1~~$113.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The ~~$63.4~~$108.5 million ~~decrease~~increase was due to ~~reduced~~net cash used in the acquisition of our Scandinavian distributor of $70.4 million and increased net investment activity of ~~$91.4~~$54.2 million, offset by ~~increased~~decreased capital expenditures of ~~$28.0~~$16.1 million.

Our capital investments remain focused on supporting our strategic growth priorities, growing our Direct-to-Consumer business, as well as expanding the presence of our brand internationally. Capital expenditures for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 were ~~$263.6~~$147.4 million, which included ~~$92.1~~$60.0 million related to the expansion of our global distribution infrastructure; ~~$79.9~~$40.5 million related to investments in our retail stores and direct-to-consumer technologies; and ~~$67.0~~$20.4 million of investments in our ~~expanded~~new corporate ~~offices domestically and in India.~~offices. We expect our annual capital expenditures for ~~2022~~2023 to be approximately $300.0 million to ~~$325.0~~$350.0 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 corporate offices in Southern California. We expect to fund ongoing capital expenses through a combination of available cash and ~~borrowings~~borrowings..

Financing Activities

Net cash used in financing activities was ~~$48.6~~$63.3 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, compared to~~$415.5~~ $81.4 million during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The decrease is primarily the result of ~~lower repayments on~~net increased proceeds from short-term borrowings and increased proceeds from long-term borrowings of ~~$447.5~~$23.7 million, partially offset by ~~repurchasing $74.2 million~~increased repurchases of common ~~stock.~~stock of $10.8 million.

Capital Resources and Prospective Capital Requirements

Financing Arrangements

As of ~~September~~June 30, ~~2022,~~2023, outstanding short-term and long-term borrowings were ~~$393.4~~$349.8 million, of which ~~$293.9~~$255.8 million relates to loans for our domestic and China distribution centers, ~~$60.6~~$53.1 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~~information..

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the United States of ~~America~~.America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies and estimates did not change materially during the quarter ended ~~September~~June 30, ~~2022~~.2023.

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, ~~2021.~~2022.

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 ~~September~~June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

~~Michael Conte v. Robert Greenberg, et al.~~ – On July 21, 2022, Skechers and certain past and present members of the Board of Directors were sued by a stockholder on behalf of our company in a derivative action in the Chancery Court of the State of Delaware, Case No. 2022-0633, alleging breach of fiduciary duty, waste of corporate assets, breach of duty of candor and breach of contract in connection with certain executive officers’ personal use of two company-owned aircraft. The complaint seeks actual damages in favor of Skechers sustained as the alleged result of defendants’ alleged breaches of fiduciary duties, judgment directing our company to take all necessary actions to reform and improve its corporate governance practices, termination of certain executive officers for allegedly violating their employment agreements, judgment directing the sale of one of the company-owned aircraft and attorneys’, accountants’ and experts’ fees, costs and expenses. We believe that we have meritorious defenses and intend to defend this matter vigorously. Notwithstanding, given the early stages of these proceedings and the limited information available, we cannot predict the outcome of this legal proceeding or whether an adverse result in this case would have a material adverse impact on our results of operations or financial position.

In addition to the matters included in our reserve for loss contingencies, we occasionally become involved in litigation arising from the normal course of business, and we are unable to determine the extent of any liability that may arise from any such unanticipated future litigation. WeThere have been no ~~reason to believe that there is a reasonable possibility or a probability that we may incur a~~ material ~~loss, or a material loss in excess of a recorded accrual,~~developments with respect to ~~any other such loss contingencies. However,~~ the outcome of litigation is inherently uncertain and assessments and decisions on defense and settlement can change significantly in a short period of time. Therefore, although we consider the likelihood of such an outcome to be remote with respect to those matters for which we have not reserved an amount for loss contingencies, if one or more of these legal matters were resolved against our company in the same reporting period for amounts in excessinformation previously reported under Part I, Item 3 of our ~~expectations, our consolidated financial statements of a particular reporting period could be materially adversely affected.~~Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Item 1A. Risk Factors

~~Except as described below, there~~ 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, ~~2021.~~2022.

~~Risks Related to Economic, Political and External Factors~~

~~The Uncertainty Of Global Market Conditions May Continue To Have A Negative Impact On Our Business, Results Of Operations Or Financial Condition.~~

The uncertain state of global economic and political conditions, including the impact of inflation and challenging consumer retail market, may negatively impact our business, which depends on the general economic environment and levels of consumers’ discretionary spending. If the current economic situation does not improve or if it weakens, we may not be able to maintain or increase our sales to existing customers, make sales to new customers, open and operate new retail stores, maintain sales levels at our existing stores, maintain or increase our international operations on a profitable basis, or maintain or improve our earnings from operations as a percentage of sales. Furthermore, Russia’s war with Ukraine and the subsequent economic sanctions imposed by the U.S., NATO and other countries may impact the economic conditions or our ability to sell products to customers in the affected region. The conflict could also have broader implications on economies outside the region, such as the global inflationary impact of a potential boycott of Russian oil and gas by other countries. If there is an unexpected decline in sales, our results of operations will depend on our ability to implement a corresponding and timely reduction in our costs and manage other aspects of our operations. These challenges include (i) managing our infrastructure, (ii) hiring and maintaining, as required, the appropriate number of qualified employees, (iii) managing inventory levels and (iv) controlling other expenses. If the uncertain global market conditions continue for a significant period or worsen, our results of operations, financial condition, and cash flows could be materially adversely affected.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In January 2022, the Board of Directors approved a $500 million share repurchase program. The program allows the Company to repurchase shares of Class A common stock from time to time and does not obligate the Company to acquire any particular amount. The following table summarizes the share repurchase activity during the quarter ended ~~September~~June 30, ~~2022.~~2023.

Month Ended

Total Number of Shares Purchased

Average Price
Paid Per Share

Maximum Dollar Value of Shares that May Yet Be Purchased under the Program
(in thousands)

July 31, 2022

—

$
—

$
450,768

August 31, 2022

573,860

39.24

428,249

September 30, 2022

65,435

38.11

425,755

Total

639,295

$
39.13


Month Ended	Total Number of Shares Purchased		Average Price Paid Per Share		Maximum Dollar Value of Shares that May Yet Be Purchased under the Program (in thousands)
April 30, 2023		—	$	—	$	395,742
May 31, 2023		97,476		51.29		390,742
June 30, 2023		481,999		51.89		365,730
Total		579,475	$	51.79

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

~~None.~~During the quarter ended June 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” as each such term is defined in Item 408 of Regulation S-K.

Item 6. Exhibits


Exhibit Number		Description

10.1* 3.1		~~Loan Contract,~~Second Amendment to Amended and Restated Certificate of Incorporation dated October 18, 2022, between Skechers Taicang Trading and Logistics Co Limited, a wholly owned subsidiary of Skechers China Limited, which is a joint venture of the Registrant, and Bank of China Co., Ltd., regarding distribution center in Taicang, China.June 12, 2023.

~~31.1~~ 10.1		2023 Incentive Award Plan (Incorporated by reference to Appendix A of the Registrant’s Definitive Proxy Statement filed on May 1, 2023).

31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101
~~101~~		Financial statements from the quarterly report on Form 10-Q of Skechers U.S.A., Inc. for the quarter ended ~~September~~June 30, ~~2022~~2023 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)(iv) of Regulation S-K, portions of this exhibit have been omitted.~~

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.

~~SIGNATURES~~* 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.

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: ~~November~~August 4, ~~2022~~2023	SKECHERS U.S.A., INC.

	By:	/s/ John Vandemore
		John Vandemore
		Chief Financial Officer (Principal Financial Officer and Duly Authorized Signatory)

2625


Title of each class	Trading symbol	Name of each exchange on which registered
Class A Common Stock, par value ~~$0.001~~$0.001 per share	SKX	New York Stock Exchange

		As of			As of
(in thousands)		September 30, 2022			December 31, 2021
									As of			As of
(in thousands, except par value)									June 30, 2023			December 31, 2022
ASSETS	ASSETS							ASSETS
Current assets
Cash and cash equivalents		$	508,281		$	796,283			$	896,514		$	615,733
Short-term investments			102,986			98,580				80,648			102,166
Trade accounts receivable, less allowances of $58,818 and $62,684			933,908			732,793
Trade accounts receivable, less allowances of $68,501 and $59,472										940,201			848,287
Other receivables			75,075			80,043				69,307			86,036
Inventory			1,779,369			1,470,994				1,486,012			1,818,016
Prepaid expenses and other			182,260			193,547				197,007			176,035
Total current assets ($996,197 and $1,040,765 related to VIEs)			3,581,879			3,372,240
Total current assets ($1,100,137 and $1,014,962 related to VIEs)										3,669,689			3,646,273
Property, plant and equipment, net			1,289,520			1,128,909				1,417,225			1,345,370
Operating lease right-of-use assets			1,117,951			1,224,580				1,230,635			1,200,565
Deferred tax assets			448,179			451,355				461,021			454,190
Long-term investments			70,242			145,590				96,591			70,498
Goodwill			93,497			93,497				101,483			93,497
Other assets, net			77,371			75,109				131,013			83,094
Total non-current assets ($587,295 and $608,607 related to VIEs)			3,096,760			3,119,040
Total non-current assets ($616,850 and $598,973 related to VIEs)										3,437,968			3,247,214
TOTAL ASSETS		$	6,678,639		$	6,491,280			$	7,107,657		$	6,893,487
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY							LIABILITIES AND EQUITY
Current liabilities
Accounts payable		$	925,907		$	876,342			$	802,234		$	957,384
Accrued expenses			261,577			265,420				300,071			294,143
Operating lease liabilities			221,396			225,658				261,954			238,694
Current installments of long-term borrowings			136,930			76,967				76,388			103,184
Short-term borrowings			31,013			1,195				36,654			19,635
Total current liabilities ($566,888 and $601,929 related to VIEs)			1,576,823			1,445,582
Total current liabilities ($533,807 and $568,158 related to VIEs)										1,477,301			1,613,040
Long-term operating lease liabilities			996,414			1,094,748				1,069,384			1,063,672
Long-term borrowings			225,505			263,445				236,763			216,488
Deferred tax liabilities			11,739			11,820				20,224			8,656
Other long-term liabilities			119,288			133,613				112,523			120,045
Total non-current liabilities ($309,923 and $368,994 related to VIEs)			1,352,946			1,503,626
Total non-current liabilities ($313,526 and $293,726 related to VIEs)										1,438,894			1,408,861
Total liabilities			2,929,769			2,949,208				2,916,195			3,021,901
Commitments and contingencies (Note 10)
Stockholders’ equity
Preferred Stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding			—			—
Class A Common Stock, $0.001 par value; 500,000 shares authorized; 134,212 and 135,107 shares issued and outstanding			134			135
Class B Common Stock, $0.001 par value; 75,000 shares authorized; 20,889 and 20,939 shares issued and outstanding			21			21
Preferred Stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding										—			—
Class A Common Stock, $0.001 par value; 500,000 shares authorized; 134,291 and 134,473 shares issued and outstanding										134			134
Class B Common Stock, $0.001 par value; 75,000 shares authorized; 20,464 and 20,810 shares issued and outstanding										20			21
Additional paid-in capital			387,459			429,608				362,769			403,799
Accumulated other comprehensive loss			(104,326	)		(48,323	)			(87,707	)		(84,897	)
Retained earnings			3,175,416			2,877,903				3,564,133			3,250,931
Skechers U.S.A., Inc. equity			3,458,704			3,259,344				3,839,349			3,569,988
Noncontrolling interests			290,166			282,728				352,113			301,598
Total stockholders' equity			3,748,870			3,542,072				4,191,462			3,871,586
TOTAL LIABILITIES AND EQUITY		$	6,678,639		$	6,491,280			$	7,107,657		$	6,893,487

	Nine Months Ended September 30,
(in thousands)	2022			2021
Cash flows from operating activities
Net earnings	$	336,660		$	393,033
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities
Depreciation and amortization		110,688			100,658
Provision for bad debts and returns		22,212			21,504
Stock compensation		44,018			41,350
Deferred income taxes		1,909			(8,393	)
Net foreign currency adjustments		17,266			(2,022	)
Changes in operating assets and liabilities
Receivables		(287,470	)		(179,108	)
Inventory		(380,877	)		(221,366	)
Other assets		15,082			(5,937	)
Accounts payable		91,901			106,202
Other liabilities		(14,230	)		7,317
Net cash (used in) provided by operating activities		(42,841	)		253,238
Cash flows from investing activities
Capital expenditures		(263,631	)		(235,626	)
Purchases of investments		(43,527	)		(168,892	)
Proceeds from sales and maturities of investments		114,469			148,442
Net cash used in investing activities		(192,689	)		(256,076	)
Cash flows from financing activities
Net proceeds from the employee stock purchase plan		4,836			4,027
Repayments on long-term borrowings		(30,408	)		(477,909	)
Proceeds from long-term borrowings		52,431			72,746
Net proceeds from (repayments on) short-term borrowings		29,818			(2,977	)
Payments for employee taxes related to stock compensation		(17,512	)		(309	)
Repurchases of common stock		(74,245	)		—
Purchase of noncontrolling interests		—			(9,928	)
Contributions from noncontrolling interests		—			6,731
Distributions to noncontrolling interests		(13,541	)		(7,876	)
Net cash used in financing activities		(48,621	)		(415,495	)
Effect of exchange rate changes on cash and cash equivalents		(3,851	)		(417	)
Net change in cash and cash equivalents		(288,002	)		(418,750	)
Cash and cash equivalents at beginning of the period		796,283			1,370,826
Cash and cash equivalents at end of the period	$	508,281		$	952,076

Supplemental disclosures of cash flow information
Cash paid during the period for
Interest	$	13,857		$	10,620
Income taxes, net		73,320			96,710
Non-cash transactions
ROU assets exchanged for lease liabilities		199,646			144,729


	Six Months Ended June 30,
(in thousands)	2023			2022
Cash flows from operating activities
Net earnings	$	371,867		$	242,326
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization		85,395			72,032
Provision for bad debts and returns		35,169			9,542
Stock compensation		31,968			33,796
Deferred income taxes		(5,381	)		(4,110	)
Net foreign currency adjustments		(16,211	)		12,336
Changes in operating assets and liabilities
Receivables		(61,318	)		(210,229	)
Inventory		353,102			(125,485	)
Other assets		(27,440	)		10,766
Accounts payable		(164,224	)		118,667
Other liabilities		(27,668	)		(4,932	)
Net cash provided by operating activities		575,259			154,709
Cash flows from investing activities
Capital expenditures		(147,425	)		(163,511	)
Acquisitions, net of cash acquired		(70,369	)		—
Purchases of investments		(73,034	)		(32,770	)
Proceeds from sales and maturities of investments		68,458			82,418
Net cash used in investing activities		(222,370	)		(113,863	)
Cash flows from financing activities
Net proceeds from the employee stock purchase plan		5,402			4,836
Repayments on long-term borrowings		(28,031	)		(29,777	)
Proceeds from long-term borrowings		21,510			16,040
Net proceeds from (repayments on) short-term borrowings		17,019			(1,195	)
Payments for employee taxes related to stock compensation		(18,375	)		(17,401	)
Repurchases of common stock		(60,026	)		(49,232	)
Distributions to noncontrolling interests		(750	)		(4,650	)
Net cash used in financing activities		(63,251	)		(81,379	)
Effect of exchange rate changes on cash and cash equivalents		(8,857	)		(3,846	)
Net change in cash and cash equivalents		280,781			(44,379	)
Cash and cash equivalents at beginning of the period		615,733			796,283
Cash and cash equivalents at end of the period	$	896,514		$	751,904

Supplemental disclosures of cash flow information
Cash paid during the period for
Interest	$	10,770		$	8,855
Income taxes, net		66,782			50,817
Non-cash transactions
Right-of-use assets exchanged for lease liabilities		143,941			154,448
Non-cash consideration for acquired business		9,180			—

	As of September 30, 2022
(in thousands)	Adjusted Cost		Fair Value		Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments
Cash	$	454,788	$	454,788	$	454,788	$	—	$	—
Level 1
Money market funds		53,493		53,493		53,493		—		—
U.S. Treasury securities		18,314		18,314		—		18,314		—
Total level 1		71,807		71,807		53,493		18,314		—
Level 2
Corporate notes and bonds		98,034		98,034		—		83,812		14,222
Asset-backed securities		6,670		6,670		—		860		5,810
Mutual funds		50,210		50,210		—		—		50,210
Total level 2		154,914		154,914		—		84,672		70,242
Total	$	681,509	$	681,509	$	508,281	$	102,986	$	70,242


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


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


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Earnings (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	5
	Condensed Consolidated Statements of Equity (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1718
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2223
Item 4.	Controls and Procedures	23

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	2524
Item 4.	Mine Safety Disclosures	2524
Item 5.	Other Information	2524
Item 6.	Exhibits	2524
	Signatures	2625


	As of June 30, 2023
(in thousands)	Adjusted Cost		Fair Value		Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments
Cash	$	789,496	$	789,496	$	789,496	$	—	$	—
Level 1
Money market funds		98,033		98,033		98,033		—		—
U.S. Treasury securities		14,119		14,119		2,999		11,120		—
Mutual funds	N/A			11,355		—		—		11,355
Total level 1		112,152		123,507		101,032		11,120		11,355
Level 2
Corporate notes and bonds		98,921		98,921		5,986		66,526		26,409
Asset-backed securities		8,547		8,547		—		—		8,547
U.S. Agency securities		4,710		4,710		—		3,002		1,708
Total level 2		112,178		112,178		5,986		69,528		36,664
Total	$	1,013,826	$	1,025,181	$	896,514	$	80,648	$	48,019


	As of December 31, 2022
(in thousands)	Adjusted Cost		Fair Value		Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments
Cash	$	539,730	$	539,730	$	539,730	$	—	$	—
Level 1
Money market funds		71,503		71,503		71,503		—		—
U.S. Treasury securities		18,201		18,201		2,000		16,201		—
Mutual funds	N/A			5,893		—		—		5,893
Total level 1		89,704		95,597		73,503		16,201		5,893
Level 2
Corporate notes and bonds		101,959		101,959		2,500		85,731		13,728
Asset-backed securities		4,641		4,641		—		234		4,407
Total level 2		106,600		106,600		2,500		85,965		18,135
Total	$	736,034	$	741,927	$	615,733	$	102,166	$	24,028

	As of December 31, 2021
(in thousands)	Adjusted Cost		Fair Value		Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments
Cash	$	664,220	$	664,220	$	664,220	$	—	$	—
Level 1
Money market funds		132,063		132,063		132,063		—		—
U.S. Treasury securities		25,437		25,437		—		8,896		16,541
Total level 1		157,500		157,500		132,063		8,896		16,541
Level 2
Corporate notes and bonds		148,373		148,373		—		84,783		63,590
Asset-backed securities		17,180		17,180		—		4,901		12,279
Mutual funds		53,180		53,180		—		—		53,180
Total level 2		218,733		218,733		—		89,684		129,049
Total	$	1,040,453	$	1,040,453	$	796,283	$	98,580	$	145,590

	Shares			Weighted-Average Grant-Date Fair Value
Unvested at December 31, 2021		3,253,316		$	38.97
Granted		1,613,150			40.19
Vested		(1,266,281	)		36.07
Cancelled		(53,633	)		40.81
Unvested at September 30, 2022		3,546,552		$	40.53

(in thousands)	As of September 30, 2022		As of December 31, 2021
Identifiable assets
Wholesale	$	3,700,436	$	3,816,513
Direct-to-Consumer		2,978,203		2,674,767
Total	$	6,678,639	$	6,491,280

Regional Sales
Americas (AMER)	$	947,987	$	815,786	$	2,928,752	$	2,396,644
Europe, Middle East & Africa (EMEA)		469,787		318,389		1,285,554		961,955
Asia Pacific (APAC)		460,593		424,301		1,351,459		1,296,203
Total sales	$	1,878,367	$	1,558,476	$	5,565,765	$	4,654,802

China sales	$	226,728	$	278,081	$	754,676	$	845,554

Month Ended	Total Number of Shares Purchased		Average Price Paid Per Share		Maximum Dollar Value of Shares that May Yet Be Purchased under the Program (in thousands)
July 31, 2022		—	$	—	$	450,768
August 31, 2022		573,860		39.24		428,249
September 30, 2022		65,435		38.11		425,755
Total		639,295	$	39.13