UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20222023
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 001-14429
SKECHERS U.S.A., INC.
(Exact name of registrant as specified in its charter)
Delaware | 95-4376145 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
228 Manhattan Beach Blvd. Manhattan Beach, California | 90266 | |
(Address of principal executive office) | (Zip Code) |
(310) (310) 318-3100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol | Name of each exchange on which registered | ||
Class A Common Stock, par value | SKX | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of OctoberJuly 28, 2022, 134,212,2382023 134,368,462 shares of the registrant’s Class A Common Stock, $0.001 par value per share, were outstanding.
As of OctoberJuly 28, 2022, 20,888,5712023 20,385,569 shares of the registrant’s Class B Common Stock, $0.001 par value per share, were outstanding.
SKECHERS U.S.A., INC. AND SUBSIDIARIES
Form 10-Q
Table of Contents
PART I – FINANCIAL INFORMATION | ||
Item 1. | ||
3 | ||
4 | ||
Condensed Consolidated Statements of Comprehensive Income (Unaudited) | 5 | |
6 | ||
8 | ||
Notes to Condensed Consolidated Financial Statements (Unaudited) | 9 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
Item 3. |
| |
Item 4. | 23 | |
PART II – OTHER INFORMATION | ||
Item 1. | 24 | |
Item 1A. | 24 | |
Item 2. | 24 | |
Item 3. |
| |
Item 4. |
| |
Item 5. |
| |
Item 6. |
| |
|
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
SKECHERS U.S.A., INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
|
| 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 |
|
See accompanying notes to unaudited condensed consolidated financial statements.
3
SKECHERS U.S.A., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(in thousands, except per share data) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Sales |
| $ | 1,878,367 |
|
| $ | 1,558,476 |
|
| $ | 5,565,765 |
|
| $ | 4,654,802 |
|
| $ | 2,012,516 |
|
| $ | 1,867,804 |
|
| $ | 4,014,444 |
|
| $ | 3,687,398 |
|
Cost of sales |
|
| 994,432 |
|
|
| 781,513 |
|
|
| 2,960,088 |
|
|
| 2,338,588 |
|
|
| 951,992 |
|
|
| 970,225 |
|
|
| 1,975,341 |
|
|
| 1,965,656 |
|
Gross profit |
|
| 883,935 |
|
|
| 776,963 |
|
|
| 2,605,677 |
|
|
| 2,316,214 |
|
|
| 1,060,524 |
|
|
| 897,579 |
|
|
| 2,039,103 |
|
|
| 1,721,742 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Selling |
|
| 150,857 |
|
|
| 127,845 |
|
|
| 425,675 |
|
|
| 360,640 |
|
|
| 187,118 |
|
|
| 166,609 |
|
|
| 315,678 |
|
|
| 274,818 |
|
General and administrative |
|
| 603,107 |
|
|
| 502,871 |
|
|
| 1,719,969 |
|
|
| 1,450,449 |
|
|
| 655,673 |
|
|
| 576,812 |
|
|
| 1,282,115 |
|
|
| 1,116,862 |
|
Total operating expenses |
|
| 753,964 |
|
|
| 630,716 |
|
|
| 2,145,644 |
|
|
| 1,811,089 |
|
|
| 842,791 |
|
|
| 743,421 |
|
|
| 1,597,793 |
|
|
| 1,391,680 |
|
Earnings from operations |
|
| 129,971 |
|
|
| 146,247 |
|
|
| 460,033 |
|
|
| 505,125 |
|
|
| 217,733 |
|
|
| 154,158 |
|
|
| 441,310 |
|
|
| 330,062 |
|
Other expense |
|
| (15,139 | ) |
|
| (8,049 | ) |
|
| (40,144 | ) |
|
| (20,065 | ) | ||||||||||||||||
Other income (expense) |
|
| 2,792 |
|
|
| (19,259 | ) |
|
| 12,715 |
|
|
| (25,005 | ) | ||||||||||||||||
Earnings before income taxes |
|
| 114,832 |
|
|
| 138,198 |
|
|
| 419,889 |
|
|
| 485,060 |
|
|
| 220,525 |
|
|
| 134,899 |
|
|
| 454,025 |
|
|
| 305,057 |
|
Income tax expense |
|
| 20,498 |
|
|
| 21,497 |
|
|
| 83,229 |
|
|
| 92,027 |
|
|
| 38,942 |
|
|
| 28,739 |
|
|
| 82,158 |
|
|
| 62,731 |
|
Net earnings |
|
| 94,334 |
|
|
| 116,701 |
|
|
| 336,660 |
|
|
| 393,033 |
|
|
| 181,583 |
|
|
| 106,160 |
|
|
| 371,867 |
|
|
| 242,326 |
|
Less: Net earnings attributable to noncontrolling interests |
|
| 8,448 |
|
|
| 13,562 |
|
|
| 39,147 |
|
|
| 53,952 |
|
|
| 28,824 |
|
|
| 15,756 |
|
|
| 58,665 |
|
|
| 30,699 |
|
Net earnings attributable to Skechers U.S.A., Inc. |
| $ | 85,886 |
|
| $ | 103,139 |
|
| $ | 297,513 |
|
| $ | 339,081 |
|
| $ | 152,759 |
|
| $ | 90,404 |
|
| $ | 313,202 |
|
| $ | 211,627 |
|
Net earnings per share attributable to Skechers U.S.A., Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Basic |
| $ | 0.55 |
|
| $ | 0.66 |
|
| $ | 1.91 |
|
| $ | 2.18 |
|
| $ | 0.99 |
|
| $ | 0.58 |
|
| $ | 2.02 |
|
| $ | 1.36 |
|
Diluted |
| $ | 0.55 |
|
| $ | 0.66 |
|
| $ | 1.90 |
|
| $ | 2.17 |
|
| $ | 0.98 |
|
| $ | 0.58 |
|
| $ | 2.00 |
|
| $ | 1.35 |
|
Weighted-average shares used in calculating net earnings per share attributable to Skechers U.S.A., Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Basic |
|
| 155,420 |
|
|
| 155,835 |
|
|
| 155,783 |
|
|
| 155,413 |
|
|
| 154,970 |
|
|
| 155,941 |
|
|
| 155,055 |
|
|
| 155,969 |
|
Diluted |
|
| 156,233 |
|
|
| 157,123 |
|
|
| 156,714 |
|
|
| 156,590 |
|
|
| 156,571 |
|
|
| 156,748 |
|
|
| 156,654 |
|
|
| 157,074 |
|
See accompanying notes to unaudited condensed consolidated financial statements.
4
SKECHERS U.S.A., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(in thousands) | (in thousands) | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| (in thousands) | 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Net earnings |
| $ | 94,334 |
|
| $ | 116,701 |
|
| $ | 336,660 |
|
| $ | 393,033 |
|
| $ | 181,583 |
|
| $ | 106,160 |
|
| $ | 371,867 |
|
| $ | 242,326 |
|
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net unrealized gain on derivative contract |
|
| 3,113 |
|
|
| 200 |
|
|
| 10,210 |
|
|
| 1,823 |
| ||||||||||||||||
Net unrealized gain (loss) on derivative contract |
|
| 499 |
|
|
| 1,254 |
|
|
| (917 | ) |
|
| 7,097 |
| ||||||||||||||||
Loss on foreign currency translation adjustment |
|
| (42,888 | ) |
|
| (13,027 | ) |
|
| (83,628 | ) |
|
| (22,520 | ) |
|
| (16,144 | ) |
|
| (42,229 | ) |
|
| (9,293 | ) |
|
| (40,740 | ) |
Comprehensive income |
|
| 54,559 |
|
|
| 103,874 |
|
|
| 263,242 |
|
|
| 372,336 |
|
|
| 165,938 |
|
|
| 65,185 |
|
|
| 361,657 |
|
|
| 208,683 |
|
Less: Comprehensive income (loss) attributable to noncontrolling interests |
|
| (2,785 | ) |
|
| 10,255 |
|
|
| 20,979 |
|
|
| 50,480 |
| ||||||||||||||||
Less: Comprehensive income attributable to noncontrolling interests |
|
| 20,669 |
|
|
| 3,743 |
|
|
| 51,265 |
|
|
| 23,764 |
| ||||||||||||||||
Comprehensive income attributable to Skechers U.S.A., Inc. |
| $ | 57,344 |
|
| $ | 93,619 |
|
| $ | 242,263 |
|
| $ | 321,856 |
|
| $ | 145,269 |
|
| $ | 61,442 |
|
| $ | 310,392 |
|
| $ | 184,919 |
|
See accompanying notes to unaudited condensed consolidated financial statements.
5
SKECHERS U.S.A., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Equity
(Unaudited)
|
| Shares |
|
| Amount |
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Class A |
|
| Class B |
|
| Class A |
|
| Class B |
|
| Additional |
|
| other |
|
|
|
|
|
| Skechers |
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
|
| Common |
|
| Common |
|
| Common |
|
| Common |
|
| paid-in |
|
| comprehensive |
|
| Retained |
|
| U.S.A., Inc. |
|
| Noncontrolling |
|
| stockholders' |
|
| 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.
6
SKECHERS U.S.A., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Equity
(Unaudited)
|
| Shares |
|
| Amount |
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Class A |
|
| Class B |
|
| Class A |
|
| Class B |
|
| Additional |
|
| other |
|
|
|
|
|
| Skechers |
|
|
|
|
|
| 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.
7
SKECHERS U.S.A., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| 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 |
|
|
| — |
|
See accompanying notes to unaudited condensed consolidated financial statements.
8
SKECHERS U.S.A., INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) General
|
|
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Skechers U.S.A., Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S‑X. In the opinion of management, all normal adjustments and accruals considered necessary to provide a fair statement of the results of operations for the interim periods presented have been included. The December 31, 20212022 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 20212022 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.
Noncontrolling Interests
The Company has equity interests in several joint ventures that were established either to exclusively distribute the Company’s products throughout Mexico, Asia and the Middle East or to construct the Company’s domestic distribution facility. These joint ventures are variable interest entities (“VIE”), and the Company is considered the primary beneficiary. This determination is based on the relationships between the Company and the VIE, including management agreements, governance documents and other contractual arrangements. Specifically, the Company has both of the following characteristics: (a) the power to direct the activities of the entity that most significantly impact the entity’s economic performance; and (b) the obligation to absorb losses of the entity that could potentially be significant to the VIE, or the right to receive benefits from the entity that could potentially be significant to the VIE. The assets and liabilities and results of operations of these entities are included in the Company’s condensed consolidated financial statements, even though the Company may not hold a majority equity interest.
In March 2021, the minority interest related to the Hong Kong joint venture was purchased for $10.0 million. The Hong Kong entity continues to be included in the Company’s condensed consolidated financial statements. There have been no changes during 2022 in the accounting treatment or characterization of any previously identified VIEs. The Company continues to reassess these relationships quarterly. The assets of these joint ventures are restricted, as they are not available for general business use outside the context of such joint ventures. The holders of the liabilities of each joint venture have no recourse to the Company.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value hierarchy as defined by applicable accounting standards prioritizes the use of inputs used in valuation techniques into the following three levels:
• Level 1: Quoted market prices in active markets for identical assets or liabilities. • Level 2: Other observable market-based inputs or unobservable inputs that are corroborated by market data. • Level 3: Unobservable inputs that cannot be corroborated by market data that reflect the reporting entity’s own assumptions.
|
|
|
|
|
|
The Company’s Level 1 investments primarily include money market funds, and United States (“U.S.”) Treasury securities;securities and actively traded mutual funds; Level 2 investments primarily include corporate notes and bonds, asset-backed securities and actively traded mutual funds;U.S. Agency securities; and the Company does not currently have any Level 3 assets or liabilities. The Company has one Level 2 derivative instrument which is an interest rate swap related to the refinancing of its U.S. distribution center (see Note 4 – Financial Commitments) classified as other assets, net.net. The fair value of the interest rate swap was determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipt was based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. Credit valuation adjustments were incorporated to appropriately reflect both the Company’s nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.
The carrying amount of receivables, payables and other amounts arising out of the normal course of business approximates fair value because of the relatively short maturity of such instruments. The carrying amount of the Company’s short-term and long-term borrowings, which are considered Level 2 liabilities, approximates fair value based on current rates and terms available to the Company for similar debt.
DERIVATIVE INSTRUMENTS
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, the Company uses an interest rate swap as part of its interest rate risk
management strategy. The Company’s interest rate swap, designated as a cash flow hedge, involves the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. By utilizing an interest rate swap, the Company is exposed to credit-related losses in the event that the counterparty fails to
9
perform under the terms of the derivative contract. To mitigate this risk, the Company enters into derivative contracts with major financial institutions based upon credit ratings and other factors. The Company continually assesses the creditworthiness of its counterparties. As of SeptemberJune 30, 2022,2023, all counterparties to the interest rate swap had performed in accordance with their contractual obligations.
RecentRecentLY ADOPTED Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general income tax accounting methodology including an exception for the recognition of a deferred tax liability when a foreign subsidiary becomes an equity method investment and an exception for interim periods showing operating loss in excess of anticipated operating loss for the year. The amendment also reduces the complexity surrounding franchise tax recognition; the step up in the tax basis of goodwill in conjunction with business combinations; and the accounting for the effect of changes in tax laws enacted during interim periods. The Company adopted ASU 2019-12 on January 1, 2021, and the adoption did not have a material impact on its condensed consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, as amended and supplemented by subsequent ASUs (collectively, “ASU 2020-04” and “ASU 2022-06”), which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for borrowing instruments, which use LIBORLondon Interbank Offered Rate ("LIBOR") as a reference rate, and is effective immediately, but is only available through December 31, 2022.2024. 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 Secured Overnight Financing Rate ("SOFR") as part of our planned reference rate reform activities, as discussed in Note 4 - Financial Commitments. The Company has evaluated this ASUelected to apply the practical expedient which allows us to account for the modification of the amended agreements as if the modifications were not substantial. These amendments did not result in any change to our application of hedge accounting or and doesdid not expect its adoption to have a material impact on its condensedto our consolidated financial statements.
(2) Cash, Cash Equivalents, Short-term and Long-term Investments
|
|
The following tables show the Company’s cash, cash equivalents, short-term and long-term investments by significant investment category:
|
| As of 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 |
|
|
| 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 |
|
10
|
| 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 |
|
The Company’s investments consist of U.S. Treasury securities, corporate notes and bonds, asset-backed securities and asset-backedU.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.
(3) Accrued Expenses
|
|
Accrued expenses were as follows:
|
| As of |
|
| As of |
| ||
(in thousands) |
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Accrued payroll, taxes, and other |
| $ | 147,217 |
|
| $ | 143,664 |
|
Return reserve liability |
|
| 80,072 |
|
|
| 60,482 |
|
Accrued inventory purchases |
|
| 72,782 |
|
|
| 89,997 |
|
Accrued expenses |
| $ | 300,071 |
|
| $ | 294,143 |
|
|
| 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 |
|
|
|
The Company had $2.8$3.1 million and $2.7 and $17.2 million of outstanding letters of credit as of SeptemberJune 30, 20222023 and December 31, 2021,2022, and approximately $31.0$36.7 million and $1.2$19.6 million in short-term borrowings as of SeptemberJune 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 SeptemberJune 30, 20222023 and 2021 2022,and $14.1$11.1 million and $10.9$9.1 million for ninesix months ended SeptemberJune 30, 20222023 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 SeptemberJune 30, 2022,2023, there was $25.0 millionno 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 SeptemberJune 30, 20222023 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 SeptemberJune 30, 2023.
11
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 LIBORSOFR 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.AN.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 SeptemberJune 30, 20222023 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 LIBORSOFR 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 ninesix months ended SeptemberJune 30, 20222023. 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 SeptemberJune 30, 20222023 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 SeptemberJune 30, 20222023 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, 2022June 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 SeptemberJune 30, 2022.2023. The balance of working capital loans as of December 31, 20212022 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 $14.0million, 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 loansinstallments of long-term borrowings.
12
|
|
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 SeptemberJune 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 ninesix months ended SeptemberJune 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 SeptemberJune 30, 2022,2023, there were 2,782,1326,768,539 shares available for grant as equity awards under the 20172023 Incentive Award Plan if target levels are achieved for performance-based awards and 2,082,1326,292,756 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 SeptemberJune 30, 20222023 and 2021,2022, the Company recognized $$9.716.9 million and $14.2$15.1 million of incentive stock compensation expense. For the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, the Company recognized $42.0$30.4 million and $39.7$32.3 million of incentive stock compensation expense. As of SeptemberJune 30, 2022,2023, the unamortized stock compensation of $$98.0111.6 million is expected to be recognized over a weighted-average period of 2.011.93 years. years.
13
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 SeptemberJune 30, 20222023 and 2021,2022, the Company recognized $0.6$0.8 million and $0.5$0.7 million of ESPP stock compensation expense. For the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, the Company recognized $2.1 million and $1.7$1.5 million of ESPP stock compensation expense. As of SeptemberJune 30, 2022,2023, there were 3,914,5033,667,869 shares available for sale under the 2018 ESPP.
(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 |
|
|
|
The tax provisions for the three and ninesix months ended SeptemberJune 30, 20222023 and 20212022, 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 SeptemberJune 30, 20222023 and 2021,2022, and 19.8%18.1% and 19.0%20.6% for the ninesix months ended SeptemberJune 30, 20222023 and 2021.2022. The increasedecrease for the quarterly and nine-month rates is the result of revisionsprimarily 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
|
|
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 forDuring the three months ended SeptemberJune 30, 2023 and June 30, 2022, and 2021, and $1.5the Company made contributions of $1.0 million and $2.5$0.5 million, and contributions of $1.0 million for each of the nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021. In March 2021, theJune 30, 2022.
14
The Company purchasedhas 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.
|
|
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 assegments, Wholesale and Direct-to-Consumer. Comparative periods have been recast to reflect these changes. Management continues to evaluateevaluates 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 |
|
| As of |
| ||
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 |
|
15
|
| 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 |
|
| As of |
| ||
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 SeptemberJune 30, 20222023 and 2021,2022, and for the ninesix months ended SeptemberJune 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 SeptemberJune 30, 20222023 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 SeptemberJune 30, 2023 and 2022 and 2021 were $2.2$0.4 million and $2.2$0.7 million, and for thethe ninesix months ended SeptemberJune 30, 2023 and 2022 and 2021were $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 |
|
| As of |
| ||
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 |
|
16
|
| 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 |
|
|
|
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 SeptemberJune 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.
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.
17
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 Notesnotes 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.”
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|
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 thirdsecond quarter set a new quarterly record, reflecting the robust global demand for our product. Sales increased across bothGross 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 righta 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 forbuild efficiencies and expand our distribution capabilities around the world. We remain focused on executing against our long-term growth with a focus on enhancingstrategies 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. 18 |
|
|
|
|
|
|
RESULTS OF OPERATIONS – THIRDSECOND QUARTER
During the first quarter of 2022, the Company realigned its reporting structure toWe 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 domesticallyinternationally and a 24.6% increase internationally, primarily driven by strength in wholesale sales. Both segments experienced growth, with4.6% 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 improvedhigher sales volume in Direct-to-Consumer and higher average selling prices.prices in Wholesale.
Gross margin
Gross margin decreased 280increased 460 basis points to 47.1%52.7% compared to 49.9%48.1%, primarily the result of increased freight and logistics costs, anddue to a higher proportion of distributorDirect-to-Consumer sales partially offset byand higher average selling price increasesprices..
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 30increased 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 higherincrease in labor costs of $56.5$35.7 million, as a resultfacility related costs of supply chain$23.2 million, including rent and logistics challenges,depreciation, and volume-driven warehouse and distribution expensescosts of $25.0$10.2 million.
Other expenseincome (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 $7.1for the three months ended June 30, 2022. The increase of $22.1 million was primarily due to unfavorable lossesfavorable 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 | % |
19
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 increasedecrease in the effective tax rate is the result of revisionsprimarily 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 incomeearnings of consolidated joint venturessubsidiaries
Noncontrolling interests represents the share of net earnings that is attributable to our joint venture partners. Net earnings attributable to noncontrolling interests decreased $5.1increased $13.1 million to $8.4$28.8 million compared to $13.6$15.8 million in the prior year, due to lowerhigher earnings by our joint ventures, predominantly in China, and partially offset by improvementsdue to impacts of COVID-related restrictions in other Asia Pacific countries.the prior year.
RESULTS OF SEGMENT OPERATIONS – THIRDSECOND 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 $247.1declined $67.3 million, or 26.2%5.9%, to $1.2$1.1 billion, ledwhich includes a decrease in the Americas of 18.7%, partially offset by growthincreases in Asia Pacific of 58.8% in14.3% 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. VolumeAmericas 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 sold23.8% 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 70increased 50 basis points to 66.9%, primarily due to higher per unit freight costsdriven 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 – NINESIX 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
20
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 reflectingas a 19.3%result of a 19.5% increase domesticallyinternationally and a 19.8% increase internationally, with the largest contribution derived from wholesale sales. Both segments experienced increases with4.7% 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 improvedhigher sales volume in Direct-to-Consumer and higher average selling prices.prices in Wholesale.
Gross margin
Gross margin decreased 290increased 410 basis points to 46.8%50.8% compared to 49.8%46.7%, primarily driven by increased freightdue to higher average selling prices in Wholesale and logistics costs, and an increaseda 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 40increased 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 higherincrease in labor and compensation costs of $139.3$65.5 million, facility related costs of $38.7 million, including rent and volume-drivendepreciation, and warehouse and distribution expensescosts of $39.9$28.3 million.
Other expenseincome (expense)
Other expense increased $20.1income was $12.7 million to $40.1 million,for the six months ended June 30, 2023, as compared to $20.1an expense of $25.0 million for the six months ended June 30, 2022. The increase of $37.7 million was primarily due to unfavorable lossesfavorable 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 increasedecrease in the effective tax rate was the result of revisionsis 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 interestinterests represents the share of net earnings that is attributable to our joint venture partners. Net earnings attributable to noncontrolling interest decreased $14.8interests increased $28.0 million to $39.1$58.7 million compared to $54.0$30.7 million primarilyin the prior year, due to lowerhigher earnings by our joint ventures, predominantly in China, which were partially offset by improvementsdue to impacts of COVID-related restrictions in other Asia Pacific countries.the prior year.
RESULTS OF SEGMENT OPERATIONS – NINESIX 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 primarilyled 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%. VolumeDirect-to-Consumer volume increased 20.8% in the number of units sold25.2% and average selling price per unit increased 4.4%1.5%..
WholesaleDirect-to-Consumer gross margin decreased 280increased 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 SeptemberJune 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 SeptemberJune 30, 20222023, without incurring additional U.S. federal income taxes and applicable non-U.S. income and withholding taxes.
We borrowed $25.0As 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 SeptemberJune 30, 20222023 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 SeptemberJune 30, 20222023 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 ninesix months ended SeptemberJune 30, 2022,2023, net cash used inprovided by operating activities was $42.8$575.3 million compared to net cash provided of $253.2$154.7 million for the ninesix months ended SeptemberJune 30, 2021.2022. The $296.1$420.6 million decreaseincrease in operating cash flows primarily resulted from increaseddecreased inventory purchaseslevels 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 ninesix months ended SeptemberJune 30, 20222023, compared to $256.1$113.9 million for the ninesix months ended SeptemberJune 30, 2021.2022. The $63.4$108.5 million decreaseincrease was due to reducednet 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 increaseddecreased 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 ninesix months ended SeptemberJune 30, 20222023 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 expandednew corporate offices domestically and in India.offices. We expect our annual capital expenditures for 20222023 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 borrowingsborrowings..
Financing Activities
Net cash used in financing activities was $48.6$63.3 million during the ninesix months ended SeptemberJune 30, 20222023, compared to$415.5 $81.4 million during the ninesix months ended SeptemberJune 30, 2021.2022. The decrease is primarily the result of lower repayments onnet 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 millionincreased repurchases of common stock.stock of $10.8 million.
22
Capital Resources and Prospective Capital Requirements
Financing Arrangements
As of SeptemberJune 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 informationinformation..
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 SeptemberJune 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 SeptemberJune 30, 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
23
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 SeptemberJune 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 |
| |||
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 | |
| ||
| ||
31.1 | ||
31.2 | ||
32.1* | ||
101 | ||
| Financial statements from the quarterly report on Form 10-Q of Skechers U.S.A., Inc. for the quarter ended | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
|
|
|
|
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.
24
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: | SKECHERS U.S.A., INC. | |
By: | /s/ John Vandemore | |
John Vandemore | ||
Chief Financial Officer (Principal Financial Officer and Duly Authorized Signatory) |
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