e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2010
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-14429
SKECHERS U.S.A., INC.
(Exact name of registrant as specified in its charter)
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Delaware
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95-4376145 |
(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.) |
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228 Manhattan Beach Blvd. |
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Manhattan Beach, California
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90266 |
(Address of Principal Executive Office)
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(Zip Code) |
(310) 318-3100
(Registrants Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
THE NUMBER OF SHARES OF CLASS A COMMON STOCK OUTSTANDING AS OF NOVEMBER 1, 2010: 36,317,159.
THE NUMBER OF SHARES OF CLASS B COMMON STOCK OUTSTANDING AS OF NOVEMBER 1, 2010: 11,310,610.
SKECHERS U.S.A., INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
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3 |
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4 |
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5 |
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6 |
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14 |
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24 |
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24 |
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25 |
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25 |
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27 |
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28 |
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2
PART I FINANCIAL INFORMATION
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ITEM 1. |
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CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
SKECHERS U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
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September 30, |
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December 31, |
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2010 |
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2009 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
248,828 |
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$ |
265,675 |
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Short-term investments |
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0 |
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30,000 |
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Trade accounts receivable, net |
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286,085 |
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219,924 |
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Other receivables |
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4,497 |
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12,177 |
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Total receivables |
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290,582 |
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232,101 |
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Inventories |
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326,651 |
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224,050 |
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Prepaid expenses and other current assets |
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46,987 |
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28,233 |
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Deferred tax assets |
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8,950 |
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8,950 |
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Total current assets |
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921,998 |
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789,009 |
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Property and equipment, at cost, less accumulated depreciation and amortization |
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268,642 |
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171,667 |
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Intangible assets, less accumulated amortization |
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7,762 |
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9,011 |
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Deferred tax assets |
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13,678 |
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13,660 |
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Other assets, at cost |
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18,196 |
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12,205 |
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TOTAL ASSETS |
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$ |
1,230,276 |
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$ |
995,552 |
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LIABILITIES AND EQUITY |
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Current Liabilities: |
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Short-term borrowings |
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$ |
2,329 |
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$ |
2,006 |
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Current installments of long-term borrowings |
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15,767 |
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529 |
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Accounts payable |
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231,533 |
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196,163 |
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Accrued expenses |
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22,206 |
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31,843 |
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Total current liabilities |
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271,835 |
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230,541 |
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Long-term borrowings, excluding current installments |
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15,802 |
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15,641 |
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Total liabilities |
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287,637 |
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246,182 |
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Commitments and contingencies |
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Equity: |
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Preferred Stock, $.001 par value; 10,000 authorized; none issued and outstanding |
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0 |
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0 |
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Class A Common Stock, $.001 par value; 100,000 shares authorized; 36,310 and
34,229 shares issued and outstanding at September 30, 2010 and December
31, 2009, respectively respectively |
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36 |
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34 |
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Class B Common Stock, $.001 par value; 100,000 shares authorized; 11,311 and
12,360 shares issued and outstanding at September 30, 2010 and December
31, 2009, respectively respectively |
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12 |
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13 |
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Additional paid-in capital |
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301,714 |
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272,662 |
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Accumulated other comprehensive income |
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9,304 |
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9,348 |
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Retained earnings |
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596,776 |
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463,865 |
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Skechers U.S.A., Inc. equity |
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907,842 |
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745,922 |
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Noncontrolling interests |
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34,797 |
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3,448 |
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Total equity |
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942,639 |
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749,370 |
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TOTAL LIABILITIES AND EQUITY |
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$ |
1,230,276 |
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$ |
995,552 |
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See accompanying notes to unaudited condensed consolidated financial statements.
3
SKECHERS U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share data)
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Three-Months Ended September 30, |
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Nine-Months Ended September 30, |
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2010 |
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2009 |
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2010 |
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2009 |
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Net sales |
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$ |
554,626 |
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$ |
405,374 |
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$ |
1,552,249 |
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$ |
1,047,820 |
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Cost of sales |
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301,975 |
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221,648 |
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824,535 |
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616,062 |
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Gross profit |
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252,651 |
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183,726 |
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727,714 |
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431,758 |
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Royalty income |
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1,888 |
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418 |
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3,148 |
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1,022 |
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254,539 |
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184,144 |
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730,862 |
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432,780 |
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Operating expenses: |
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Selling |
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59,516 |
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41,245 |
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146,262 |
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97,568 |
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General and administrative |
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139,455 |
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110,454 |
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389,241 |
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304,340 |
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198,971 |
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151,699 |
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535,503 |
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401,908 |
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Earnings from operations |
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55,568 |
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32,445 |
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195,359 |
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30,872 |
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Other income (expense): |
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Interest income |
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487 |
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322 |
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2,350 |
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1,612 |
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Interest expense |
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(3 |
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(987 |
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(835 |
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(1,944 |
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Other, net |
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(3,143 |
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2,176 |
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(1,323 |
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2,203 |
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(2,659 |
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1,511 |
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192 |
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1,871 |
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Earnings before income taxes |
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52,909 |
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33,956 |
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195,551 |
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32,743 |
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Income tax expense |
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16,330 |
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10,175 |
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62,532 |
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8,236 |
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Net earnings |
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36,579 |
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23,781 |
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133,019 |
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24,507 |
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Less: Net earnings (loss) attributable to
noncontrolling interests |
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201 |
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(679 |
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108 |
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(2,246 |
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Net earnings attributable to Skechers U.S.A., Inc. |
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$ |
36,378 |
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$ |
24,460 |
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$ |
132,911 |
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$ |
26,753 |
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Net earnings per share attributable to Skechers U.S.A., Inc.: |
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Basic |
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$ |
0.76 |
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$ |
0.53 |
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$ |
2.81 |
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$ |
0.58 |
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Diluted |
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$ |
0.74 |
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$ |
0.52 |
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$ |
2.71 |
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$ |
0.57 |
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Weighted average shares used in calculating earnings per
share attributable to Skechers U.S.A., Inc.: |
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Basic |
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47,586 |
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46,405 |
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47,268 |
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46,304 |
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Diluted |
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49,176 |
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47,095 |
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49,017 |
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46,649 |
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Comprehensive income: |
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Net earnings |
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$ |
36,378 |
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$ |
24,460 |
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$ |
132,911 |
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$ |
26,753 |
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Unrealized gain on marketable securities, net of tax |
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0 |
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0 |
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0 |
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8,151 |
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Gain (loss) on foreign currency translation adjustment, net
of tax |
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10,372 |
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1,009 |
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(44 |
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4,883 |
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Total comprehensive income |
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$ |
46,750 |
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$ |
25,469 |
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$ |
132,867 |
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$ |
39,787 |
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See accompanying notes to unaudited condensed consolidated financial statements.
4
SKECHERS U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Nine-Months Ended September 30, |
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2010 |
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2009 |
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Cash flows from operating activities: |
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Net earnings |
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$ |
132,911 |
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$ |
26,753 |
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Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities: |
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Noncontrolling interest in subsidiaries |
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108 |
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(2,246 |
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Depreciation of property and equipment |
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17,641 |
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14,465 |
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Amortization of deferred financing costs |
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1,111 |
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370 |
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Amortization of intangible assets |
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1,287 |
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579 |
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Provision for bad debts and returns |
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4,663 |
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2,959 |
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Non-cash stock compensation |
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10,136 |
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2,464 |
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Loss on disposal of property and equipment |
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42 |
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2 |
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Deferred taxes |
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(19 |
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(614 |
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Impairment of property and equipment |
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0 |
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761 |
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(Increase) decrease in assets: |
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Receivables |
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(63,355 |
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(31,039 |
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Inventories |
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(101,911 |
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70,925 |
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Prepaid expenses and other current assets |
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(18,681 |
) |
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2,369 |
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Other assets |
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(7,342 |
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(1,362 |
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Increase (decrease) in liabilities: |
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Accounts payable |
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32,332 |
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(6,339 |
) |
Accrued expenses |
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(9,642 |
) |
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10,229 |
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Net cash provided by (used in) operating activities |
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(719 |
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90,276 |
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Cash flows from investing activities: |
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Capital expenditures |
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(65,617 |
) |
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(31,197 |
) |
Purchases of investments |
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0 |
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(30,000 |
) |
Maturities of investments |
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30,000 |
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375 |
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Redemption of auction rate securities |
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0 |
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95,250 |
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Intangible additions |
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(40 |
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0 |
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Net cash provided by (used in) investing activities |
|
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(35,657 |
) |
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34,428 |
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Cash flows from financing activities: |
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Net proceeds from the issuances of stock through employee stock
purchase plan and the exercise of stock options |
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11,527 |
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1,344 |
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Payments on long-term debt |
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(576 |
) |
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|
(275 |
) |
Increase in short-term borrowings |
|
|
281 |
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|
525 |
|
Capital contribution from noncontrolling interest of consolidated entity |
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1,000 |
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4,000 |
|
Excess tax benefits from stock-based compensation |
|
|
7,389 |
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0 |
|
|
|
|
|
|
|
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Net cash provided by financing activities |
|
|
19,621 |
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|
|
5,594 |
|
|
|
|
|
|
|
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Net increase (decrease) in cash and cash equivalents |
|
|
(16,755 |
) |
|
|
130,298 |
|
Effect of exchange rates on cash and cash equivalents |
|
|
(92 |
) |
|
|
1,141 |
|
Cash and cash equivalents at beginning of the period |
|
|
265,675 |
|
|
|
114,941 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period |
|
$ |
248,828 |
|
|
$ |
246,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
1,830 |
|
|
$ |
3,260 |
|
Income taxes |
|
|
82,941 |
|
|
|
1,624 |
|
Non-cash transactions: |
|
|
|
|
|
|
|
|
Land contribution from noncontrolling interest of consolidated entity |
|
|
30,000 |
|
|
|
0 |
|
Note payable contribution from noncontrolling interest of consolidated entity |
|
|
16,032 |
|
|
|
0 |
|
Acquisition of Chilean distributor |
|
|
0 |
|
|
|
4,382 |
|
See accompanying notes to unaudited condensed consolidated financial statements.
5
SKECHERS U.S.A., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010 and 2009
(Unaudited)
(1) GENERAL
Basis of Presentation
The accompanying condensed consolidated financial statements of the Company have been prepared
in accordance with accounting principles generally accepted in the United States of America for
interim financial information and in accordance with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include certain footnotes and financial presentations
normally required under accounting principles generally accepted in the United States of America
for complete financial reporting. The interim financial information is unaudited, but reflects all
material normal recurring adjustments and accruals which are, in the opinion of management,
considered necessary to provide a fair presentation for the interim periods presented. The
accompanying condensed consolidated financial statements should be read in conjunction with the
audited consolidated financial statements included in the Companys Annual Report on Form 10-K for
the fiscal year ended December 31, 2009.
The results of operations for the nine months ended September 30, 2010 are not necessarily
indicative of the results to be expected for the entire fiscal year ending December 31, 2010.
Use of Estimates
The preparation of the condensed consolidated financial statements, in conformity with
accounting principles generally accepted in the United States of America, requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting periods. Actual results could differ
from those estimates.
Noncontrolling interests
The Company has interests in certain joint ventures which are consolidated into its financial
statements. Noncontrolling interest was income of $0.2 million and loss of $0.7 million for the
three months ended September 30, 2010 and 2009, respectively, which represents the share of net
earnings or loss that is attributable to our joint venture partners. Noncontrolling interest was
income of $0.1 million and a loss of $2.2 million for the nine months ended September 30, 2010 and
2009, respectively. Our joint venture partners made a $30.0 million capital contribution in land
and a cash capital contribution of $1.0 million during the nine months ended September 30, 2010.
For the period ended September 30, 2010, the Company has determined that its joint venture
with HF Logistics I, LLC (HF) is a variable interest entity (VIE) and that the Company is the
primary beneficiary. The VIE is consolidated into the condensed consolidated financial statements
and the carrying amounts and classification of assets and liabilities was as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
|
December 31, 2009 |
|
Current assets |
|
$ |
8,669 |
|
|
$ |
0 |
|
Noncurrent assets |
|
|
84,960 |
|
|
|
0 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
93,629 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
17,551 |
|
|
$ |
0 |
|
Noncurrent liabilities |
|
|
16,031 |
|
|
|
0 |
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
33,582 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
The Company does not have a significant variable interest in any unconsolidated VIEs.
6
Recent accounting pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) 2009-17, Amendments to FASB Interpretation No. 46(R). ASU 2009-17 requires a
qualitative approach to identifying a controlling financial interest in a VIE, and requires ongoing
assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the
primary beneficiary of the VIE. ASU 2009-17 is effective for interim and annual reporting periods
beginning after November 15, 2009. Our adoption of ASU 2009-17 did not have a material impact on
our consolidated financial statements.
(2) INVESTMENTS
At December 31, 2009, short-term investments were $30.0 million, which consisted of U.S.
government obligations with maturities of greater than 90 days. These investments were redeemed at
par during the nine months ended September 30, 2010.
(3) REVENUE RECOGNITION
The Company recognizes revenue on wholesale sales when products are shipped and the customer
takes title and assumes risk of loss, collection of relevant receivable is reasonably assured,
persuasive evidence of an arrangement exists and the sales price is fixed or determinable. This
generally occurs at time of shipment. The Company recognizes revenue from retail sales at the point
of sale. Allowances for estimated returns, discounts, doubtful accounts and chargebacks are
provided for when related revenue is recorded. Related costs paid to third-party shipping companies
are recorded as a cost of sales.
Royalty income is earned from licensing arrangements. Upon signing a new licensing agreement,
we receive up-front fees, which are generally characterized as prepaid royalties. These fees are
initially deferred and recognized as revenue as earned (i.e., as licensed sales are reported to the
company or on a straight-line basis over the term of the agreement). The first calculated royalty
payment is based on actual sales of the licensed product. Typically, at each quarter-end we receive
correspondence from our licensees indicating the actual sales for the period. This information is
used to calculate and accrue the related royalties based on the terms of the agreement.
(4) OTHER COMPREHENSIVE INCOME
In addition to net earnings, other comprehensive income includes changes in foreign currency
translation adjustments and unrealized gains and losses on marketable securities. The Company
operates internationally through several foreign subsidiaries. Assets and liabilities of the
foreign operations denominated in local currencies are translated at the rate of exchange at the
balance sheet date. Revenues and expenses are translated at the weighted average rate of exchange
during the period of translation. The resulting translation adjustments, along with translation
adjustments related to long-term intercompany loans, make up the translation adjustment in other
comprehensive income.
The activity in other comprehensive income, net of income taxes, was as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Months Ended September 30, |
|
|
Nine-Months Ended September 30, |
|
Diluted earnings per share |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Net earnings |
|
$ |
36,579 |
|
|
$ |
23,781 |
|
|
$ |
133,019 |
|
|
$ |
24,507 |
|
Unrealized gain on marketable securities, net of tax |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
8,151 |
|
Income on foreign currency translation adjustment,
net of tax |
|
|
10,555 |
|
|
|
1,093 |
|
|
|
197 |
|
|
|
4,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
47,134 |
|
|
|
24,874 |
|
|
|
133,216 |
|
|
|
37,650 |
|
Comprehensive income (loss) attributable to
noncontrolling interest |
|
|
384 |
|
|
|
(595 |
) |
|
|
349 |
|
|
|
(2,137 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Skechers U.S.A. |
|
$ |
46,750 |
|
|
$ |
25,469 |
|
|
$ |
132,867 |
|
|
$ |
39,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
The Company recognizes compensation expense for stock-based awards based on the grant date
fair value. Stock compensation expense was $3.5 million and $1.3 million for the three months
ended September 30, 2010 and 2009, respectively. Stock compensation expense was $10.1 million and
$2.5 million for the nine months ended September 30, 2010 and 2009, respectively.
Stock options granted pursuant to the 1998 Stock Option, Deferred Stock and Restricted Stock
Plan and the 2007 Incentive Award Plan (collectively, the Equity Incentive Plan) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE |
|
AGGREGATE |
|
|
|
|
|
|
WEIGHTED AVERAGE |
|
REMAINING |
|
INTRINSIC |
|
|
SHARES |
|
EXERCISE PRICE |
|
CONTRACTUAL TERM |
|
VALUE |
Outstanding at December 31, 2009 |
|
|
1,505,694 |
|
|
$ |
12.01 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(906,516 |
) |
|
|
12.46 |
|
|
|
|
|
|
|
|
|
Cancelled |
|
|
(24,791 |
) |
|
|
3.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2010 |
|
|
574,387 |
|
|
|
11.65 |
|
|
1.6 years |
|
$ |
6,838,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2010 |
|
|
574,387 |
|
|
|
11.65 |
|
|
1.6 years |
|
$ |
6,838,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the status and changes of our nonvested shares related to the Equity Incentive
Plan as of and during the nine months ended September 30, 2010 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE |
|
|
|
|
|
|
GRANT-DATE FAIR |
|
|
SHARES |
|
VALUE |
Nonvested at December 31, 2009 |
|
|
2,158,644 |
|
|
$ |
17.86 |
|
Granted |
|
|
139,000 |
|
|
|
30.38 |
|
Vested |
|
|
(105,977 |
) |
|
|
17.29 |
|
Cancelled |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
Nonvested at September 30, 2010 |
|
|
2,191,667 |
|
|
|
18.68 |
|
|
|
|
|
|
|
|
|
|
As of September 30, 2010, there was $28.5 million of unrecognized compensation cost related to
nonvested common shares. The cost is expected to be amortized over a weighted average period of 2.1
years.
(6) EARNINGS PER SHARE
Basic earnings per share represents net earnings divided by the weighted average number of
common shares outstanding for the period. Diluted earnings per share represents the weighted
average number of common shares and potential common shares, if dilutive, that would arise from the
exercise of stock options and nonvested shares using the treasury stock method.
The following is a reconciliation of net earnings and weighted average common shares
outstanding for purposes of calculating basic earnings per share (in thousands, except per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Months Ended September 30, |
|
Nine-Months Ended September 30, |
Basic earnings per share |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
Net earnings attributable to Skechers U.S.A., Inc. |
|
$ |
36,378 |
|
|
$ |
24,460 |
|
|
$ |
132,911 |
|
|
$ |
26,753 |
|
Weighted average common shares outstanding |
|
|
47,586 |
|
|
|
46,405 |
|
|
|
47,268 |
|
|
|
46,304 |
|
Basic earnings per share attributable to Skechers
U.S.A., Inc. |
|
$ |
0.76 |
|
|
$ |
0.53 |
|
|
$ |
2.81 |
|
|
$ |
0.58 |
|
8
The following is a reconciliation of net earnings and weighted average common shares
outstanding for purposes of calculating diluted earnings per share (in thousands, except per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Months Ended September 30, |
|
|
Nine-Months Ended September 30, |
|
Diluted earnings per share |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Net earnings attributable to Skechers U.S.A., Inc. |
|
$ |
36,378 |
|
|
$ |
24,460 |
|
|
$ |
132,911 |
|
|
$ |
26,753 |
|
Weighted average common shares outstanding |
|
|
47,586 |
|
|
|
46,405 |
|
|
|
47,268 |
|
|
|
46,304 |
|
Dilutive effect of stock options |
|
|
1,590 |
|
|
|
690 |
|
|
|
1,749 |
|
|
|
345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
49,176 |
|
|
|
47,095 |
|
|
|
49,017 |
|
|
|
46,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share attributable to Skechers
U.S.A., Inc. |
|
$ |
0.74 |
|
|
$ |
0.52 |
|
|
$ |
2.71 |
|
|
$ |
0.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no options excluded from the computation of diluted earnings per share for the
three months and nine months ended September 30, 2010, respectively. Options to purchase 370,528
shares and 768,220 shares of Class A common stock were not included in the computation of diluted
earnings per share for the three months and nine months ended September 30, 2009, respectively,
because their effect would have been anti-dilutive.
(7) INCOME TAXES
The Companys effective tax rates for the third quarter and first nine months of 2010 were
30.9% and 32.0%, respectively, compared to the effective tax rates of 30.0% and 25.2% for the third
quarter and first nine months of 2009, respectively. Income tax expense for the three months ended
September 30, 2010 was $16.3 million compared to $10.2 million for the same period in 2009. Income
tax expense for the nine months ended September 30, 2010 was $62.5 million compared to $8.2 million
for the same period in 2009. The income tax expense for the nine months ended September 30, 2010
includes $0.9 million in discrete tax benefits relating to the settlement of certain tax reserves
during the period. The income tax benefit for the nine months ended September 30, 2009 includes a
$1.9 million discrete tax benefit adjusting the amount of tax benefit recognized in 2008 relating
to the Company entering into an advanced pricing agreement APA with the U.S. Internal Revenue
Service IRS.
The tax provision for the nine months ended September 30, 2010 was computed using the
estimated effective tax rates applicable to each of the domestic and international taxable
jurisdictions for the full year. The estimated effective tax rate is subject to managements
ongoing review and revision, if necessary. The rate for the nine months ended September 30, 2010
is lower than the expected domestic rate of approximately 40% due to our non-U.S. subsidiary
earnings in lower tax rate jurisdictions and our planned permanent reinvestment of undistributed
earnings from our non-U.S. subsidiaries, thereby indefinitely postponing their repatriation to the
United States. As such, the Company did not provide for deferred income taxes on accumulated
undistributed earnings of our non-U.S. subsidiaries.
The Company files income tax returns in the U.S. federal jurisdiction and various state, local
and foreign jurisdictions. The Company has completed U.S. federal audits through 2003, and is
currently under examination by the IRS for the 2008 tax year. The Company is also under examination
by a number of states. During the nine months ended September 30, 2010, settlements were reached
with certain state tax jurisdictions which reduced the balance of 2010 and prior year unrecognized
tax benefits by $0.3 million.
With few exceptions, the Company is no longer subject to federal, state, local or non-U.S.
income tax examinations by tax authorities for years before 2007. Tax years 2007 through 2009
remain open to examination by the U.S. federal, state, and foreign tax authorities. During the
third quarter, the statute of limitations for the 2006 tax year lapsed for the U.S. federal and
several state tax jurisdictions. The lapse in statute reduced the balance of prior year
unrecognized tax benefits by $0.6 million.
(8) LINE OF CREDIT AND SHORT-TERM BORROWINGS
On June 30, 2009, the Company entered into a $250 million secured credit agreement with a
group of eight banks that replaced the existing $150 million credit agreement. The new credit
facility matures in June 2013. The
9
credit agreement permits the Company and certain of its subsidiaries to borrow up to $250 million based upon a
borrowing base of eligible accounts receivable and inventory, which amount can be increased to
$300 million at the Companys request and upon satisfaction of certain conditions including
obtaining the commitment of existing or prospective lenders willing to provide the incremental
amount. Borrowings bear interest at the borrowers election based on LIBOR or a Base Rate (defined
as the greatest of LIBOR plus 1.00%, the Federal Funds Rate plus 0.5% or one of the lenders prime
rate), in each case, plus an applicable margin based on the average daily principal balance of
revolving loans under the credit agreement (2.75% to 3.25% for Base Rate Loans and 3.75% to 4.25%
for LIBOR loans). The Company pays a monthly unused line of credit fee between 0.5% and 1.0% per
annum, which varies based on the average daily principal balance of outstanding revolving loans and
undrawn amounts of letters of credit outstanding during such month. The credit agreement further
provides for a limit on the issuance of letters of credit to a maximum of $50 million. The credit
agreement contains customary affirmative and negative covenants for secured credit facilities of
this type, including a fixed charges coverage ratio that applies when excess availability is less
than $50 million. In addition, the credit agreement places limits on additional indebtedness that
the Company is permitted to incur as well as other restrictions on certain transactions. We and
our subsidiaries were in compliance with all of the covenants of the
credit agreement at September 30, 2010. The Company and its subsidiaries had $2.8 million of outstanding letters of credit and short-term
borrowings of $2.3 million as of September 30, 2010. The Company paid syndication and commitment fees of
$5.9 million on this facility which are being amortized over the four-year life of the facility.
(9) LITIGATION
The Companys claims and advertising for its products including for its Shape-ups are subject
to the requirements of various regulatory and quasi-government agencies around the world and the
Company receives periodic requests for information. The Company is currently responding to
requests for information from regulatory and quasi-regulatory agencies in several countries
throughout the world and fully cooperates with such requests. The Company believes that its claims
and advertising are supported by tests, medical opinions and other relevant data and has been
successful in substantiating and/or defending its claims and advertising in several different
countries.
Tamara Grabowski v. Skechers USA, Inc. On June 18, 2010, Tamara Grabowski filed an action
against the Company in the United States District Court for the Southern District of California,
Case No. 10 CV 1300 JM (WVG), on her behalf and on behalf of all others similarly situated,
alleging that the Companys advertising for Shape-ups violates Californias Unfair Competition Law
and the California Consumer Legal Remedies Act, and constitutes a breach of express warranty (the
Grabowski action). The complaint seeks certification of a nationwide class, damages, restitution
and disgorgement of profits, declaratory and injunctive relief, corrective advertising, and
attorneys fees and costs. The matter is still in the early stages. While it is too early to
predict the outcome of the litigation and whether an adverse result would have a material adverse
impact on the Companys operations or financial statements, the Company believes it has meritorious
defenses, vehemently denies the allegations, believes that class certification is not warranted and
intends to defend the case vigorously.
Sonia Stalker v. Skechers USA, Inc. On July 2, 2010, Sonia Stalker filed an action against
the Company in the Superior Court of the State of California for the County of Los Angeles, on her
behalf and on behalf of all others similarly situated, alleging that the Companys advertising for
Shape-ups violates Californias Unfair Competition Law and the California Consumer Legal Remedies
Act. The complaint, as subsequently amended, seeks certification of a nationwide class, actual and
punitive damages, restitution, declaratory and injunctive relief, corrective advertising, and
attorneys fees and costs. On July 23, 2010, the Company removed the case to the United States
District Court for the Central District of California, and it is now pending as Sonia Stalker v.
Skechers USA, Inc., CV 10-5460 SJO (JEM). On August 23, 2010, the Company filed a motion to
dismiss the action or transfer it to the United States District Court for the Southern District of
California, in view of the prior pending Grabowski action. On August 27, 2010, plaintiff moved to
certify the class, which motion the Company has opposed. The matter is still in its early stages.
While it is too early to predict the outcome of the litigation and whether an adverse result would
have a material adverse impact on the Companys operations or financial statements, the Company
believes it has meritorious defenses, vehemently denies the allegations, believes that class
certification is not warranted and intends to defend the case vigorously.
10
Venus Morga v. Skechers USA, Inc. On August 25, 2010, Venus Morga filed an action against
the Company in the United States District Court for the Southern District of California, Case No.
10 CV 1780 JM (WVG), on her behalf and on behalf of all others similarly situated, alleging that
the Companys advertising for Shape-ups violates Californias Unfair Competition Law, Californias
False Advertising Law and the California Consumer Legal Remedies Act, and gives rise to a claim for
unjust enrichment. The complaint seeks certification of a nationwide class, restitution,
injunctive relief, and attorneys fees and costs. On September 10, 2010, a motion was filed to
consolidate the action with the prior pending Grabowski action. The matter is still in the early
stages. While it is too early to predict the outcome of the litigation and whether an adverse
result would have a material adverse impact on the Companys operations or financial statements,
the Company believes it has meritorious defenses, vehemently denies the allegations, believes that
class certification is not warranted and intends to defend the case vigorously.
(10) STOCKHOLDERS EQUITY
Certain Class B stockholders converted 34,900 shares of Class B common stock into an
equivalent number of shares of Class A common stock during the three months ended September 30,
2010. No shares of Class B common stock were converted into shares of Class A common stock during
the three months ended September 30, 2009. Certain Class B stockholders converted 1,049,005 and
43,902 shares of Class B common stock into an equivalent number of shares of Class A common stock
during the nine months ended September 30, 2010 and 2009, respectively.
The following table reconciles equity attributable to noncontrolling interest (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine-Months Ended September 30, |
|
|
|
2010 |
|
|
2009 |
|
Noncontrolling interest, beginning of the period |
|
$ |
3,448 |
|
|
$ |
3,199 |
|
Net income (loss) attributable to noncontrolling interest |
|
|
108 |
|
|
|
(2,246 |
) |
Foreign currency translation adjustment |
|
|
241 |
|
|
|
109 |
|
Capital contribution by noncontrolling interest |
|
|
31,000 |
|
|
|
4,000 |
|
|
|
|
|
|
|
|
Noncontrolling interest, end of the period |
|
$ |
34,797 |
|
|
$ |
5,062 |
|
|
|
|
|
|
|
|
|
|
|
(11) |
|
SEGMENT AND GEOGRAPHIC REPORTING INFORMATION |
We have four reportable segments domestic wholesale sales, international wholesale sales,
retail sales, and e-commerce sales. Management evaluates segment performance based primarily on
net sales and gross profit. All other costs and expenses of the Company are analyzed on an
aggregate basis, and these costs are not allocated to the Companys segments. Net sales, gross
profit and identifiable assets for the domestic wholesale segment, international wholesale, retail,
and the e-commerce segment on a combined basis were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic wholesale |
|
$ |
312,319 |
|
|
$ |
202,963 |
|
|
$ |
904,066 |
|
|
$ |
544,352 |
|
International wholesale |
|
|
124,623 |
|
|
|
100,099 |
|
|
|
325,751 |
|
|
|
261,140 |
|
Retail |
|
|
111,825 |
|
|
|
95,250 |
|
|
|
301,410 |
|
|
|
227,541 |
|
E-commerce |
|
|
5,859 |
|
|
|
7,062 |
|
|
|
21,022 |
|
|
|
14,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
554,626 |
|
|
$ |
405,374 |
|
|
$ |
1,552,249 |
|
|
$ |
1,047,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic wholesale |
|
$ |
129,496 |
|
|
$ |
82,328 |
|
|
$ |
387,478 |
|
|
$ |
194,715 |
|
International wholesale |
|
|
52,070 |
|
|
|
39,281 |
|
|
|
138,073 |
|
|
|
93,127 |
|
Retail |
|
|
68,043 |
|
|
|
58,449 |
|
|
|
191,156 |
|
|
|
136,113 |
|
E-commerce |
|
|
3,042 |
|
|
|
3,668 |
|
|
|
11,007 |
|
|
|
7,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
252,651 |
|
|
$ |
183,726 |
|
|
$ |
727,714 |
|
|
$ |
431,758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
|
December 31, 2009 |
|
Identifiable assets |
|
|
|
|
|
|
|
|
Domestic wholesale |
|
$ |
887,754 |
|
|
$ |
712,712 |
|
International wholesale |
|
|
229,527 |
|
|
|
192,085 |
|
Retail |
|
|
112,752 |
|
|
|
90,049 |
|
E-commerce |
|
|
243 |
|
|
|
706 |
|
|
|
|
|
|
|
|
Total |
|
$ |
1,230,276 |
|
|
$ |
995,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Additions to property and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic wholesale |
|
$ |
30,443 |
|
|
$ |
402 |
|
|
$ |
47,185 |
|
|
$ |
19,628 |
|
International wholesale |
|
|
521 |
|
|
|
1,718 |
|
|
|
3,113 |
|
|
|
4,811 |
|
Retail |
|
|
4,932 |
|
|
|
2,217 |
|
|
|
15,319 |
|
|
|
6,758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
35,896 |
|
|
$ |
4,337 |
|
|
$ |
65,617 |
|
|
$ |
31,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic Information:
The following summarizes our operations in different geographic areas for the period indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Net sales (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
416,577 |
|
|
$ |
296,458 |
|
|
$ |
1,193,410 |
|
|
$ |
766,865 |
|
Canada |
|
|
17,472 |
|
|
|
14,044 |
|
|
|
45,347 |
|
|
|
29,988 |
|
Other international (2) |
|
|
120,577 |
|
|
|
94,872 |
|
|
|
313,492 |
|
|
|
250,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
554,626 |
|
|
$ |
405,374 |
|
|
$ |
1,552,249 |
|
|
$ |
1,047,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
|
December 31, 2009 |
|
Long-lived assets |
|
|
|
|
|
|
|
|
United States |
|
$ |
252,382 |
|
|
$ |
160,444 |
|
Canada |
|
|
1,390 |
|
|
|
866 |
|
Other international (2) |
|
|
14,870 |
|
|
|
10,357 |
|
|
|
|
|
|
|
|
Total |
|
$ |
268,642 |
|
|
$ |
171,667 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Company has subsidiaries in Canada, United Kingdom, Germany, France, Spain, Italy,
Netherlands, Brazil, and Chile that generate net sales within those respective countries and
in some cases the neighboring regions. The Company has joint ventures in China, Hong Kong,
Malaysia, Singapore, and Thailand that generate net sales from those countries. The Company
also has a subsidiary in Switzerland that generates net sales from Switzerland in addition to
net sales to our distributors located in numerous non-European countries. Net sales are
attributable to geographic regions based on the location of the Company subsidiary. |
|
(2) |
|
Other international consists of Switzerland, United Kingdom, Germany, France, Spain, Italy,
Netherlands, China, Hong Kong, Malaysia, Singapore, Thailand, Brazil and Chile. |
|
|
|
(12) |
|
BUSINESS AND CREDIT CONCENTRATIONS |
The Company generates the majority of its sales in the United States; however, several of its
products are sold into various foreign countries, which subjects the Company to the risks of doing
business abroad. In addition, the Company operates in the footwear industry, which is impacted by
the general economy, and its business depends on the general economic environment and levels of
consumer spending. Changes in the marketplace may significantly affect managements estimates and
the Companys performance. Management performs regular evaluations concerning the ability of
customers to satisfy their obligations and provides for estimated doubtful accounts. Domestic
accounts receivable, which generally do not require collateral from customers, were equal to $178.7
million and $148.3 million before allowances for bad debts, sales returns and chargebacks at
September 30, 2010
12
and December 31, 2009, respectively. Foreign accounts receivable, which in some
cases are collateralized by letters of credit, were equal to $126.1 million and $86.0 million
before allowance for bad debts, sales returns and chargebacks at September 30, 2010 and December
31, 2009, respectively. The Companys credit losses due to
write-offs for the three months ended September 30, 2010 and 2009 were $2.2 million and $2.6
million, respectively. The Companys credit losses due to write-offs for the nine months ended
September 30, 2010 and 2009 were $3.8 million and $1.7 million, respectively.
Net sales to customers in the U.S. exceeded 70% of total net sales for the three and nine
months ended September 30, 2010 and 2009. Assets located outside the U.S. consist primarily of
cash, accounts receivable, inventory, property and equipment, and other assets. Net assets held
outside the United States were $252.5 million and $205.9 million at September 30, 2010 and December
31, 2009, respectively.
The Companys net sales to its five largest customers accounted for approximately 26.0% and
24.7% of total net sales for the three months ended September 30, 2010 and 2009, respectively. The
Companys net sales to its five largest customers accounted for approximately 27.2% and 25.0% of
total net sales for the nine months ended September 30, 2010 and 2009, respectively. No customer
accounted for more than 10% of our net sales during the three months ended September 30, 2010 and
2009. No customer accounted for more than 10% of our net sales during the nine months ended
September 30, 2010 and 2009, respectively. No customer accounted for more than 10% of our
outstanding accounts receivable balance at September 30, 2010. One customer accounted for 11.3% of
our outstanding accounts receivable at December 31, 2009. No customer accounted for more than 10%
of our outstanding accounts receivable balance at September 30, 2009.
The Companys top five manufacturers produced the following for the three and nine months
ended September 30, 2010 and 2009, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
Manufacturer #1 |
|
|
36.3 |
% |
|
|
30.1 |
% |
|
|
35.4 |
% |
|
|
27.8 |
% |
Manufacturer #2 |
|
|
12.2 |
% |
|
|
14.7 |
% |
|
|
12.8 |
% |
|
|
12.5 |
% |
Manufacturer #3 |
|
|
9.5 |
% |
|
|
11.6 |
% |
|
|
9.4 |
% |
|
|
11.4 |
% |
Manufacturer #4 |
|
|
8.6 |
% |
|
|
11.1 |
% |
|
|
9.0 |
% |
|
|
10.6 |
% |
Manufacturer #5 |
|
|
6.0 |
% |
|
|
4.7 |
% |
|
|
4.7 |
% |
|
|
6.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72.6 |
% |
|
|
72.2 |
% |
|
|
71.3 |
% |
|
|
68.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The majority of the Companys products are produced in China. The Companys operations are
subject to the customary risks of doing business abroad, including, but not limited to, currency
fluctuations and revaluations, custom duties and related fees, various import controls and other
monetary barriers, restrictions on the transfer of funds, labor unrest and strikes and, in certain
parts of the world, political instability. The Company believes it has acted to reduce these risks
by diversifying manufacturing among various factories. To date, these business risks have not had a
material adverse impact on the Companys operations.
(13) RELATED PARTY TRANSACTIONS
On July 29, 2010, the Company formed Skechers Foundation (the Foundation), which
is a 501(c)(3) non-profit entity that does not have any shareholders or members. The Foundation is
not a subsidiary of and is not otherwise affiliated with the Company, and the Company does not have
a financial interest in the Foundation. However, two officers of the Company, Michael Greenberg
who is its President and David Weinberg who is its Chief Operating Officer and Chief Financial
Officer, are also officers and directors of the Foundation. During the three months and nine
months ended September 30, 2010, the Company contributed $250,000 to the Foundation to use for
various charitable causes.
13
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with our Condensed Consolidated
Financial Statements and Notes thereto in Item 1 of this document and our companys annual report
on Form 10-K for the year ended December 31, 2009.
We intend for this discussion to provide the reader with information that will assist in
understanding our financial statements, the changes in certain key items in those financial
statements from period to period, and the primary factors that accounted for those changes, as well
as how certain accounting principles affect our financial statements. The discussion also provides
information about the financial results of the various segments of our business to provide a better
understanding of how those segments and their results affect the financial condition and results of
operations of our company as a whole.
This quarterly report on Form 10-Q may contain forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which can be
identified by the use of forward-looking language such as intend, may, will, believe,
expect, anticipate or other comparable terms. These forward-looking statements involve risks
and uncertainties that could cause actual results to differ materially from those projected in
forward-looking statements, and reported results shall not be considered an indication of our
companys future performance. Factors that might cause or contribute to such differences include:
|
|
|
international, national and local general economic, political and market conditions,
including the recent global economic slowdown and financial crisis; |
|
|
|
|
entry into the highly competitive performance footwear market; |
|
|
|
|
sustaining, managing and forecasting our costs and proper inventory levels; |
|
|
|
|
losing any significant customers, decreased demand by industry retailers and
cancellation of order commitments due to the lack of popularity of particular designs
and/or categories of our products; |
|
|
|
|
maintaining our brand image and intense competition among sellers of footwear for
consumers; |
|
|
|
|
anticipating, identifying, interpreting or forecasting changes in fashion trends,
consumer demand for the products and the various market factors described above; |
|
|
|
|
sales levels during the spring, back-to-school and holiday selling seasons; and |
|
|
|
|
other factors referenced or incorporated by reference in our companys annual report
on Form 10-K for the year ended December 31, 2009. |
The risks included here are not exhaustive. Other sections of this report may include
additional factors that could adversely impact our business, financial condition and results of
operations. Moreover, we operate in a very competitive and rapidly changing environment. New risk
factors emerge from time to time and we cannot predict all such risk factors, nor can we assess the
impact of all such risk factors on our business or the extent to which any factor or combination of
factors may cause actual results to differ materially from those contained in any forward-looking
statements. Given these risks and uncertainties, investors should not place undue reliance on
forward-looking statements as a prediction of actual results. Investors should also be aware that
while we do, from time to time, communicate with securities analysts, we do not disclose any
material non-public information or other confidential commercial information to them. Accordingly,
individuals should not assume that we agree with any statement or report issued by any analyst,
regardless of the content of the report. Thus, to the extent that reports issued by securities
analysts contain any projections, forecasts or opinions, such reports are not our responsibility.
FINANCIAL OVERVIEW
We have four reportable segments domestic wholesale sales, international wholesale sales,
retail sales, which includes domestic and international retail sales, and e-commerce sales. We
evaluate segment performance based primarily on net sales and gross profit. The largest portion of
our revenue is derived from the domestic wholesale segment. Net earnings for the three months
ended September 30, 2010 was $36.4 million, or $0.74 per diluted share.
14
Revenue as a percentage of net sales was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Months Ended September 30, |
|
|
Nine-Months Ended September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Percentage of revenues by segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic wholesale |
|
|
56.3 |
% |
|
|
50.1 |
% |
|
|
58.2 |
% |
|
|
52.0 |
% |
International wholesale |
|
|
22.5 |
% |
|
|
24.7 |
% |
|
|
21.0 |
% |
|
|
24.9 |
% |
Retail |
|
|
20.2 |
% |
|
|
23.5 |
% |
|
|
19.4 |
% |
|
|
21.7 |
% |
E-commerce |
|
|
1.0 |
% |
|
|
1.7 |
% |
|
|
1.4 |
% |
|
|
1.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2010, we owned 235 domestic retail stores and 40 international retail
stores, and we have established our presence in most of what we believe to be the major domestic
retail markets. During the first nine months of 2010, we opened eleven domestic concept stores,
five domestic outlet stores, one domestic warehouse store, three international concept stores, and
ten international outlet stores and we closed one domestic outlet store. We periodically review
all of our stores for impairment, and we carefully review our under-performing stores and consider
the potential for non-renewal of leases upon completion of the current term of the applicable
lease.
During the remainder of 2010 and in 2011, we intend to focus on: (i) enhancing the efficiency
of our operations by managing our inventory and reducing expenses (ii) growing our international
business to 25% to 30% of our total sales, (iii) expanding our retail distribution channel by
opening another nine to eleven stores, including three international company-owned stores, (iv)
increasing the product count of all customers by delivering trend-right styles at reasonable
prices, and (v) developing our domestic infrastructure to support ongoing growth.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, selected information from our
results of operations (in thousands) and as a percentage of net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Months Ended September 30, |
|
|
Nine-Months Ended September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
2009 |
|
Net sales |
|
$ |
554,626 |
|
|
|
100.0 |
% |
|
$ |
405,374 |
|
|
|
100.0 |
% |
|
$ |
1,552,249 |
|
|
|
100.0 |
% |
|
$ |
1,047,820 |
|
|
|
100.0 |
% |
Cost of sales |
|
|
301,975 |
|
|
|
54.4 |
|
|
|
221,648 |
|
|
|
54.7 |
|
|
|
824,535 |
|
|
|
53.1 |
|
|
|
616,062 |
|
|
|
58.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
252,651 |
|
|
|
45.6 |
|
|
|
183,726 |
|
|
|
45.3 |
|
|
|
727,714 |
|
|
|
46.9 |
|
|
|
431,758 |
|
|
|
41.2 |
|
Royalty income |
|
|
1,888 |
|
|
|
0.3 |
|
|
|
418 |
|
|
|
0.1 |
|
|
|
3,148 |
|
|
|
0.2 |
|
|
|
1,022 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
254,539 |
|
|
|
45.9 |
|
|
|
184,144 |
|
|
|
45.4 |
|
|
|
730,862 |
|
|
|
47.1 |
|
|
|
432,780 |
|
|
|
41.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling |
|
|
59,516 |
|
|
|
10.7 |
|
|
|
41,245 |
|
|
|
10.2 |
|
|
|
146,262 |
|
|
|
9.4 |
|
|
|
97,568 |
|
|
|
9.3 |
|
General and administrative |
|
|
139,455 |
|
|
|
25.1 |
|
|
|
110,454 |
|
|
|
27.2 |
|
|
|
389,241 |
|
|
|
25.1 |
|
|
|
304,340 |
|
|
|
29.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
198,971 |
|
|
|
35.8 |
|
|
|
151,699 |
|
|
|
37.4 |
|
|
|
535,503 |
|
|
|
34.5 |
|
|
|
401,908 |
|
|
|
38.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations |
|
|
55,568 |
|
|
|
10.1 |
|
|
|
32,445 |
|
|
|
8.0 |
|
|
|
195,359 |
|
|
|
12.6 |
|
|
|
30,872 |
|
|
|
2.9 |
|
Interest income |
|
|
487 |
|
|
|
0.1 |
|
|
|
322 |
|
|
|
0.1 |
|
|
|
2,350 |
|
|
|
0.2 |
|
|
|
1,612 |
|
|
|
0.2 |
|
Interest expense |
|
|
(3 |
) |
|
|
0 |
|
|
|
(987 |
) |
|
|
(0.2 |
) |
|
|
(835 |
) |
|
|
(0.1 |
) |
|
|
(1,944 |
) |
|
|
(0.2 |
) |
Other, net |
|
|
(3,143 |
) |
|
|
(0.7 |
) |
|
|
2,176 |
|
|
|
0.5 |
|
|
|
(1,323 |
) |
|
|
(0.1 |
) |
|
|
2,203 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
52,909 |
|
|
|
9.5 |
|
|
|
33,956 |
|
|
|
8.4 |
|
|
|
195,551 |
|
|
|
12.6 |
|
|
|
32,743 |
|
|
|
3.1 |
|
Income tax expense |
|
|
16,330 |
|
|
|
2.9 |
|
|
|
10,175 |
|
|
|
2.5 |
|
|
|
62,532 |
|
|
|
4.0 |
|
|
|
8,236 |
|
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
36,579 |
|
|
|
6.6 |
|
|
|
23,781 |
|
|
|
5.9 |
|
|
|
133,019 |
|
|
|
8.6 |
|
|
|
24,507 |
|
|
|
2.3 |
|
Less: Net earnings (loss) attributable to noncontrolling interests |
|
|
201 |
|
|
|
0 |
|
|
|
(679 |
) |
|
|
(0.1 |
) |
|
|
108 |
|
|
|
0 |
|
|
|
(2,246 |
) |
|
|
(0.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Skechers U.S.A., Inc. |
|
$ |
36,378 |
|
|
|
6.6 |
% |
|
$ |
24,460 |
|
|
|
6.0 |
% |
|
$ |
132,911 |
|
|
|
8.6 |
% |
|
$ |
26,753 |
|
|
|
2.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
THREE MONTHS ENDED SEPTEMBER 30, 2010 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2009
Net sales
Net sales for the three months ended September 30, 2010 were $554.6 million, an increase of
$149.2 million or 36.8%, as compared to net sales of $405.4 million for the three months ended
September 30, 2009. The increase in net sales was broad-based.
Our domestic wholesale net sales increased $109.3 million, or 53.9%, to $312.3 million for the
three months ended September 30, 2010, from $203.0 million for the three months ended September 30,
2009. The largest increases in our domestic wholesale segment came in our Womens and Mens
divisions. The average selling price per pair within the domestic wholesale segment was $25.87 per
pair for the three months ended September 30, 2010 compared to $21.71 per pair for the same period
last year, primarily due to acceptance of new designs and styles for our in-demand products and
reduced close-outs. The increase in the domestic wholesale segments net sales came on a 29.2%
unit sales volume increase to 12.1 million pairs from 9.3 million pairs for the same period in
2009.
Our international wholesale segment net sales increased $24.5 million, or 24.5%, to $124.6
million for the three months ended September 30, 2010, compared to $100.1 million for the three
months ended September 30, 2009. Our international wholesale sales consist of direct subsidiary
sales sales we make to department stores and specialty retailers and sales to our distributors
who in turn sell to retailers in various international regions where we do not sell direct. Direct
subsidiary sales increased $19.5 million, or 26.3%, to $93.6 million for the three months ended
September 30, 2010 compared to net sales of $74.1 million for the three months ended September 30,
2009. The largest sales increases during the quarter came from our subsidiaries in Germany,
Canada, and Switzerland. Our distributor sales increased $5.0 million, or 19.3%, to $31.0 million
for the three months ended September 30, 2010, compared to sales of $26.0 million for the three
months ended September 30, 2009. This was primarily due to increased sales to our distributors in
Korea and Serbia.
Our retail segment sales increased $16.5 million to $111.8 million for the three months ended
September 30, 2010, a 17.4% increase over sales of $95.3 million for the three months ended
September 30, 2009. The increase in retail sales was due to positive comparable store sales (i.e.
those open at least one year) and a net increase of 31 stores. For the three months ended
September 30, 2010, we realized positive comparable store sales of 6.2% in our domestic retail
stores and 4.2% in our international retail stores. During the three months ended September 30,
2010, we opened five new domestic concept stores, one domestic outlet store, one domestic warehouse
store, three international concept stores, and three international outlet stores. Our domestic
retail sales increased 13.8% for the three months ended September 30, 2010 compared to the same
period in 2009 due to positive comparable store sales and a net increase of 17 domestic stores.
Our international retail sales increased 52.3% for the three months ended September 30, 2010
compared to the same period in 2009 attributable to positive comparable store sales and a net
increase of 14 international stores.
Our e-commerce sales decreased $1.2 million, or 17.0%, to $5.9 million for the three months
ended September 30, 2010 from $7.1 million for the three months ended September 30, 2009. Our
e-commerce sales made up approximately 1% of our consolidated net sales for the three-month period
ended September 30, 2010 and approximately 2% of our consolidated net sales for the three-month
period ended September 30, 2009.
Gross profit
Gross profit for the three months ended September 30, 2010 increased $68.9 million to $252.6
million as compared to $183.7 million for the three months ended September 30, 2009. Gross profit
as a percentage of net sales, or gross margin, increased to 45.6% for the three months ended
September 30, 2010 from 45.3% for the same period in the prior year. Our domestic wholesale
segment gross profit increased $47.2 million, or 57.3%, to $129.5 million for the three months
ended September 30, 2010 compared to $82.3 million for the three months ended September 30, 2009.
Domestic wholesale margins increased to 41.5% in the three months ended September 30,
16
2010 from 40.6% for the same period in the prior year. The increase in domestic wholesale
margins was due to increased average selling prices, less closeouts and more in-demand inventory.
Gross profit for our international wholesale segment increased $12.8 million, or 32.6%, to
$52.1 million for the three months ended September 30, 2010 compared to $39.3 million for the three
months ended September 30, 2009. Gross margins were 41.8% for the three months ended September 30,
2010 compared to 39.2% for the three months ended September 30, 2009. The increase in gross
margins for our international wholesale segment was due to less closeouts and more in-demand
inventory. International wholesale sales through our foreign subsidiaries historically have
achieved higher gross margins than our international wholesale sales through our foreign
distributors. Gross margins for our direct subsidiary sales were 46.8% for the three months ended
September 30, 2010 as compared to 43.0% for the three months ended September 30, 2009. Gross
margins for our distributor sales were 26.7% for the three months ended September 30, 2010 as
compared to 28.5% for the three months ended September 30, 2009.
Gross profit for our retail segment increased $9.6 million, or 16.4%, to $68.0 million for the
three months ended September 30, 2010 as compared to $58.4 million for the three months ended
September 30, 2009. Gross margins for all stores were 60.9% for the three months ended September
30, 2010 as compared to 61.4% for the three months ended September 30, 2009. Gross margins for our
domestic stores were 60.8% for the three months ended September 30, 2010 as compared to 61.3% for
the three months ended September 30, 2009. Gross margins for our international stores were 61.5%
for the three months ended September 30, 2010 as compared to 62.4% for the three months ended
September 30, 2009. The decrease in domestic retail margins was due to increased sales volumes in
our warehouse and outlet stores.
Our cost of sales includes the cost of footwear purchased from our manufacturers, royalties,
duties, quota costs, inbound freight (including ocean, air and freight from the dock to our
distribution centers), broker fees and storage costs. Because we include expenses related to our
distribution network in general and administrative expenses while some of our competitors may
include expenses of this type in cost of sales, our gross margins may not be comparable, and we may
report higher gross margins than some of our competitors in part for this reason.
Selling expenses
Selling expenses increased by $18.3 million, or 44.3%, to $59.5 million for the three months
ended September 30, 2010 from $41.2 million for the three months ended September 30, 2009. As a
percentage of net sales, selling expenses were 10.7% and 10.2% for the three months ended September
30, 2010 and 2009, respectively. The increase in selling expenses was primarily due to advertising
expenses that increased by $17.4 million for the three months ended September 30, 2010.
Selling expenses consist primarily of sales representative sample costs, sales commissions,
trade shows, advertising and promotional costs, which may include television, print ads, ad
production costs and point-of-purchase (POP) costs.
General and administrative expenses
General and administrative expenses increased by $29.0 million, or 26.3%, to $139.5 million
for the three months ended September 30, 2010 from $110.5 million for the three months ended
September 30, 2009. As a percentage of sales, general and administrative expenses were 25.1% and
27.2% for the three months ended September 30, 2010 and 2009, respectively. The increase in
general and administrative expenses was primarily due to increased salaries and wages of $12.6
million that included $3.5 million in stock compensation costs, increased temporary help costs of
$2.8 million, and higher rent expense of $2.3 million due to an additional 31 stores from prior
year. In addition, the expenses related to our distribution network, including the functions of
purchasing, receiving, inspecting, allocating, warehousing and packaging of our products totaled
$30.9 million and $28.9 million for the three months ended September 30, 2010 and 2009,
respectively. The $2.0 million increase was primarily due to significantly higher sales volumes.
17
General and administrative expenses consist primarily of the following: salaries, wages and
related taxes and various overhead costs associated with our corporate staff, stock-based
compensation, domestic and international retail store operations, non-selling-related costs of our
international operations, costs associated with our domestic and European distribution centers,
professional fees related to legal, consulting and accounting, insurance, depreciation and
amortization, and expenses related to our distribution network, which includes the functions of
purchasing, receiving, inspecting, allocating, warehousing and packaging our products. These costs
are included in general and administrative expenses and are not allocated to segments.
Interest income
Interest income for the three months ended September 30, 2010 increased $0.2 million to $0.5
million compared to $0.3 million for the same period in 2009. The increase in interest income was
primarily due to interest received on refunds of customs and duties payments for the three months
ended September 30, 2010.
Interest expense
Interest expense decreased $1.0 million for the three months ended September 30, 2010 compared
to the interest expense for the same period in 2009. The decrease was due to reduced interest paid
to our foreign manufacturers and capitalized interest costs. Interest expense was incurred on our
mortgages for our domestic distribution center and our corporate office located in Manhattan Beach,
California, and on amounts owed to our foreign manufacturers.
Income taxes
The Companys effective tax rate was 30.9% and 30.0% for the three months ended September 30,
2010 and 2009, respectively. Income tax expense for the three months ended September 30, 2010 was
$16.3 million compared to $10.2 million for the same period in 2009. The tax provision for the
three months ended September 30, 2010 was computed using the estimated effective tax rates
applicable to each of the domestic and international taxable jurisdictions for the full year. The
estimated effective tax rate is subject to managements ongoing review and revision, if necessary.
We expect our effective annual tax rate in 2010 to be approximately 32.0 percent.
The rate for the three months ended September 30, 2010 is lower than the expected domestic
rate of approximately 40% due to our non-U.S. subsidiary earnings in lower tax rate jurisdictions
and our planned permanent reinvestment of undistributed earnings from our non-U.S. subsidiaries,
thereby indefinitely postponing their repatriation to the United States. As such, the Company did
not provide for deferred income taxes on accumulated undistributed earnings of our non-U.S.
subsidiaries.
Noncontrolling interest in net income and loss of consolidated subsidiaries
Noncontrolling interest for the three months ended September 30, 2010 increased $0.9 million
to income of $0.2 million as compared to a loss of $0.7 million for the same period in 2009.
Noncontrolling interest represents the share of net earnings or loss that is attributable to our
joint venture partners.
NINE MONTHS ENDED SEPTEMBER 30, 2010 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2009
Net sales
Net sales for the nine months ended September 30, 2010 were $1.552 billion, an increase of
$504.4 million or 48.1%, as compared to net sales of $1.048 billion for the nine months ended
September 30, 2009. The increase in net sales was broad-based in all our segments.
Our domestic wholesale net sales increased $359.7 million, or 66.1%, to $904.1 million for the
nine months ended September 30, 2010, from $544.4 million for the nine months ended September 30,
2009. The largest
18
increases in our domestic wholesale segment came in our Womens and Mens divisions. The
average selling price per pair within the domestic wholesale segment was $24.81 per pair for the
nine months ended September 30, 2010 compared to $19.17 per pair for the same period last year,
primarily due to acceptance of new designs and styles for our in-demand products and reduced
close-outs. The increase in the domestic wholesale segments net sales came on a 28.3% unit sales
volume increase to 36.4 million pairs from 28.4 million pairs for the same period in 2009.
Our international wholesale segment net sales increased $64.6 million, or 24.7%, to $325.7
million for the nine months ended September 30, 2010, compared to $261.1 million for the nine
months ended September 30, 2009. Direct subsidiary sales increased $65.8 million, or 36.0%, to
$248.9 million for the nine months ended September 30, 2010 compared to net sales of $183.1 million
for the nine months ended September 30, 2009. The largest sales increases during the nine months
ended September 30, 2010 came from our subsidiaries in Canada and Germany as well as the
acquisition of our distributor in Chile on June 1, 2009. Our distributor sales decreased $1.3
million, or 1.6%, to $76.8 million for the nine months ended September 30, 2010, compared to sales
of $78.1 million for the nine months ended September 30, 2009. This was primarily due to decreased
sales to our distributors in Japan and Panama partially offset by increased sales to our
distributors in Russia and Korea.
Our retail segment sales increased $73.9 million to $301.4 million for the nine months ended
September 30, 2010, a 32.5% increase over sales of $227.5 million for the nine months ended
September 30, 2009. The increase in retail sales was due to positive comparable store sales and a
net increase of 31 stores. For the nine months ended September 30, 2010, we realized positive
comparable store sales of 20.9% in our domestic retail stores and 10.8% in our international retail
stores. During the nine months ended September 30, 2010, we opened eleven new domestic concept
stores, five domestic outlet stores, one domestic warehouse store, three international concept
stores, ten international outlet stores, and closed one domestic outlet store. Our domestic retail
sales increased 29.2% for the nine months ended September 30, 2010 compared to the same period in
2009 due to positive comparable store sales and a net increase of 17 domestic stores. Our
international retail sales increased 67.0% for the nine months ended September 30, 2010 compared to
the same period in 2009 attributable to positive comparable store sales and a net increase of 14
international stores.
Our e-commerce sales increased $6.2 million, or 42.2%, to $21.0 million for the nine months
ended September 30, 2010 from $14.8 million for the nine months ended September 30, 2009. Our
e-commerce sales made up approximately 1% of our consolidated net sales for each of the nine-month
periods ended September 30, 2010 and 2009.
Gross profit
Gross profit for the nine months ended September 30, 2010 increased $295.9 million to $727.7
million as compared to $431.8 million for the nine months ended September 30, 2009. Gross profit
as a percentage of net sales, or gross margin, increased to 46.9% for the nine months ended
September 30, 2010 from 41.2% for the same period in the prior year. Our domestic wholesale
segment gross profit increased $192.8 million, or 99.0%, to $387.5 million for the nine months
ended September 30, 2010 compared to $194.7 million for the nine months ended September 30, 2009.
Domestic wholesale margins increased to 42.9% in the nine months ended September 30, 2010 from
35.8% for the same period in the prior year. The increase in domestic wholesale margins was due to
increased average selling prices, less closeouts and more in-demand inventory.
Gross profit for our international wholesale segment increased $45.0 million, or 48.3%, to
$138.1 million for the nine months ended September 30, 2010 compared to $93.1 million for the nine
months ended September 30, 2009. Gross margins were 42.4% for the nine months ended September 30,
2010 compared to 35.7% for the nine months ended September 30, 2009. The increase in gross margins
for our international wholesale segment was due to less closeouts and more in-demand inventory.
Gross margins for our direct subsidiary sales were 46.8% for the nine months ended September 30,
2010 as compared to 39.1% for the nine months ended September 30, 2009. Gross margins for our
distributor sales were 28.2% for the nine months ended September 30, 2010 as compared to 27.6% for
the nine months ended September 30, 2009.
19
Gross profit for our retail segment increased $55.1 million, or 40.4%, to $191.2 million for
the nine months ended September 30, 2010 as compared to $136.1 million for the nine months ended
September 30, 2009. Gross margins for all stores were 63.4% for the nine months ended September
30, 2010 as compared to 59.8% for the nine months ended September 30, 2009. Gross margins for our
domestic stores were 63.5% for the nine months ended September 30, 2010 as compared to 59.9% for
the nine months ended September 30, 2009. Gross margins for our international stores were 63.0%
for the nine months ended September 30, 2010 as compared to 58.6% for the nine months ended
September 30, 2009. The increase in domestic and international retail margins was due to less
closeouts and more in-demand inventory.
Selling expenses
Selling expenses increased by $48.7 million, or 49.9%, to $146.3 million for the nine months
ended September 30, 2010 from $97.6 million for the nine months ended September 30, 2009. As a
percentage of net sales, selling expenses were 9.4% and 9.3% for the nine months ended September
30, 2010 and 2009, respectively. The increase in selling expenses was primarily due to advertising
expenses that increased by $43.0 million for the nine months ended September 30, 2010.
General and administrative expenses
General and administrative expenses increased by $84.9 million, or 27.9%, to $389.2 million
for the nine months ended September 30, 2010 from $304.3 million for the nine months ended
September 30, 2009. As a percentage of sales, general and administrative expenses were 25.1% and
29.1% for the nine months ended September 30, 2010 and 2009, respectively. The increase in general
and administrative expenses was primarily due to increased salaries and wages of $39.4 million that
included $10.1 million in stock compensation costs, higher professional fees of $6.1 million,
higher rent expense of $5.9 million due to an additional 31 stores from prior year, increased
warehouse and distribution costs of $5.4 million, increased office supplies of $4.0 million, and
increased outside services of $3.9 million. In addition, the expenses related to our distribution
network, including the functions of purchasing, receiving, inspecting, allocating, warehousing and
packaging of our products totaled $89.6 million and $83.0 million for the nine months ended
September 30, 2010 and 2009, respectively. The $6.6 million increase was primarily due to
significantly higher sales volumes.
Interest income
Interest income for the nine months ended September 30, 2010 increased $0.8 million to $2.4
million compared to $1.6 million for the same period in 2009. The increase in interest income was
primarily due to interest received on refunds of customs and duties payments for the nine months
ended September 30, 2010.
Interest expense
Interest expense was $0.8 million for the nine months ended September 30, 2010 compared to
$1.9 million for the same period in 2009. The decrease was due to reduced interest paid to our
foreign manufacturers and capitalized interest costs.
Income taxes
The Companys effective tax rate was 32.0% and 25.2% for the nine months ended September 30,
2010 and 2009, respectively. Income tax expense for the nine months ended September 30, 2010 was
$62.5 million compared to $8.2 million for the same period in 2009. The income tax expense for the
nine months ended September 30, 2009 includes a $1.9 million discrete benefit adjusting the amount
of tax benefit recognized in 2008 relating to the APA with the IRS. The tax provision for the nine
months ended September 30, 2010 was computed using the estimated effective tax rates applicable to
each of the domestic and international taxable jurisdictions for the full year. The estimated
effective tax rate is subject to managements ongoing review and revision, if necessary. We expect
our effective annual tax rate in 2010 to be approximately 32.0 percent.
20
The rate for the nine months ended September 30, 2010 is lower than the expected domestic rate
of approximately 40% due to our non-U.S. subsidiary earnings in lower tax rate jurisdictions and
our planned permanent reinvestment of undistributed earnings from our non-U.S. subsidiaries,
thereby indefinitely postponing their repatriation to the United States. As such, the Company did
not provide for deferred income taxes on accumulated undistributed earnings of our non-U.S.
subsidiaries.
Noncontrolling interest in net income and loss of consolidated subsidiaries
Noncontrolling interest for the nine months ended September 30, 2010 increased $2.3 million to
income of $0.1 million as compared to a loss of $2.2 million for the same period in 2009.
LIQUIDITY AND CAPITAL RESOURCES
Our working capital at September 30, 2010 was $650.2 million, an increase of $91.7 million
from working capital of $558.5 million at December 31, 2009. Our cash and cash equivalents at
September 30, 2010 were $248.8 million compared to $265.7 million at December 31, 2009. The
decrease in cash and cash equivalents of $16.9 million was the result of increased inventory of
$101.9 million due to customer order cancellations, capital expenditures of $65.6 million,
increased receivables of $63.4 million, which was partially offset by our net earnings of $132.9
million, increased payables of $32.3 million, and the maturity of $30.0 million in short-term
investments.
For the nine months ended September 30, 2010, net cash used in operating activities was $0.7
million compared to net cash provided of $90.3 million for the nine months ended September 30,
2009. The decrease in our operating cash flows for the nine months ended September 30, 2010, when
compared to the nine months ended September 30, 2009 was primarily the result of increased
inventory levels due to customer order cancellations partially offset by higher net earnings.
Net cash used in investing activities was $35.7 million for the nine months ended September
30, 2010 as compared to net cash provided of $34.4 million for the nine months ended September 30,
2009. The decrease in cash provided by investing activities in the nine months ended September 30,
2010 as compared to the same period in the prior year was primarily the result of the redemption of
auction rate securities that were classified as long-term investments in the prior year. Capital
expenditures for the nine months ended September 30, 2010 were approximately $65.6 million, which
$38.1 million consisted of development costs for our new distribution center, a corporate real
property purchase and $16.7 million for new store openings and remodels. This compared to capital
expenditures of $31.2 million for the nine months ended September 30, 2009, which primarily
consisted of warehouse equipment upgrades and new store openings and remodels. Excluding the costs
of our new distribution center and distribution equipment, we expect our ongoing capital
expenditures for the remainder of 2010 to be approximately $13 million to $17 million, which
includes opening an additional nine to eleven retail stores and store remodels. We are currently
in the process of designing and purchasing the equipment to be used in our new distribution center
and estimate the cost of this equipment to be approximately $85.0 million, of which $39.3 million
was incurred as of September 30, 2010. We expect to spend the remaining balances in 2011. Our
operating cash flows, current cash, and available lines of credit should be adequate to fund these
capital expenditures, although we may seek additional funding for all or a portion of these
expenditures.
Net cash provided by financing activities was $19.6 million during the nine months ended
September 30, 2010 compared to $5.6 million during the nine months ended September 30, 2009. The
increase in cash provided by financing activities was primarily due to higher proceeds from the
issuance of Class A common stock upon the exercise of stock options during the nine months ended
September 30, 2010 as compared to the same period in the prior year.
On January 30, 2010, we entered into a joint venture agreement with HF Logistics I, LLC
through Skechers R.B., LLC, a wholly-owned subsidiary, regarding the ownership and management of HF
Logistics-SKX, LLC, a Delaware limited liability company (the JV). The purpose of the JV is to
acquire and to develop real property consisting of approximately 110 acres situated in Rancho
Belago, California, and to construct approximately 1.8 million square feet of buildings and other
improvements to lease to us as a distribution facility. The term of the JV
21
is fifty years. The parties are equal fifty percent partners. In April 2010, we made an
initial cash capital contribution of $30 million and HF made an initial capital contribution of
land to the JV. Additional capital contributions, if necessary, would be made on an equal basis by
Skechers R.B., LLC and HF. During the second quarter, the JV obtained $55 million in construction
financing and broke ground on the facility, which we expect to occupy when completed in 2011. We
have completed our assessment of the joint venture and have determined it to be a VIE and that
Skechers is the primary beneficiary, and therefore consolidate the operations of the joint
venture into our financial statements.
We have outstanding debt of $31.6 million, of which $15.6 million relates to notes payable for
one of our distribution center warehouses and one of our administrative offices, which notes are
secured by the respective properties, and $16.0 million relates to a note for development costs
paid by HF for our new distribution center.
On June 30, 2009, we entered into a $250 million secured credit agreement with a group of
eight banks that replaced the existing $150 million credit agreement. The new credit facility
matures in June 2013. The credit agreement permits us and certain of our subsidiaries to borrow up
to $250 million based upon a borrowing base of eligible accounts receivable and inventory, which
amount can be increased to $300 million at our request and upon satisfaction of certain conditions
including obtaining the commitment of existing or prospective lenders willing to provide the
incremental amount. Borrowings bear interest at the borrowers election based on LIBOR or a Base
Rate (defined as the greatest of the base LIBOR plus 1.00%, the Federal Funds Rate plus 0.5% or one
of the lenders prime rate), in each case, plus an applicable margin based on the average daily
principal balance of revolving loans under the credit agreement (2.75% to 3.25% for Base Rate loans
and 3.75% to 4.25% for LIBOR loans). We pay a monthly unused line of credit fee between 0.5% and
1.0% per annum, which varies based on the average daily principal balance of outstanding revolving
loans and undrawn amounts of letters of credit outstanding during such month. The credit agreement
further provides for a limit on the issuance of letters of credit to a maximum of $50 million. The
credit agreement contains customary affirmative and negative covenants for secured credit
facilities of this type, including a fixed charges coverage ratio that applies when excess
availability is less than $50 million. In addition, the credit agreement places limits on
additional indebtedness that we are permitted to incur as well as other restrictions on certain
transactions. We and our subsidiaries were in compliance with all of the covenants of the credit
agreement at September 30, 2010. We and our subsidiaries had $2.8 million of outstanding letters
of credit and short-term borrowings of $2.3 million as of September 30, 2010. We paid syndication
and commitment fees of $5.9 million on this facility which are being amortized over the four year
life of the facility.
We believe that anticipated cash flows from operations, available borrowings under our secured
line of credit, cash on hand and financing arrangements will be sufficient to provide us with the
liquidity necessary to fund our anticipated working capital and capital requirements through
September 30, 2011. However, in connection with our current strategies, we will incur significant
working capital requirements and capital expenditures. Our future capital requirements will depend
on many factors, including, but not limited to, costs associated with moving to a new distribution
facility, the levels at which we maintain inventory, the market acceptance of our footwear, the
success of our international operations, the levels of advertising and marketing required to
promote our footwear, the extent to which we invest in new product design and improvements to our
existing product design, any potential acquisitions of other brands or companies, and the number
and timing of new store openings. To the extent that available funds are insufficient to fund our
future activities, we may need to raise additional funds through public or private financing of
debt or equity. We cannot be assured that additional financing will be available or that, if
available, it can be obtained on terms favorable to our stockholders and us. Failure to obtain such
financing could delay or prevent our current business plans, which could adversely affect our
business, financial condition and results of operations. In addition, if additional capital is
raised through the sale of additional equity or convertible securities, dilution to our
stockholders could occur.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any relationships with unconsolidated entities or financial partnerships such
as entities often referred to as structured finance or special purpose entities that would have
been established for the purpose of facilitating off-balance-sheet arrangements or for other
contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity,
market or credit risk that could arise if we had engaged in such relationships.
22
CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES
Managements Discussion and Analysis of Financial Condition and Results of Operations is based
upon our consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. We
base our estimates on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different assumptions or conditions.
For a detailed discussion of our critical accounting policies please refer to our annual report on
Form 10-K for the year ended December 31, 2009 filed with the U.S. Securities and Exchange
Commission (SEC) on March 5, 2010. Our critical accounting policies and estimates did not change
materially during the quarter ended September 30, 2010.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2009, the FASB issued ASU 2009-17, Amendments to FASB Interpretation No. 46(R). ASU
2009-17 requires a qualitative approach to identifying a controlling financial interest in a VIE,
and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE
makes the holder the primary beneficiary of the VIE. ASU 2009-17 is effective for interim and
annual reporting periods beginning after November 15, 2009. Our adoption of ASU 2009-17 did not
have a material impact on our consolidated financial statements.
QUARTERLY RESULTS AND SEASONALITY
While sales of footwear products have historically been somewhat seasonal in nature with the
strongest sales generally occurring in the second and third quarters, we believe that our product
offerings somewhat mitigate the effect of this seasonality and, consequently, our sales are not
necessarily as subjected to seasonal trends as those of our competitors in the footwear industry.
We have experienced, and expect to continue to experience, variability in our net sales and
operating results on a quarterly basis. During 2009, various macroeconomic pressures created a
difficult retail environment which caused a downturn in our overall business. Our domestic
customers generally assume responsibility for scheduling pickup and delivery of purchased products.
Any delay in scheduling or pickup which is beyond our control could materially negatively impact
our net sales and results of operations for any given quarter. We believe the factors which
influence this variability include (i) the timing of our introduction of new footwear products,
(ii) the level of consumer acceptance of new and existing products, (iii) general economic and
industry conditions that affect consumer spending and retail purchasing, (iv) the timing of the
placement, cancellation or pickup of customer orders, (v) increases in the number of employees and
overhead to support growth, (vi) the timing of expenditures in anticipation of increased sales and
customer delivery requirements, (vii) the number and timing of our new retail store openings and
(viii) actions by competitors. Due to these and other factors, the operating results for any
particular quarter are not necessarily indicative of the results for the full year.
INFLATION
We do not believe that the relatively moderate rates of inflation experienced in the United
States over the last three years have had a significant effect on our sales or profitability.
However, we cannot accurately predict the effect of inflation on future operating results. We do
not believe that inflation has had or will have a material effect on our sales or profitability.
While we have been able to offset our foreign product cost increases by increasing prices or
changing suppliers in the past, we cannot assure you that we will be able to continue to make such
increases or changes in the future.
23
EXCHANGE RATES
Although we currently invoice most of our customers in U.S. Dollars, changes in the value of
the U.S. Dollar versus the local currency in which our products are sold, along with economic and
political conditions of such foreign countries, could adversely affect our business, financial
condition and results of operations. Because we operate in several foreign countries and have
recently experienced both favorable and unfavorable currency translations we cannot predict whether
currency translations will be favorable or unfavorable to us in the future. Purchase prices for
our products may be impacted by fluctuations in the exchange rate between the U.S. dollar and the
local currencies of the contract manufacturers, which may have the effect of increasing our cost of
goods in the future. In addition, the weakening of an international customers local currency and
banking market may negatively impact such customers ability to meet their payment obligations to
us. We regularly monitor the creditworthiness of our international customers and make credit
decisions based on both prior sales experience with such customers and their current financial
performance, as well as overall economic conditions. While we currently believe that our
international customers have the ability to meet all of their obligations to us, there can be no
assurance that they will continue to be able to meet such obligations. During 2009 and the first
nine months of 2010, exchange rate fluctuations did not have a material impact on our inventory
costs. We do not engage in hedging activities with respect to such exchange rate risk.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not hold any derivative securities that require fair value presentation per FASB ASC
815-25.
Market risk is the potential loss arising from the adverse changes in market rates and prices,
such as interest rates and foreign currency exchange rates. Changes in interest rates and changes
in foreign currency exchange rates have had and may continue to have an impact on our results of
operations.
Interest rate fluctuations. The interest rate charged on our secured line of credit fluctuates
and changes in interest rates will have an effect on the interest charged on outstanding balances.
No amounts relating to this secured line of credit facility are currently outstanding at September
30, 2010. We had $2.3 million of outstanding short-term borrowings subject to changes in interest
rates; however, we do not expect any changes will have a material impact on our financial condition
or results of operations.
Foreign exchange rate fluctuations. We face market risk to the extent that changes in foreign
currency exchange rates affect our non-U.S. dollar functional currency foreign subsidiarys
revenues, expenses, assets and liabilities. In addition, changes in foreign exchange rates may
affect the value of our inventory commitments. Also, inventory purchases of our products may be
impacted by fluctuations in the exchange rates between the U.S. dollar and the local currencies of
the contract manufacturers, which could have the effect of increasing the cost of goods sold in the
future. We manage these risks by primarily denominating these purchases and commitments in U.S.
dollars. We do not engage in hedging activities with respect to such exchange rate risks.
Assets and liabilities outside the United States are located in the United Kingdom, France,
Germany, Spain, Switzerland, Italy, Canada, Belgium, the Netherlands, Brazil, Chile, China, Hong
Kong, Singapore, Malaysia and Thailand. Our investments in foreign subsidiaries with a functional
currency other than the U.S. dollar are generally considered long-term. Accordingly, we do not
hedge these net investments. The fluctuation of foreign currencies resulted in a cumulative foreign
currency translation loss of less than $0.1 million and gain of $4.9 million for the nine months
ended September 30, 2010 and 2009, respectively, that are deferred and recorded as a component of
accumulated other comprehensive income in stockholders equity. A 200 basis point reduction in the
exchange rates used to calculate foreign currency translations at September 30, 2010 would have
reduced the values of our net investments by approximately $5.1 million.
ITEM 4. CONTROLS AND PROCEDURES
Attached as exhibits to this quarterly report on Form 10-Q are certifications of our Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), which are required in accordance
with Rule 13a-14 of the Securities
24
Exchange Act of 1934, as amended (the Exchange Act). This Controls and Procedures section
includes information concerning the controls and controls evaluation referred to in the
certifications.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The term disclosure controls and procedures refers to the controls and procedures of a
company that are designed to ensure that information required to be disclosed by a company in the
reports that it files under the Exchange Act is recorded, processed, summarized and reported within
required time periods. We have established disclosure controls and procedures to ensure that
material information relating to Skechers and its consolidated subsidiaries is made known to the
officers who certify our financial reports, as well as other members of senior management and the
Board of Directors, to allow timely decisions regarding required disclosures. As of the end of the
period covered by this quarterly report on Form 10-Q, we carried out an evaluation under the
supervision and with the participation of our management, including our CEO and CFO, of the
effectiveness of the design and operation of our disclosure controls and procedures pursuant to
Rule 13a-15 of the Exchange Act. Based upon that evaluation, our CEO and CFO concluded that our
disclosure controls and procedures are effective in timely alerting them, at the reasonable
assurance level, to material information related to our company that is required to be included in
our periodic reports filed with the SEC under the Exchange Act.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting during the three months
ended September 30, 2010 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS
Our management, including our Chief Executive Officer and Chief Financial Officer, does not
expect that our disclosure controls or our internal control over financial reporting will prevent
or detect all error and all fraud. A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control systems objectives will be met.
The design of a control system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Further, because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that
misstatements due to error or fraud will not occur or that all control issues and instances of
fraud, if any, within the company have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty and that breakdowns can occur because of
simple error or mistake. Controls can also be circumvented by the individual acts of some persons,
by collusion of two or more people, or by management override of the controls. The design of any
system of controls is based in part on certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Projections of any evaluation of controls effectiveness to future
periods are subject to risks. Over time, controls may become inadequate because of changes in
conditions or deterioration in the degree of compliance with policies or procedures. Because of the
inherent limitations in a cost-effective control system, misstatements due to error or fraud may
occur and not be detected.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See note nine to the financial statements on page 10 of this quarterly report for a discussion
of legal proceedings as required under applicable SEC rules and regulations.
ITEM 1A. RISK FACTORS
The information presented below updates the risk factors disclosed in our annual report on
Form 10-K for the year ended December 31, 2009 and should be read in conjunction with the risk
factors and other information
25
disclosed in our 2009 annual report that could have a material effect on our business,
financial condition and results of operations.
We Depend Upon A Relatively Small Group Of Customers For A Large Portion Of Our Sales.
During the nine months ended September 30, 2010 and September 30, 2009, our net sales to our
five largest customers accounted for approximately 27.2% and 25.0% of total net sales,
respectively. No customer accounted for more than 10% of our net sales during the nine months
ended September 30, 2010 or 2009. No customers accounted for more than 10% of our outstanding
accounts receivable balance at September 30, 2010 or September 30, 2009. Although we have
long-term relationships with many of our customers, our customers do not have a contractual
obligation to purchase our products and we cannot be certain that we will be able to retain our
existing major customers. Furthermore, the retail industry regularly experiences consolidation,
contractions and closings which may result in our loss of customers or our inability to collect
accounts receivable of major customers. If we lose a major customer, experience a significant
decrease in sales to a major customer or are unable to collect the accounts receivable of a major
customer, our business could be harmed.
We Rely On Independent Contract Manufacturers And, As A Result, Are Exposed To Potential
Disruptions In Product Supply.
Our footwear products are currently manufactured by independent contract manufacturers. During
the nine months ended September 30, 2010 and September 30, 2009, the top five manufacturers of our
manufactured products produced approximately 71.3% and 68.3% of our total purchases, respectively.
One manufacturer accounted for 35.4% and 27.8% of total purchases during the nine months ended
September 30, 2010 and 2009, respectively. A second manufacturer accounted for 12.8% and 12.5% of
our total purchases during the nine months ended September 30, 2010 and 2009, respectively. Two
other manufacturers accounted for 11.4% and 10.6% of our total purchases during the nine months
ended September 30, 2009. We do not have long-term contracts with manufacturers, and we compete
with other footwear companies for production facilities. We could experience difficulties with
these manufacturers, including reductions in the availability of production capacity, failure to
meet our quality control standards, failure to meet production deadlines or increased manufacturing
costs. This could result in our customers canceling orders, refusing to accept deliveries or
demanding reductions in purchase prices, any of which could have a negative impact on our cash flow
and harm our business.
If our current manufacturers cease doing business with us, we could experience an interruption
in the manufacture of our products. Although we believe that we could find alternative
manufacturers, we may be unable to establish relationships with alternative manufacturers that will
be as favorable as the relationships we have now. For example, new manufacturers may have higher
prices, less favorable payment terms, lower manufacturing capacity, lower quality standards or
higher lead times for delivery. If we are unable to provide products consistent with our standards
or the manufacture of our footwear is delayed or becomes more expensive, our business would be
harmed.
One Principal Stockholder Is Able To Exert Significant Influence Over All Matters Requiring A Vote
Of Our Stockholders And His Interests May Differ From The Interests Of Our Other Stockholders.
As of September 30, 2010, Robert Greenberg, Chairman of the Board and Chief Executive Officer,
beneficially owned 56.4% of our outstanding Class B common shares and members of Mr. Greenbergs
immediate family beneficially owned an additional 15.6% of our outstanding Class B common shares.
The remainder of our outstanding Class B common shares is held in two irrevocable trusts for the
benefit of Mr. Greenberg and his immediate family members, and voting control of such shares
resides with an independent trustee. The holders of Class A common shares and Class B common shares
have identical rights except that holders of Class A common shares are entitled to one vote per
share while holders of Class B common shares are entitled to ten votes per share on all matters
submitted to a vote of our stockholders. As a result, as of September 30, 2010, Mr. Greenberg
beneficially owned approximately 42.1% of the aggregate number of votes eligible to be cast by our
stockholders, and together with shares beneficially owned by other members of his immediate family,
they beneficially owned approximately 54.7% of the aggregate number of votes eligible to be cast by
our stockholders. Therefore, Mr.
26
Greenberg is able to exert significant influence over all matters requiring approval by our
stockholders. Matters that require the approval of our stockholders include the election of
directors and the approval of mergers or other business combination transactions. Mr. Greenberg
also has significant influence over our management and operations. As a result of such influence,
certain transactions are not likely without the approval of Mr. Greenberg, including proxy
contests, tender offers, open market purchase programs or other transactions that can give our
stockholders the opportunity to realize a premium over the then-prevailing market prices for their
shares of our Class A common shares. Because Mr. Greenbergs interests may differ from the
interests of the other stockholders, Mr. Greenbergs significant influence on actions requiring
stockholder approval may result in our company taking action that is not in the interests of all
stockholders. The differential in the voting rights may also adversely affect the value of our
Class A common shares to the extent that investors or any potential future purchaser view the
superior voting rights of our Class B common shares to have value.
ITEM 6. EXHIBITS
|
|
|
Exhibit |
|
|
Number |
|
Description |
10.1
|
|
General Conditions of the Contract for Construction regarding 29800
Eucalyptus Avenue, Rancho Belago, California. |
|
|
|
10.2+
|
|
Construction Loan Agreement dated as of April 30, 2010, by and among HF
Logistics-SKX T1, LLC, which is a wholly owned subsidiary of a joint
venture entered into between HF Logistics I, LLC and a wholly owned
subsidiary of the Registrant, Bank of America, N.A., as administrative
agent and as a lender, and Raymond James Bank FSB, as a lender. |
|
|
|
10.3+
|
|
Amended and Restated Limited Liability Company Agreement dated April 12,
2010 between Skechers R.B., LLC, a Delaware limited liability company and
wholly owned subsidiary of the Registrant, and HF Logistics I, LLC,
regarding the ownership and management of the joint venture, HF
Logistics-SKX, LLC, a Delaware limited liability company. |
|
|
|
10.4
|
|
Second Amendment to Lease Agreement, dated April 12, 2010, between the
Registrant and HF Logistics I, LLC, regarding distribution facility in
Moreno Valley, California. |
|
|
|
10.5
|
|
Assignment of Lease Agreement, dated April 12, 2010, between HF Logistics
I, LLC and HF Logistics-SKX T1, LLC, regarding distribution facility in
Moreno Valley, California. |
|
|
|
10.6
|
|
Third Amendment to Lease Agreement, dated August 18, 2010, between the
Registrant and HF Logistics-SKX T1, LLC, regarding distribution facility
in Moreno Valley, California. |
|
|
|
31.1
|
|
Certification of the Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2
|
|
Certification of the Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1***
|
|
Certification of the Chief Executive Officer and the Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
+ |
|
The Company has applied with the Secretary of the Securities and Exchange Commission for
confidential treatment of certain information pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended. The Company has filed separately with its application a copy
of the exhibit including all confidential portions, which may be made available for public
inspection pending the Securities and Exchange Commissions review of the application in
accordance with Rule 24b-2. |
|
*** |
|
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. |
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
Date: November 9, 2010 |
SKECHERS U.S.A., INC.
|
|
|
By: |
/s/ DAVID WEINBERG
|
|
|
|
David Weinberg |
|
|
|
Chief Financial Officer |
|
|
28