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Skechers U.S.A. Inc. Reports Operating Results (10-K)

February 29, 2012 | About:

10qk

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Skechers U.S.A. Inc. (SKX) filed Annual Report for the period ended 2011-12-31.

Skechers Usa-a has a market cap of $633.1 million; its shares were traded at around $12.84 with and P/S ratio of 0.4. Skechers Usa-a had an annual average earning growth of 6.4% over the past 5 years.

Highlight of Business Operations:

Our net sales for 2011 were $1.606 billion, a decrease of $400.9 million, or 20.0%, compared to net sales of $2.007 billion in 2010. Net loss was $67.5 million, a decrease of $203.6 million or 149.6% from net earnings of $136.1 million in 2010. Diluted loss per share was $1.39, which reflected a 150.0% decrease from the $2.78 diluted earnings per share reported in the prior year. Our decreased earnings were primarily the result of lower sales volumes and decreased margins primarily due to overall lower demand for toning footwear and a weak U.S. retail environment, inventory write-downs of $10.0 million on our toning products, a reserve of $45.0 million for costs and potential exposure relating to existing litigation and regulatory matters, foreign bad debt write-offs of $4.6 million and $3.1 million in asset impairments. Working capital was $578.9 million at December 31, 2011, a decrease of $87.2 million from working capital of $666.1 million at December 31, 2010. Cash increased by $117.5 million to $351.1 million at December 31, 2011 compared to $233.6 million at December 31, 2010. The increase in cash of $117.5 million was the result of reduced inventory levels of $170.2 million, lower receivables of $86.1 million, and increased borrowings of $69.3 million, partially offset by capital expenditures of $122.2 million and net loss of $67.5 million.

Our international wholesale segment net sales increased $50.7 million, or 11.6%, to $487.3 million in 2011 compared to sales of $436.6 million in 2010. Our international wholesale sales consist of direct subsidiary sales those we make to department stores and specialty retailers and sales to our distributors who in turn sell to department stores and specialty retailers in various international regions where we do not sell direct. Direct subsidiary sales increased $29.1 million, or 9.2%, to $343.9 million compared to sales of $314.8 million in 2010. The largest sales increases came from our subsidiaries in Italy and our joint ventures in Asia. Our distributor sales increased $21.5 million, or 17.6%, to $143.4 million in 2011, compared to sales of $121.9 million in 2010. This was primarily attributable to increased sales to our distributors in Panama and Japan.

General and administrative expenses increased by $78.9 million, or 14.8%, to $613.1 million for 2011 from $534.2 million in 2010. As a percentage of sales, general and administrative expenses were 38.2% and 26.6% in 2011 and 2010, respectively. The increase in general and administrative expenses was primarily attributable to higher legal settlement expenses of $42.8 million which includes a $45.0 million charge for potential exposure relating to previously disclosed litigation and regulatory matters, increased outside professional fees of $13.6 million, $4.6 million in foreign bad debt reserves, increased depreciation expense of $12.0 million, and higher rent expense of $10.4 million attributable to an additional 42 stores from the 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 $114.2 million and $119.1 million for 2011 and 2010, respectively.

Gross profit for our retail segment increased $57.7 million, or 29.1%, to $255.9 million in 2010 as compared to $198.2 million in 2009. Gross margins for all stores were 62.3% for 2010 compared to 61.6% in 2009. Gross margins for our domestic stores were 62.3% in 2010 as compared to 60.7% in 2009. Gross margins for our international stores were 62.3% in 2010 as compared to 70.5% in 2009. The increase in retail margins was due to less closeouts and more in-demand inventory.

General and administrative expenses increased by $110.6 million, or 26.2%, to $534.2 million for 2010 from $423.4 million in 2009. As a percentage of sales, general and administrative expenses were 26.6% and 29.5% in 2010 and 2009, respectively. The increase in general and administrative expenses was primarily due to increased salaries and wages of $44.0 million that included $13.7 million in stock compensation costs, increased professional fees of $9.7 million, higher rent expense of $8.7 million due to an additional 41 stores, increased temporary help costs of $6.1 million, and higher outside service fees of $5.6 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 $119.1 million and $109.2 million for 2010 and 2009, respectively. The $9.9 million increase was primarily due to significantly higher sales volumes.

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